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TMI Blog2008 (10) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... brought any evidence on record to prove that the non-compete fee agreement signed between the assessee and M/s. SIEL Ltd. was a sham agreement. (4)On the facts and circumstances of the case, the CIT(A) has erred in law and on facts in ignoring the facts that agreement was signed without a date by the parties and witnesses and not notarized by the Notary public and hence a sham agreement." 2. Rival contentions have been heard and records perused. At the outset, Ld. A.R. placed on record, order of ITAT Special Bench in case of Saurabh Srivastava v. Dy. CIT [2008] 111 ITD 287 (Delhi) and contended that this squarely covered by the proposition laid down by the Tribunal in this order. Copy of the same was also supplied to the DR. From the records, we found that during the year under consideration, the assessee was in receipt of non-compete fee of Rs. 42 lakhs which was claimed to be capital receipt exempt from tax and claimed credit of TDS against the same. While claiming the non-compete fee as capital receipt exempt from tax, the assessee had given reasons for the same along with the return of income by relying on the Hon ble Supreme Court decision in many faces (mentioned be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oil and caustic soda.... This makes it very clear that the appellant was very well in a commanding position to use his knowledge and experience, which he had gained while working as CEO of SIEL Ltd., to use for other competitors and if he had done so it would have adversely affected the interest of SIEL Ltd. Thus it was not a question of having purely technical knowledge regarding manufacturer of sugar, edible oil and caustic soda etc., it was the knowledge and basic information of SIEL Ltd. which were acquired by the appellant, which were equally important as technical knowledge, it could be used by him elsewhere against the interest of the employer M/s. SIEL Ltd. and hence the payment of non-compete fee. The agreement further makes it clear that with the liberalization of the Government s economic policy and with the decontrol of the economy having percolated to the extent that it had a significant impact in the market particularly of products manufactured by SIEL, that SIEL was facing a threat of greater competition from overseas companies who had stepped into or were likely to step into India, that M/s. SIEL compelled by circumstances agreed to enter into written agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an asset. Apparently by entering into such agreement the rights of the appellant were extinguished insofar as he was specifically prohibited not to undertake any employment directly or indirectly or to provide any advice or consultancy to any company whatsoever whether an overseas corporate body, domestic or joint venture engaged in business relating to manufacture and sale of sugar, edible oil and caustic soda. Para-1 para-3 of the terms and conditions of the agreement make it clear that the payment was made in lieu of such restrictive conditions and therefore it cannot be said that there was no extinguishments of the right of the appellant. The decision of the Hon ble ITAT Chandigarh Bench B , Chandigarh in the case of ACIT, Circle 1(1) v. Tarun Kumar Ghai [2005] 97 ITD 517 is squarely applicable in the case of the appellant which reads as under : In the instant case, from the facts available or record, it was abundantly clear that the assessee received compensation in consideration of his agreement and undertaking not to engage himself, directly or indirectly, in the business activities which were competitive to the company and also not to join any service in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge and basic information of SIEL Ltd. which was acquired by the assessee and the same was equally important as the technical knowledge, and it could be used by him elsewhere against interest of employer SIEL Ltd. and payment of non-compete fee. The CIT(A) also found that no evidence was brought on record to prove that agreement executed was the sham agreement or that it was just for sake of benefit to the assessee by giving an amount of Rs. 42 lakhs in the garb of salary as per section 17(3) of the Income-tax Act, 1961. It was not a compensation received by the assessee from SIEL Ltd. in question with the termination of his employment or modification of terms and conditions relating thereto nor it was any payment as per section 17(3)( ii ) of the Income-tax Act, 1961. With regard to Assessing Officer s observation regarding extinguishments of receipt from an asset, the CIT(A) found that by entering into such agreement, on receipt of assets were extinguished insofar as he would specifically prohibited not to undertake any employment directly or indirectly or to provide any advise and consultancy to any company whatsoever whether overseas corporate body, domestic and joint venture e ..... 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