9911796707
TMI Blog2004 (12) TMI 290X X X X Extracts X X X X X X X X Extracts X X X X ..... of addition made of non-compete allowance, except the amount of addition which are as under: Asst. yr. Asst. yr. Amount of addition 1992-93 10 lacs 1993-94 2 lacs 1994-95 2 lacs 1995-96 4 lacs The facts of the case are that the assessee, late Shri V.V. Gandhi, a highly qualified engineer and holding a key position as Vice President of an American joint venture company at Ahmedabad, Inductotherm (India) Ltd., voluntarily retired after thirteen years of active service in asst. yr. 1992-93. In response to his proposal for voluntary retirement by resignation, the Board of Directors of the company stipulated that he should enter into a non-compete agreement for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al pronouncements relied upon on behalf of the assessee, conclusively held that the entire amount of non-compete allowance received by the assessee did not fall within the mischief of s. 17(3)(i) or (ii) as profits in lieu of salary and it was clearly a capital receipt not liable to income-tax. After considering the facts of the case and submissions of the assessee as also various decisions of the Tribunal, the CIT(A) vide para 9 of his appellate order observed as under: "9. I find that apart from the various decisions relied upon by the Tribunal Madras Bench, the appellant's case is also covered by the decision of the Madras High Court in the case of CIT vs. Saraswati Publicities (1981) 132 ITR 207 (Mad). In the said case, the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le the learned counsel for the Revenue proceeded as if the case on hand fell within the ambit of the first of the two provisions, the attempt of the learned counsel for the assessee was to bring it in the latter category. In view of the finding of the Tribunal, which we have already extracted that, in the present case, the receipt is referable to a restrictive covenant, we have to hold that the principle of the decision in CIT vs. Best Co. (P) Ltd. (1966) 60 ITR 11 (SC) in so far as it considers the restrictive covenant and the receipt therefore will be applicable here. The question referred to us, is accordingly, answered in the affirmative and in favour of the assessee." The ratio of the Supreme Court in the case of CIT vs. Best Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egorically restrictive. On the other hand, the learned Departmental Representative submitted that since the payee has treated the payment as revenue and made provisions, accordingly the same should be treated as revenue receipt in the hands of the assessee. Apart from that, the learned Departmental Representative submitted that the last two instalments of Rs. 4 lacs out of Rs. 10 lacs were paid subsequent to death of erstwhile engineer, Shri V.V. Gandhi. So the same cannot be treated in any case as non-compete allowance in the hands of the legal heir of the erstwhile Shri Gandhi. 4. Sec. 2(24) of the IT Act, 1961 gives an inclusive definition of "income". It interprets various items which in ordinary parlance cannot be understood as incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pex Court in Gillanders Arbuthnot Co. Ltd. vs. CIT (1964) 53 ITR 283 (SC) that compensation paid for agreeing to refrain from carrying on competitive business in the commodities in respect of the agency terminated, or for loss of goodwill, is, prima facie, of the nature, of a capital receipt. Further, the amount of Rs. 11 lakhs, received by the assessee, could not be said to be profit from his employment. It was not a remuneration or reward or return for his services in any sense of the word. The fact of employment was the cause without which the occurrence would not have happened (causa sine qua non). It was not the immediate cause (causa causans). It did not, therefore, arise therefrom. Hence, the receipt in question could not be cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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