Transfer of right to carry on business by transferee carrying on business would be taxable as capital gain

Brief of the case:

• The ITAT Mumbai in the case of Monsanto India Limited held that when the assessee at the time of transfer of business agrees for a consideration not to carry on same line of business for a certain period of time , then such an arrangement is definitely a transfer(surrender) of right to carry on business . Such right being capital asset would result in capital gain as result of transfer thereof. Henceforth , in such an arrangement the transaction cannot be taxed as business income u/s 28(va).
• Further, since the right to transfer accrues from commencement of business itself , the period of holding of such capital gain would be reckoned from the date of commencement of business. In the present case , since prior to date of transfer assessee was nearly 10 years in its business , the capital gain arising would be taxable as long term.

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