2017 (2) TMI 456

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..... as permanent as completely excluding oneself given the fast changing nature of the goodsindustry. It is quite likely that at the end of ten years, the assessee might itself not be interested in creating a distribution network and engaging in the same activity or conversely the agreement and compensation might be to defer competition which may deter it from entering into the same business. Whatever be the reasons, its desisting from the business on the one hand and agreeing to receive compensation on the other clearly points to the fact that the sum of ₹ 2 Crores was paid as non-compete fee. Therefore, it fell in the capital stream. - Decided in favour of the assessee - ITA 487/2004 - - - Dated:- 2-1-2017 - S. Ravindra Bhat And Naj .....

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..... that there was nothing in the agreement which barred the assessee from carrying on its business; rather it merely agreed to place an embargo upon the exercise of its rights including distribution rights for a period of ten years for which one lump sum amount was received. This could be the aggregation of the annual receipts which otherwise the assessee could very well have derived in the normal course of its activities. Counsel for the assessee, on the other hand, urges that the Tribunal s findings are correct and relied upon paragraph 20 of the impugned order. She relied upon clause 10 of the strategic alliance agreement and said that of the amounts agreed in terms of another separate non-compete agreement, entered into on the same dat .....

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..... g any business of marketing and selling ice cream, ice lollies and dairy and non dairy based frozen desserts for ten years from the effective date, directly or indirectly...... . The Revenue s contention is that the assessee never really went out of business but rather it agreed to suspend its right to market, sell and distribute ice creams and related products. This Court is of the opinion that the technicalities upon which the revenue s argument is premised do not further its case. There cannot be a set formula or manner in which commercial entities engaged in business can be said to behave. In the present case, the assessee along with other business entities came together. The assessee used to carry on a restaurant business and wa .....

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