Case Law Details
Nalini Mahajan Vs ACIT (ITAT Delhi)
ITAT Delhi held that received towards undertaking restrictive covenant of non imparting service to any other person and not to share associated goodwill of medical practice being in the nature of non compete fee is a capital receipt and not taxable under provision of the Income Tax Act.
Facts- The assessee is an individual and doctor by profession and was running a hospital under the name and style of Mother and Child New Delhi. A ‘Service Agreement’, was executed between Nova Pulse IVF Clinic Pvt. Ltd. and the assessee, Nalini Mahajan. As per the agreement company engaged the assessee as a consultant, and the assessee has agreed to be exclusively engaged with the company for providing her professional services.
AO noted that the fee payable to the assessee by the company is to be decided by the sub-clause 2 ‘Fees’ of the service agreement executed on October 28, 2012 between Nova Pulse IVF Clinic Pvt. Ltd. and the assessee. Thereafter, reproducing certain portion of the agreement, the AO found that the assessee has provided her professional services to Nova Pulse IVF Clinic Pvt. Ltd. during the relevant assessment year. The assessee received professional income during the year, along with Rs. 3,20,00,000/-.
AO noted that the assessee has increased her capital by Rs. 3,20,00,000/- on account of a payment receipt from the said company, the payment of which is said to be exclusive for engagement goodwill. AO was of the opinion that the assessee had provided professional services to the company. The assessee explained that the company has paid the amount of Rs. 3,20,00,000/- because the assessee has transferred her practice and associated goodwill to the company, which cannot be taxed as profits and gains of business or profession.
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