2019 (2) TMI 734

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..... agreement was merely a part of the understanding between the parties. What purchaser received under such agreement was entire business of the assessee along with non-compete assurance. We notice that Clause (va) of Section 28 pertains to any sum whether received or receivable, in cash or kind, under an agreement, inter alia for not carrying out any activity in relation to any business or profession. A non-compete agreement would therefore fall in this clause. Proviso to said clause (va), however, provides that the said clause would not apply, to any sum whether received or receivable, in cash or kind, on account of transfer of right to manufacture, produce or process any article or thing or right to carry on any business or profession w .....

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..... going concern for consideration of ₹ 54.73 crore (rounded off). The assessee offered such receipt to tax as capital gain. The Assessing Officer did not accept this stand of the assessee. He noticed that in the deed of transfer of business, there was a clause that the assessee would not involve into carrying on the same business. According to the Assessing Officer, therefore, in view of such non-compete clause in the agreement, the receipt could be the assessee's income in terms of Section 28(va) of the Income Tax Act, 1961 ( the Act for short) and consequentially taxable under the head 'Profits and Gains of Business and Profession' (b). The assessee carried the matter in appeal. The Commissioner of Income Tax (Appeal .....

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..... pproach of the Commissioner of Income Tax (Appeals). What however, the Revenue argued is that the entire amount was attributable to the non-compete agreement which is clearly an incorrect proposition. The assessee which was engaged in highly specialized business, transferred the entire business for valuable consideration. Non-compete clause in such agreement was merely a part of the understanding between the parties. What purchaser received under such agreement was entire business of the assessee along with non-compete assurance. 5. We notice that Clause (va) of Section 28 pertains to any sum whether received or receivable, in cash or kind, under an agreement, inter alia for not carrying out any activity in relation to any business or pr .....

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