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Issues:
Whether the sum received by the assessee is a capital receipt or taxable as income from business and profession. Analysis: The appeal was filed by the Revenue against the order passed by the CIT(A) concerning the assessment under section 143(3) of the IT Act for the assessment year 1997-98. The Revenue contended that the sum of Rs. 30 lakhs received by the assessee from a Swiss company should be taxed as income from business and profession, while the CIT(A) held it to be a capital receipt. The key issue was to determine the nature of the compensation received by the assessee. The factual background revealed that the assessee, a former managing director of a company, received the sum of Rs. 30 lakhs from the Swiss company in consideration of a non-compete agreement. The Revenue argued that this sum should be taxed as revenue receipt, alleging that the agreement was a sham to avoid taxes. However, the Tribunal found no basis for such suspicion and noted the legitimate reasons for entering into the non-compete agreement. It was established that the non-compete fee is a capital receipt and not taxable as income, supported by judicial precedents. The Tribunal emphasized that the Revenue failed to discharge the onus of proving that the sum in question was a revenue receipt. Merely labeling it as a taxable receipt without substantial evidence was insufficient. The Tribunal cited previous decisions to support the capital nature of non-compete fees and highlighted that the burden of proof lies with the Revenue. Additionally, the Tribunal noted that the relevant tax provision was only applicable from a later assessment year, further supporting the CIT(A)'s decision to treat the sum as a capital receipt. Ultimately, the Tribunal upheld the CIT(A)'s decision and dismissed the Revenue's appeal, concluding that the sum received by the assessee was indeed a capital receipt and not taxable as income from business and profession.
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