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TMI Blog2017 (4) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 2003-04. It is only vide Finance Act, 2002 with effect from 1.4.2003 that the said capital receipt is now made taxable [See: Section 28(va)]. The Finance Act, 2002 itself indicates that during the relevant assessment year compensation received by the Assessee under non-competition agreement was a capital receipt, not taxable under the 1961 Act. It became taxable only with effect from 1.4.2003. It is well settled that a liability cannot be created retrospectively In view of the observations which are made by the Tribunal and the finding arrived at regarding capital gain and clause to carry on business as introduced in 2003, the observations made by the Tribunal are required to be upheld and same is upheld. - Decided in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or process any article or thing] [or right to carry on any business], tenancy rights, stage carriage permits or loom hours,- (i) in the case of acquisition of such asset by the assessee by purchase from a previous owner, means the amount of the purchase price ; and (ii) in any other case [not being a case falling under sub-clauses (i) to (iv) of sub-section (1)of section 49], shall be taken to be nil 5. Section 48 49 of the Act reads as under:- 48. The income chargeable under the head Capital gains shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :- (i) expenditure incurred wholly and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between two phraseologies or a right to manufacture, produce or process any article or thing inserted with effect from 01.04.1998 and or right to carry on any business inserted with effect from 01.04.2003 in sub-clause (a) to sub-section (2) to section 55 of the Act, the later one is more suitable to the facts and circumstances of the present case as the assessee was admittedly by the agreement in question was restrained to compete with the business of the Company in any manner whatsoever including that of manufacturing as an aspect. Therefore, in or view, the practice of payment of non-compete fees very much recognized earlier cannot be allowed for the purpose of benefit of income-tax with effect from 01.04.2003, i.e., from the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goodwill was provided for. Where goodwill is purchased by the transferor, the cost of acquisition is taken to be the purchase price and in all other cases it is taken to be nil.The cost of improvement in either case is taken to be nil. 30.2 Instances have come to light where rights to manufacture, produce or process any article or thing have been extinguished for a consideration and claimed to be not taxable. 30.3 The Act has, therefore, amended sections 55(1) and 55(2) of the Income-tax Act in order to bring extinguishment of such a right to manufacture, etc., within the ambit of capital gains tax. Capital gains tax would be leviable only where such an extinguishment of right to manufacture, etc., is for any consideration. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business was in the nature of capital receipt? It was held that the compensation received by the Assessee for loss of agency was a revenue receipt whereas compensation received for refraining from carrying on competitive business was a capital receipt. 8. One more aspect needs to be highlighted. Payment received as non-competition fee under a negative covenant was always treated as a capital receipt till the assessment year 2003-04. It is only vide Finance Act, 2002 with effect from 1.4.2003 that the said capital receipt is now made taxable [See: Section 28(va)]. The Finance Act, 2002 itself indicates that during the relevant assessment year compensation received by the Assessee under non-competition agreement was a capital receipt, n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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