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TMI Blog2004 (10) TMI 632X X X X Extracts X X X X X X X X Extracts X X X X ..... order. 2. It is, therefore, prayed that order passed under section 263 may please be cancelled and original order passed under section 143(3) may please be restored. At the time of hearing before us, it is submitted by the ld. counsel that at the relevant time, the assessee was director in M/s. Surat Beverages Ltd. (hereinafter SBL for short). SBL sold its plant and machinery and all the assets to M/s. Hindustan Coca Cola Bottling Ltd. (hereinafter HCCBL for short). After the purchase of plant and machinery from SBL, M/s. HCCBL entered into an agreement with the assessee as per which the assessee agreed not to sell aerated beverages to any person and not to disclose any know-how of such business to any person. In consideration of such agreement which will be referred to herein as Restrictive Covenant Agreement, the 'assessee received an amount of ₹ 4.71 crores. The assessee has claimed the above amount as capital receipt not chargeable to tax. During the course of assessment proceedings, the Assessing Officer raised query in this regard several times i.e. on 11-10-2002 and 12-11-2002. The assessee furnished reply from time to time and a detailed written submission o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. [1966] 60 ITR 11 (SC) 8. CIT v. Sarasvathi Publicaties [1981] 132 ITR 207 (Mad.) 9. CIT v. G.D. Naidu [1987] 165 ITR 63 (Mad.) 10. Addl. CIT v. Dr. K.P. Karanth [1983] 139 ITR 479 (AP) He has also referred to the amendment made by the Finance Act, 2002 with effect from 1-4-2003 whereby clause (va) was inserted to section 28 by which the amount received by the assessee under an agreement for not carrying out any activity in relation to any business is deemed to be business income. Before the insertion of clause (va) to section 28, the amount received under an agreement for not carrying out any business i.e. the amount received by Restrictive Covenant Agreement was capital receipt. 2. The ld. counsel for the assessee has further stated that the Assessing Officer has raised the relevant query, considered the assessee's submission and gave his opinion in the office note why he has treated the amount as not taxable. The Assessing Officer has treated the amount as not taxable following the decision of Hon'ble Apex Court in the case CIT v. Bombay Burmah Trading Corporation [1986] 161 ITR 386 and Add. CIT v. Surat Silk Cloth Mfg. Association [1980] 121 ITR 1. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agreement for not carrying out the business of aerated beverages i.e. the business in which the assessee was engaged so far. It is also not in dispute that during the assessment proceedings, the Assessing Officer raised queries from time to time and considered the assessee's submissions. The opinion of the Assessing Officer is given in office note. Paras 3 and 4 of the office note read as under:- (3) The facts of the case and submission made by the assessee were examined. After examining the facts and submission, it transpires 'that there is neither trading transaction nor sales of any assets'. Hence non-competitive receipts discussed above cannot be held as business receipts taxable under section 28 of the Act. The Hon. Supreme Court in the case of CIT v. Bombay Burmah Trading Corporation [1986] 161 ITR 386/ 27 Taxman 314 discussed the treatment of revenue and capital receipts and it has been held that: If payment was made for sterilization of very source of profit-making apparatus of the assessee, or of a capital asset, this should also mean to be capital receipts in the hands of the recipient............... receipt for immobilisation, sterilization, destruc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be brought to tax under the Income-tax Act. However, thereafter, in para 5, the Assessing Officer recorded that although it is not taxable in the hands of the assessee, it is taxable in the hands of the employer of the assessee M/s. SBL. Now, the CIT has found this finding of the Assessing Officer i.e. the amount is taxable in the hands of SBL to be erroneous and incorrect. The ld. D.R. has also contended that the finding of Assessing Officer that the amount is taxable in the hands of SBL is incorrect. However, the first question is whether the amount is taxable in the hands of the assessee or not. The Assessing Officer has given a specific finding relying upon two Supreme Court decisions that the amount is not taxable as revenue receipt in the hands of the assessee. The CIT in his order under section 263 has not proved such finding of the Assessing Officer to be incorrect. On the other hand, the CIT in para 9 of his order under section 263 mentioned as under:- ... In fact the issue of taxability of the receipt per se in the assessee's hands has not been considered by ITO, Wd. 4(3) in the mistaken belief that it was to be considered by the Assessing Officer, (i.e., ACI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the interests of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of revenue, unless the view taken by the Income-tax Officer is unsustainable in law. From the above, it is clear that where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order unless the view taken by the Assessing Officer is unsustainable in law. In the case under consideration before us, we find that the Assessing Officer has taken a view based upon certain judicial pronouncements by the Hon'ble Apex Court. The revenue has not established that the view taken by the Assessing Officer is unsustainable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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