2017 (10) TMI 1010 - SCH - Income Tax

Non-compete agreement - gain considered to be long term capital gain - Whether the ITAT was justified in holding that the amount paid by the Company to the assessee in terms of the agreement dt. 24.5.1999, would not fall within the meaning of words right to manufacture, produce or process any article or thing but, within the meaning of the words right to carry on any business? - Held that - SLP dimissed. HC order confirmed 2017 (4) TMI 413 - RAJASTHAN HIGH COURT Payment received as non-competition fee under a negative covenant was always treated as a capital receipt till the assessment year 2003-04. It is only vide Finance Act, 2002 with effect from 1.4.2003 that the said capital receipt is now made taxable See Section 28(va) . The Finance Act, 2002 itself indicates that during the relevant assessment year compensation received by the Assessee under non-competition agreement was a capital receipt, not taxable under the 1961 Act. It became taxable only with effect from 1.4.2003. It is well settled that a liability cannot be created retrospectively. Observations which are made by the Tribunal and the finding arrived at regarding capital gain and clause to carry on business as introduced in 2003, the observations made by the Tribunal are required to be upheld and same is upheld. - Decided in favour of the assessee