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TMI Blog2017 (1) TMI 738X X X X Extracts X X X X X X X X Extracts X X X X ..... agreed terms. Also, it is common practice in case of termination of employment to put forth the condition not to engage in act of competition for a year. This cannot be considered to treat the above payment as capital in nature. Therefore, we set aside the order of the CIT(A) and delete the addition made by the AO towards compensation/settlement payment made to the MD of the assessee. - Decided in favour of assessee. - ITA No. 1243/Hyd/2015 - - - Dated:- 21-9-2016 - Smt P. Madhavi Devi, Judicial Member And Shri S. Rifaur Rahman, Accountant Member Assessee by : Shri P.S.R.V.V Surya Rao Revenue by : Shri A. Sitarama Rao ORDER Per S. Rifaur Rahman, A. M. This appeal is preferred by the assessee against the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elating to A. Y. 2010-11. The return for that year was filed on 14-10-2010, the extended due date being 15-10-2010. It claimed a refund of ₹ 37,753/- for that year. The set off was also omitted to be claimed even during the assessment proceedings. 2.4 While completing the assessment the assessing officer examined all the information and documents filed and explanations offered. She narrowed down to the payment of above referred compensation/settlement amount of ₹ 40,25,000/- made to the erstwhile MD and made an addition of that amount. She made the disallowance by holding the payment as for non-competition and being in capital in nature. She did not accept the explanation offered by the appellant company. 3. Aggrieved by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in treating it as capital n nature. She ought to have appreciated that the payment is nothing but salary n terms of sec.17, clause 3. 3. The learned CIT(A) erred in confirming the disallowance made on the ground that the assessee failed to produce a copy the return of income filled by the erstwhile Managing Director of the appellant company. 4. The learned CIT(A) erred in not bringing on record the submissions made in support of the claims made and in not disposing the appeal based on such submissions. 5. The learned CIT(A) erred in not admitting a fresh claim in relation to claim of set off of losses brought forward and in not directing the assessing officer to examine the claim. 6. The learned CIT(A) erred in not pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the AY under consideration under Schedule 4.0 Notes on accounts. (refer paper book at page 45). At pages 54 55, a copy of the Form 16 issued to the MD is placed by the assessee wherein at Annexure B details of tax deducted and deposited in the central govt. account have been shown. In our view, calling for the return of income of the M.D. is uncalled for. What is relevant is the accounting treatment of the assessee. It had followed the terms of employment with the MD and accordingly made payment of compensation. Copy of the agreement with MD has been placed at pages 56 to 62 of the paper book, wherein clause 12 of the agreement reads as under: In the event the company decides to terminate the agreement due to restructuring or an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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