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TMI Blog2019 (8) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax Case Appeal has been admitted on 22.12.2008 on the following substantial questions of law:- "1. Whether on the facts and circumstances of the case, the Tribunal was right in law in holding that the amount received towards restrictive convenant is revenue receipt chargeable to tax? 2. Whether on the facts and circumstances of the case, the Tribunal was right in law in holding that the bad debts recovered by the appellant, which were written off and allowed as deduction in respect of Companies which got amalgamated with the appellant Company, should be taxed in the hands of the appellant'? 3. We have heard Mr.R.Vijayaraghavan, learned counsel for the appellant/assessee and Mr.T.Ravikumar, learned Senior Standing Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was paid Rs. 16.80 Crores based on the agreement which according to the assessee is the receipt in the capital field, as it was received as consideration for restraining the assessee from entering into insurance business on its own and also restraining itself from negotiating with any other party for entering into insurance business. 7. The assessee filed an appeal before the Commissioner of Income Tax [Appeals]-VI, Chennai ['CIT-(A)' for brevity] . The appeal was allowed by order dated 13.01.2005. The CIT-(A) held that the restrictive clause in the agreement for which amount of Rs. 16.80 Crores was paid to the assessee was in view of the commitment given by the assessee restraining itself from negotiating with any other par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the assessee and the U.K.Company is tiled as "Letter of Intent" agreed and accepted by the parties on 5th April, 2000 in London. The following clause is the subject matter of interpretation: "At the instance of the U.K.Company, assessee restrained itself from interfering with any other party and also refrained from itself entering the insurance business. In consideration of this restraint and the assurance to join hands only with U.K.Company, agreed to pay lumpsum of E 2.4 million to the assessee." 11. While completing the assessment, the assessing officer cannot examine the exigency of business as to what would be the prudent decision from the point of view of the assessee. What is required to be seen is the interpretation whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Mr.T.Ravikumar, learned Senior Counsel for the respondent / revenue vehemently contended that the factual finding that the payment was received by the assessee before the commencement of business is the finding, which stares against the assessee and the same has not been challenged. In our considered view, we are afraid that such a finding cannot work against the assesee. The terms and conditions of the Letter of Intent is clear, in the sense, that it is the condition which precedes other conditions, which relates to 'Investment for allotment of shares'. In fact, this amount which was agreed to be paid as non-compete has been received by the assessee on 23.10.2000 and immediately invested in the shares of the company. To be not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said submission as the Letter of Intent provides "additional investment" at the instance of the assessee and the condition stated 'if at the time of finalisation of shareholders agreement it is found that assessee is required to further infuse equity during the initially agreed pay-back period, U.K.Company will make a compensatory payment to assessee in an amount to be mutually agreed, before the finalisation of the stareholders agreement'. 17. Thus, we are of the clear view that the order passed by the Tribunal dated 31.07.2007 reversing the order passed by CIT(A) calls for interference. In the light of the above, the appeal filed by the assessee is allowed and the order passed by the tribunal is set aside and the order passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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