Assessee-company had entered into an Agreement for Distribution, Manufacturing and Agency of products (ADMA 1997) with one BM Germany in 1997. In 2004 RDG had acquired BM group all over world and in same year RDG unilaterally terminated certain obligations under 1997 agreement, which was challenged by assessee in UK court and thereafter assessee and RDG entered into out of court settlement as per which assessee and RDG mutually agreed to terminate (ADMA 1997) and RDG paid compensation to assessee. Assessing Officer proceeded to hold that proceeds received by assessee-company from RDG on account of termination of agency and distribution of products in India fell under provisions of section 28(ii)(c) read with section 28(va)(a) and made addition thereof to business income of assessee.CIT(A) confirmed the addition. On appeal the Assessee submitted that since it had transferred entire business and its rights under agreement had been terminated, amount received in consideration thereof was assessable as capital gain. Tribunal held that  the  assessee-company by virtue of agreement got non-transferable, non-assignable license to manufacture, market, distribute and sell products for a satisfied commission as agent and entire intellectual property qua distribution and manufacturing of product would remain with BM and assessee would not be entitled for any such ownership or title to same and there was no loss of business.  Further, neither capital structure of assessee had been affected nor it had affected trading structure of business of assessee rather after settlement agreement assessee’s sales had enhanced. Therefore, compensation received by assessee from RDG in out of court settlement was a business income and not an income assessed to capital gains as claimed by the assessee and as such provisions contained under section 28(ii)(c) read with section 28(va)(a) were attracted. Order of Assessing Officer is affirmed.  (AY. 2005-06)