9911796707
TMI Blog2016 (3) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... ) On 31st March, 2002, the Appellant at the age of 81 years, retired from employment with M/s. Grasim Limited (Grasim). This was after having worked for over 33 years with Grasim; (b) At the time of retirement, the Appellant received retirement benefits of more than Rs. 95 lakhs from Grasim. A monthly pension of Rs. 3 lakhs per month for life, reimbursement of medical expenses for life etc. Besides, the above, in addition, the Appellant received an amount of Rs. 3,80,48,100/which the Appellant claimed was non-compete fees and in support, relied upon an Agreement dated 31st March, 2002 entered into by the Appellant with Grasim; (c) The amount of Rs. 3,80,48,100/was received by the Appellant prior to the execution of the Agreement dated 31st March, 2002 for non-compete fees in the following tranches: Sr. No. Date Amount (in Rupees) 1 30.10.2001 2,00,00,000/ 2 20.02.2002 30,00,000/ 3 27.03.2002 1,50,48,100/ Total: 3,80,48,100/ (d) In its return of income for the subject Assessment Year, the Appellant claimed that the amount of Rs. 3,80,48,100/received by him as non-compete fees from Grasim was not taxable; (e) The Assessing Officer in his Assessment Order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is highly unlikely that the person having put in such a long service with Grasim and granted generous postretirement benefit would do anything to compete with the business of his former employer. In the aforesaid circumstance, the CIT(A) by order dated 31st March, 2005 upheld the order dated 30th January, 2004 of the Assessing Officer and held that the payment of Rs. 3,80,48,100/claimed as non-compete fees is, in fact, classifiable under Section 17 of the Act as profits in lieu of salary; and (h) Being aggrieved by the order dated 31st March, 2005 of the CIT(A), the Appellant carried the issue in appeal to the Tribunal. The Tribunal by the impugned order took in to consideration the following facts: (i) payment as non-compete fees of Rs. 3,80,48,100/was made much before the date of retirement and also before the date of agreement i.e. 31st March, 2002; (ii) the Appellant was 81 years old when he retired from the service. Therefore, was not in a position to compete with Grasim; (iii) Rs. 3,80,48,100/paid as non-compete fees was an odd figure and in spite of specific request, seeking a breakup of the same and / or manner in which the same was determined, the Appellant was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Agreement dated 31st March, 2002 is to return the same if there is a breach of the Agreement on the part of the Appellant. 5. Per contra, Mr. Kotangale, learned Counsel appearing for the Revenue in support the impugned order of the Tribunal submits as under: (a) All the three authorities have independently rendered a finding of fact that the amount of Rs. 3,80,48,100/received by the Appellant is not a non-compete fee. This finding of fact was on the basis of the evidence placed before it. This finding of fact is not shown to be perverse and/or arbitrary. Accordingly, no interference is called for with the impugned order of the Tribunal; and (b) The authorities under the Act have come to a finding of fact that the so called agreement dated 31st March, 2002 is colourable document being a subterfuge, as in fact, no amount was in fact paid as non-compete fees to the Appellant. 6. We have considered the rival submissions. In principle, there is no dispute that the amount received as Rs. 3,80,48,100/if held to be a non-compete fees in respect of Assessment Year 200203, then the same is not chargeable to tax. This issue stands settled by the decision of the Apex Court in Guffic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This is one of the features which suggests that the payment is not for non-compete fees as relied upon by all the authorities. 9. Similarly, the contention that the amount of Rs. 3,80,48,100/was received by the Appellant before the date of retirement and also before the execution of the non-compete agreement dated 31st March, 2002 by itself would not determine the character of the payment. The fact that the character of payment does not undergo a change, depending upon timing of its receipt, cannot be disputed. However, in the normal course of business before any person agrees to pay such a large amount of Rs. 3,80,48,100/as non-compete fees, it would ensure that the nature of obligation a person would not undertake and if done, would fall within the meaning of competition. This would have to be first determined and the terms set out and accepted by the parties in writing before any payment is made. Consequently, this also an indication of the fact that the payment which was made in advance was for some other purpose and not for as non-compete fees as claimed. However, as an afterthought, the same has been shown as non-compete fees to reduce the tax implication. 10. It was next ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt next points out that the impugned order relies upon the fact that the Appellant was 81 years of age at the time of retirement and thereafter, incorrectly concludes that he is unlikely to compete with his employer. Moreover, the impugned order records the fact that the Appellant was reappointed on the very next date i.e. 1st April, 2002 as an adviser to the Grasim. On the above basis, the impugned order concludes that it is indicative of the fact that the Appellant continues to serve Grasim and, therefore, he could not have competed with Grasim. Thus, concluding that the payment of Rs. 3,80,48,100/was not a payment for non-compete fees. It is submitted on behalf of the Appellant that competition to Grasim from the Appellant is not by physical labour but by sharing his experiences and business tactics with Grasim's competitors. We understand. However, the fact is that in normal human conduct, where a person has worked with his employer for over 33 years and himself is over 80 years of age, has received a handsome retirement package, would not compete with his former employer. Thus, this conclusion of the Tribunal is a possible view and cannot be said to be perverse and/or arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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