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Issues involved: Appeal against order of Commissioner of Income-tax regarding taxability of Non-Compete Fee received by the assessee for assessment year 2002-03.
Summary: The appeal was filed by the assessee against the order of the Commissioner of Income-tax, Chennai, regarding the taxability of Non-Compete Fee received from a company. The assessee, an individual, had entered into an agreement with another company to receive a Non-Compete Fee over a period of 10 years. The Assessing Officer initially accepted the fee as a capital receipt, but the Commissioner issued a notice u/s 263 to tax the amount as revenue receipt. The dispute revolved around whether the fee should be taxed as per the amended provisions of section 28(va) of the Income Tax Act, 1961. The Assessing Officer had conducted necessary enquiries and concluded that the Non-Compete Fee was a capital receipt, considering the specific circumstances and the provisions of section 28(va). The Commissioner, however, held that the assessment order was erroneous and prejudicial to the Revenue's interests, directing the Assessing Officer to tax the amount. The assessee argued that the Commissioner's order was based on a difference of opinion and should be set aside. After considering the submissions, the Tribunal found that the Assessing Officer had applied his mind and made a conscious decision regarding the taxability of the Non-Compete Fee. The genuineness of the agreement and the amount received were not in dispute. Referring to the Supreme Court's decision in a similar case, the Tribunal held that the fee was a capital receipt for the assessment year 2002-03 and could not be taxed under the amended provisions of section 28(va). The Tribunal quashed the Commissioner's order u/s 263, stating that it was based on a mere difference of opinion and allowed the appeal of the assessee. The Tribunal pronounced the order on 24/02/2012.
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