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DATE: July 22, 2020 (Date of pronouncement)
DATE: July 23, 2020 (Date of publication)
AY: 1995-96
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CITATION:
S. 28(v-a): There is a dichotomy between receipt of compensation by an assessee for the loss of agency and receipt of compensation attributable to the negative/restrictive covenant. The compensation received for the loss of agency is a revenue receipt whereas the compensation attributable to a negative/ restrictive covenant is a capital receipt. Payment received as non-competition fee under a negative covenant was always treated as a capital receipt till AY 2003-2004. It is only w.e.f. 1-4-2003 that the said capital receipt is now made taxable u/s 28(v-a). It is well settled that a liability cannot be created retrospectively (All imp judgements referred)

The revenue has no business to second guess commercial or business expediency of what parties at arms-length decide for each other. For example, stating that there was no rationale behind the payment of INR 6.6 crores and that the assessee was not a probable or perceptible threat or competitor to the SWC group is the perception of the Assessing Officer, which cannot take the place of business reality from the point of view of the assessee, as has been pointed out by us hereinabove. The fact that M/s Maltings Ltd. had incurred a loss in the previous year is again neither here nor there. It may in future be a direct threat to the SWC group and may turn around and make profits in future years. Besides, M/s Maltings Ltd. is only one concern of the assessee – it is the assessee’s expertise in this field on all counts that was the threat perception of the SWC group which cannot be second guessed by the revenue

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DATE: September 22, 2017 (Date of pronouncement)
DATE: December 30, 2017 (Date of publication)
AY: 2009-10
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CITATION:
S. 32(1)(ii) Depreciation on non-compete fee: The AO should consider whether the verdict in Sharp Business System 211 TM 576 (Del) that non-compete rights are not intangible assets for depreciation can apply to a case where there is no joint venture between the person paying the non-competition fee and the recipient and both parties are outsiders. Law laid down in Nat Steel Equipments vs. CCE AIR 1988 SC 631 on the meaning of the term "similar" to be considered

The Assessing Officer shall redecide this issue afresh after comparing the facts in the case of the assessee with the case of Delhi High Court in Sharp Business Systems (supra) in accordance with law and give clear finding how the case of assessee is covered or not covered by the decision of Delhi High Court in the case of Sharp Business Systems. We may point out that in the case of the assessee there was no joint venture between the person paying the non competition fee and the person receiving the non competition fee. Both the parties were entirely outsiders and the time of the continuity of the agreement was also 10 years not 07 years. We also direct the Assessing Officer that while considering the decision of Delhi High Court he should also consider the decision of Hon’ble Supreme Court in the case of Nat Steel Equipments vs. Collector of Central Excise reported in AIR 1988 SC 631 as in our opinion this decision will also have bearing in the case of the assessee

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DATE: June 30, 2015 (Date of pronouncement)
DATE: July 29, 2015 (Date of publication)
AY: 1999-00
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CITATION:
S. 28(va)/ 115JA: non-compete consideration received prior to insertion of s. 28(va) is not taxable. Amount credited to reserves without a corresponding debit to the P&L A/c cannot be added to the "book profits"

To invoke clause (b) of the Explanation below Section 115JB (identical to Section 115JA) of the Act, two conditions must be satisfied cumulatively viz. there must be a debit of the amount to the Profit and loss account and the amount so debited must be carried to Reserves. Admitted position in this case is that there is no debit to the Profit and loss account of the amount of Reserves. The impugned order has in view of the self evident position taken a view that in the absence of the amount being debited to Profit and Loss account and taken directly to the reserve account in the balance sheet, the book profits as declared under the Profit and Loss account cannot be tampered with

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DATE: November 19, 2014 (Date of pronouncement)
DATE: December 3, 2014 (Date of publication)
AY: 2007-08
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CITATION:
S. 37(1): Non-compete fee to ex-MD is revenue expenditure

A payment has to be seen from the context of commercial and business expediency. If the outgoing expenditure is so inextricably linked or related to carrying on or conduct of the business, that is, it can be regarded as integral …

ACIT vs. Clariant Chemicals (I) Ltd (ITAT Mumbai) Read More »