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TMI Blog2024 (7) TMI 635X X X X Extracts X X X X X X X X Extracts X X X X ..... section 28(va) of the Act for ease of reference herein under: We, therefore, find no infirmity in the order of the ld. CIT(A) in holding the non compete fee to be in the nature of a capital receipt for the year under consideration. The issue pertaining to the period of the said agreement also becomes irrelevant for the fact that the assessee would be liable to tax on non compete fee as revenue receipt from A.Y. 2004 2005 as per section 28(va) of the Act. Appeal filed by the Revenue is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... equity share capital of LHHCL, thus, the assessee has not given any absolute right in the marketing, distribution and sale of product?" 4 Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in treating non-compete fees being capital receipt relying on Supreme Court Judgement in the case of GuffieChems Pvt. Ltd. 332 ITR 602, Wintac Ltd. 306 ITR 614 (Karnataka) when facts of the cited case are distinguished to the case under consideration as assessee has not given any absolute right in the marketing, distribution and sale of products?" Rs. 3,57,00,000/- 4. The solitary grounds of appeal raised by the assessee is pertaining to the receipt of non compete fees of Rs. 10 crores which has been treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance and thereby computing the total income at Rs. Nil after allowing set off of brought forward business loss and unabsorbed depreciation at Rs. 11,80,51,110/- and book profit u/s. 115JB of the Act at Rs. 3,01,69,094/-, thereby confirming the addition on receipt for non compete, scientific and technical information amounting to Rs. 17,40,00,000/-. 7. The assessee and the Revenue were in appeal before the Tribunal, challenging the order of the ld. CIT(A) where the Tribunal vide order dated 05.11.2014 set aside the issue of receipt on non compete fee amounting to Rs. 10 crores and upholding the addition of Rs. 7.40 crores on transfer of scientific knowhow and technical information in ITA Nos. 681/Mum/2008 and 1430/Mum/2008. The ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t' not taxable in the hands of the assessee. The ld. AR relied on a catena of decisions in support of the said proposition. 12. We have heard the rival submissions and perused the materials available on record. It is observed that the assessee has received a total sum of Rs. 49,80,00,000/- from its joint venture company Lyka Hetro Health Care Limited (LHHCL) which are tabulated as under: Non compete fees Rs. 10,00,00,000 Assignment of registered trade mark Rs. 15,00,00,000 Assignment of unregistered trade mark Rs. 10,00,00,000 Marketing information and consultancy Rs. 7,40,00,000 Scientific know how and technical information Rs. 7,40,00,000 Total consideration Rs. 49,80,00,000 13. It is observed that the non compete fees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. 332 ITR 602 (SC) and also section 28(va) of the Act which vide Finance Act, 2002 was effective only after A.Y. 2003-04 where the non compete fee could be taxed as 'revenue receipt'. The ld. CIT(A) has also relied on the decision of the Tribunal in assessee's case for A.Y. 1998-99 where the non compete fee was held to be a 'capital receipt'. 15. In the above factual matrix of the case, it is pertinent to point out that vide an agreement dated 12.03.2002 the assessee has entered into a negative covenant between LHHCL for not competing with LHHCL in the marketing, distribution and selling activities of certain formulations for the trade mark which has been registered or used by the assessee, which also includes brand/trademark exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive covenant where the former would be a 'revenue receipt' and the latter a 'capital receipt' in the hands of the assessee. There is no iota of doubt that the agreement entered into by the assessee and LHHCL was a negative covenant restraining the assessee from carrying out the activities of marketing, distribution and selling of certain formulations which was exclusive to the assessee and not to public at large, which nevertheless is a loss of source of business to the assessee though not wholly but to the extent of the terms of the agreement. This by no stretch of imagination could be loss of agency where there is involvement of principal and agent. We are, therefore, of the considered view that the consideration received by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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