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TMI Blog2015 (11) TMI 388X X X X Extracts X X X X X X X X Extracts X X X X ..... ts to giving up its right to carry on business, i.e., a restrictive cov enant. It held that such restrictive covenant stands covered only with effect from April 1, 2003, on introduction of section 28(va) of the Act. In view of the above, the impugned order having merely followed the decision of the apex court in Guffic Chem. Pvt. Ltd. [2011 (3) TMI 6 - Supreme Court ] no substantial question of law arises for our consideration. Accordingly question No. 1 as proposed is not entertained.- Decided against revenue. Whether the Tribunal was correct in holding that the non-compete consider ation taken as reserves to the balance-sheet cannot be added to the book profit under section 115JA of the Act even in terms of clause (b) of the Explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel, with Nishant Thakkar with Jas Sanghavi with Ms. Megha Bansal, instructed by Pds Legal for the respondent. JUDGMENT 1. This appeal filed by the Revenue under section 260A of the Income-tax Act, 1961 ( the Act ), challenges the order dated November 30, 2012, passed by the Income-tax Appellate Tribunal ( the Tribunal ). The impugned order disposes of cross-appeals as well as cross-objections relating to the assessment year 1999-2000. 2. Although numerous questions have been formulated Mr. Pinto, learned counsel for the Revenue, at the time of admission, urges that two issues arise in this appeal as under : 1 Whether, on the facts and circumstances of the case and in law, the Tribunal was justified in holding that non-comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This negative/restrictive covenant was taxable after the introduction of section 28(va) in the Act with effect from April 1, 2003. (c) Being aggrieved the Revenue carried the issue in appeal to the Tri bunal. By the impugned order the Tribunal held that the entire issue of restraint of right to carry on business would be taxable only with effect from the assessment year 2003-04 consequent to the introduction of sec tion 28(va) into the Act. The impugned order relies upon the decision of the Supreme Court in Guffic Chem. Pvt. Ltd. v. CIT [2011] 332 ITR 602 (SC) wherein it has been observed as (page 606) : The position in law is clear and well-settled. There is a dichotomy between receipt of compensation by an assessee for the loss of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case, both the Commissioner of Income-tax (Appeals) as well as the Tribunal, came to the conclusion that the agreement entered into by the assessee with Ranbaxy led to loss of source of business ; that payment was received under the negative covenant and therefore the receipt of ₹ 50 lakhs by the assessee from Ranbaxy was in the nature of capital receipt. In fact, in order to put an end to the litiga tion, Parliament stepped in to specifically tax such receipts under non-competition agreement with effect from April 1, 2003. (d) Moreover, section 55(2)(a) of the Act would have no application in the present circumstances, as it deals with the cost of acquisition in relation to a capital asset which includes a right to manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. v. CIT [2002] 255 ITR 273 (SC) wherein it is held in the context of MAT provisions that the Assessing Officer has to accept the authenticity of the accounts maintained in accordance with the provisions of Compa nies Act, 1956, which are duly audited and passed in the general body meeting of shareholders. It was held that the Assessing Officer has no power to disturb the profits in the profit and loss account as except to the extent provided in the Explanation to section 115JA. (c) On further appeal by the Revenue the Tribunal by the impugned order dismissed the Revenue's appeal. The impugned order places reliance upon the decision of the apex court in Apollo Tyres Ltd., wherein it was held that it is not open to the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be invoked it is necessary that the amount which has been carried to the reserves should have necessarily been first debited to the profit and loss account resulting in a reduction in the profit declared by the respondent- assessee-company. This issue stands settled in view of the apex court deci sion National Hydroelectric Power Corpn. Ltd. v. CIT [2010] 320 ITR 374 (SC) wherein it has been held that to invoke clause (b) of the Explanation below section 115JB (identical to section 115JA) of the Act, two conditions must be satisfied cumulatively, viz., there must be a debit of the amount to the profit and loss account and the amount so debited must be carried to reserves. Admitted position in this case is that there is no debit to the prof ..... X X X X Extracts X X X X X X X X Extracts X X X X
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