Modern Home Care Products Ltd., Delhi V. ITO, Ward-5(4), Delhi

CO 192/DEL/2007

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3367 (ITAT-DELHI)
• Duration Of Justice: 14 year(s) 4 month(s) 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 13-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 1998-1999
• Appeal Filed On: 11-06-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital receipt
• Section: 143(2); 254(2); 13; 22; 147; 148; 28

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE SHRI G.S. PANNU, HONBLE PRESIDENT AND SHRI AMIT SHUKLA, JUDICIAL MEMBER CO NO. 192/DEL/2007 (IN ITA NO. 2595/DEL/2002) ASSTT. YEAR: 1998-99 O R D E R PER AMIT SHUKLA, J.M. THE AFORESAID CROSS OBJECTION WAS FILED BY THE ASSESSEE ALONGWITH ITA NO. 2595/DEL/2002 FOR THE ASSESSMENT YEAR 1998-99. IN CROSS OBJECTION THE ASSESSEE HAS RAISED FOLLOWING GROUNDS :- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CONSIDERATION OF RS. 1,50,00,000/- RECEIVED BY THE ASSESSEE AS NON-COMPETE FEE WAS CAPITAL RECEIPT NOT LIABLE TO TAX. ITO, WARD 5(4), NEW DELHI. VS. M/S MODERN HOME CARE PRODUCTS LTD. 4, COMMUNITY CENTRE, NEW FRIENDS COLONY , NEW DELHI 110 065. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SH. MOHD. GAYASUDDIN ANSARI, SR. DR AS SESSEE BY : SHRI AJAY VOHRA, SR. ADVOCATE MS. MANISHA SHARMA, ADVOCATE DATE OF HEARING 03 /08 /20 21 DATE OF PRONOUNCEMENT 13 /10 /2021 2 2. HERE IN THIS CASE, THE TRIBUNAL VIDE ORDER DATED 13.11.2018 HAD DISPOSED OF THE REVENUES APPEAL IN ITA NO. 2595/DEL/2002 ALONG WITH THE PRESENT CO NO. 192/DEL/2007, WHEREIN THIS TRIBUNAL HELD THAT SINCE THE ASSESSEE HAS RAISED NEW ISSUE AND NEW CLAIM IN CROSS OBJECTION, WHICH WAS NOT THE SUBJECT MATTER BEFORE THE AO AND ALSO NOT THE SUBJECT MATTER OF APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, THEREFORE, IT WAS HELD THAT ASSESSEE CANNOT AGITATE THE NON-TAXABILITY OF NON-COMPETE FEE FOR THE FIRST TIME BEFORE THE TRIBUNAL. 3. THEREAFTER, ASSESSEE HAD MOVED MISCELLANEOUS APPLICATION U/S 254(2) FOR RECALL OF CROSS OBJECTION ON THE GROUND THAT THE TRIBUNAL HAS ERRED IN LAW AND ON FACTS THAT IN DISMISSING THE CROSS OBJECTION ON THE GROUND THAT FRESH ISSUE CANNOT BE RAISED IN CROSS OBJECTION. IT WAS STATED THAT, THIS FINDING WAS IN CLEAR VIOLATION OF THE PRINCIPLE LAID BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PCIT VS. SILVERLINE 383 ITR 455 (DEL), WHEREIN HONBLE HIGH COURT HAS HELD THAT THE TRIBUNAL WAS JUSTIFIED IN PERMITTING THE ASSESSEE TO RAISE AN ADDITIONAL GROUND CHALLENGING THE VALIDITY OF REASSESSMENT ORDER PASSED BY THE AO U/S 147 FOR THE FIRST TIME IN CROSS OBJECTION FILED BEFORE THE TRIBUNAL; AND HELD THAT ISSUE RAISED IN CROSS OBJECTION WAS PURELY A LEGAL ISSUE WHICH COULD BE RAISED FOR THE FIRST TIME AND WAS REQUIRED TO BE ADJUDICATED BY THE TRIBUNAL AS PER THE PRINCIPLE LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF NTPC VS. CIT REPORTED IN 229 ITR 383. AFTER DETAILED HEARING AND DISCUSSING THE LEGAL PROVISIONS, THE TRIBUNAL RECALLED THE SAID CROSS OBJECTION AFTER OBSERVING AND HOLDING AS UNDER :- 7. THE ISSUE HERE IS THAT AN ORDER HAS BEEN PASSED BY THE COORDINATE BENCH WHEREIN, A FRESH CLAIM IS RAISED BY THE ASSESSEE BEFORE THE COORDINATE BENCH, WHICH WAS NEITHER A MATTER OF DISPUTE BEFORE THE ASSESSING OFFICER OR NOT EVEN BEFORE THE LD. 3 CIT(A), BUT THE ASSESSEE RAISED A CROSS OBJECTION IN APPEAL FILED BY THE REVENUE RAISING A AFRESH CLAIM. TO PUT IT SIMPLY, ASSESSEE ASKED FOR AN EXCLUSION OF ANY INCOME ALREADY SHOWN IN THE RETURN OF INCOME, OFFERED TO TAX BY THE ASSESSEE, NOT DISPUTED BEFORE THE ASSESSING OFFICER, NOT AGITATED BEFORE THE LD. CIT(A), AS NOTHING DECIDED AGAINST THE ASSESSEE, BUT IN AN APPEAL FILED BY THE REVENUE, RAISED A CROSS OBJECTION, STATING THAT THE INCOME WHICH HAS ALREADY BEEN OFFERED FOR TAXATION IN THE RETURN OF INCOME FILED BY THE ASSESSEE, IS A CAPITAL RECEIPT AND NOT LIABLE FOR TAXATION. THIS WAS REJECTED BY THE TRIBUNAL IN THE ABOVE ORDER AS PER REASONS GIVEN ABOVE. 8. IN THE MISCELLANEOUS APPLICATION THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THE HONBLE DELHI HIGH COURT IN PRINCIPLE COMMISSIONER OF INCOME TAX VERSES SILVER LINE 383 ITR 455 (DELHI) HAS DECIDED THAT EVEN THE ADDITIONAL GROUNDS CAN BE RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL IN A CROSS OBJECTION. HE SPECIFICALLY REFERRED TO FACT IN THAT CASE WHEREIN THE ASSESSEE RAISED AN ADDITIONAL GROUND THAT NO NOTICE U/S 143 (2) HAD BEEN ISSUED PRIOR TO FINALILZE OF THE REASSESSMENT ORDER BY THE ASSESSING OFFICER AND THEREFORE THE ASSESSMENT ORDER IS PASSED WITHOUT JURISDICTION. THIS ISSUE WAS RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL AND THERE WAS NO CONCERN FOR THE ASSESSING OFFICER IN THE ABSENCE OF ANY RETURN FILED BY THE ASSESSEE PURSUANT TO NOTICE ISSUED U/S 148 OF THE INCOME TAX ACT TO ISSUE ANY NOTICE U/S 143(2) OF THE ACT. AS PER PARA NUMBER 16 OF THE DECISION OF THE HONBLE DELHI HIGH COURT IT WAS HELD THAT WHEN THERE BEING NO FRESH EVIDENCE OR DISPUTED FACTS SOUGHT TO BE BROUGHT ON RECORD, THE ISSUE BEING PURELY ONE OF LAW, THE ITAT WAS NOT IN ERROR IN PERMITTING THE ASSESEE TO RAISE SUCH A POINT BEFORE IT. THE HONBLE HIGH COURT DREW SUPPORT FROM THE DECISION OF THE HONBLE SUPREME COURT IN NATIONAL THERMAL 4 POWER CO. LTD. VERSUS COMMISSIONER OF INCOME TAX 229 ITR 383 (SC). IN THE IMPUGNED CASE BEFORE US, THE DECISION OF THE HONBLE DELHI HIGH COURT IN PCIT VERSUS SILER LINE LTD. WAS NOT AT ALL CITED BY THE ASSESSEE AT ANY TIME. THEREFORE, THE QUESTION THAT ARISES IS THAT EVEN IF NONE OF THE PARTIES HAS CITED THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT AND THE SAME WAS NOT CONSIDERED BY THE ITAT, DOES IT MAKE THE ORDER PASSED BY THE COORDINATE BENCH SUFFERING FROM A MISTAKE APPARENT FROM RECORD. THE ANSWER HAS BEEN ALREADY RENDERED BY THE HONBLE SUPREME COURT IN ASSTT. COMMISSIONER OF INCOME TAX VERSUS SAURASHTRA KUTCH STOCK EXCHANGE LTD. 305 ITR 227 WHEREIN THE COORDINATE BENCH PASSED AN ORDER U/S 254 (2) WHERE A DECISION OF THE HONBLE GURARAT HIGH COURT, THOUGH NOT CITED BEFORE THE COORDINATE BENCH, WAS IGNORED. THE COORDINATE BENCH RECALLED THAT ORDER HOLDING THAT A BINDING DECISION HAS NOT BEEN CONSIDERED BY ITAT. SUCH ORDER OF THE ITAT WAS CHALLENGED BEFORE THE HONBLE SUPREME COURT IN THE CASE IN PARA NUMBER 39-40 HAS DEALT WITH THIS ISSUE AND HELD THAT THE NON-CONSIDERATION OF A DECISION OF JURISDICTIONAL HIGH COURT OR OF THE SUPREME COURT CAN BE SAID TO BE A MISTAKE APPARENT FROM THE RECORD . THEREFORE, IN THE PRESENT CASE THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF PRINCIPLE COMMISSIONER OF INCOME TAX VERSUS SILVER LINE (SUPRA) WAS NOT AT ALL CONSIDERED AND THEREFORE THE ORDER PASSED BY THE COORDINATE BENCH IN DISMISSING THE CROSS OBJECTION OF THE ASSESSEE SUFFERS FROM A MISTAKE APPARENT FROM RECORD. HENCE THE CROSS OBJECTION OF THE ASSESSEE IS RECALLED, REGISTRY IS DIRECTED TO FIX THE SAME FOR HEARING IN DUE COURSE. 9. ACCORDINGLY, THE MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE IN MA NO. 414/DEL/2019 IS ALLOWED. 5 4. SINCE THE ORDER HAS BEEN RECALLED TO DECIDE THE GROUNDS RAISED IN THE CROSS OBJECTION, ACCORDINGLY BOTH THE PARTIES HAVE BEEN HEARD AT LENGTH. LD. DR SUBMITTED THAT TAXABILITY ON NON COMPETE FEE WAS NEITHER RAISED BEFORE THE AO NOR BEFORE THE LD. CIT(A), HOWEVER, ASSESSEE HAS RAISED A FRESH CLAIM IN CROSS OBJECTION IN APPEAL STATING THAT THE INCOME WHICH HAS ALREADY BEEN OFFERED FOR TAXATION AS REVENUE RECEIPT IN RETURN OF INCOME IS A CAPITAL RECEIPT. THEREFORE SUCH CROSS OBJECTION SHOULD NOT BE ENTERTAINED. 5. WE HAVE HEARD THE LD. SR. COUNSEL, SHRI AJAY VOHRA AND ALSO SR. DR ABOUT THE ADMISSIBILITY OF GROUNDS RAISED IN THE CROSS OBJECTION AND PERUSED THE MATERIAL ALREADY ON RECORD. FIRST OF ALL, THIS TRIBUNAL IN ORDER PASSED IN MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE VIDE ORDER DATED 22 ND MARCH, 2021, HAS RECALLED THE CROSS OBJECTION TO DECIDE THE SAID GROUND RAISED, ON THE GROUND THAT IT IS PURELY A LEGAL GROUND AND SAME CAN BE RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL IN THE CROSS OBJECTION FOLLOWING THE PRINCIPLE LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PR. CIT VS. SILVER LINE (SUPRA). BEFORE US LD. SR. COUNSEL SUBMITTED THAT, THIS CLAIM WAS RAISED IN VIEW OF THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF GUFFIC CHEM (P) LTD. VS. CIT REPORTED IN 332 ITR 602 VIDE JUDGMENT AND ORDER DATED 16 TH MARCH, 2011, WHEREIN THEIR LORDSHIP HAVE HELD THAT PRIOR TO THE AMENDMENT BROUGHT IN SECTION 28 W.E.F. 1.4.2003 ANY PAYMENT RECEIVED AS NON-COMPETITION FEE UNDER A NEGATIVE COVENANT WAS A CAPITAL RECEIPT, NOT TAXABLE UNDER THE ACT. HERE IN THIS CASE ALSO IN VIEW OF SALE AND PURCHASE AGREEMENT DATED 1.8.1997 ENTERED WITH M/S. HENKEL SPIC INDIA LTD. THERE WAS CLEAR CUT NEGATIVE COVENANT VIDE PARA 3.1, WHICH READS AS UNDER :- 3.1 IN CONSIDERATION OF THE AFORESAID AGREEMENT AND IN FURTHER CONSIDERATION OF THE SUM OF RS. 1,50,00,000/- (RUPEES ONE CRORE 6 AND FIFTY LACS ONLY) PAID BY THE PURCHASER TO THE VENDOR ON OR BEFORE THE DATE HEREOF (THE PAYMENT AND RECEIPT WHEREOF THE VENDOR DOES HEREBY ADMIT AND ACKNOWLEDGE) THE VENDOR UNDERTAKES AND COVENANTS WITH THE PURCHASER THAT THE VENDOR WILL NOT, FOR A PERIOD OF TWO YEARS FROM THE CLOSING DATE DIRECTLY OR INDIRECTLY OR OTHERWISE INDIVIDUALLY OR JOINTLY OR AS AGENTS OF ANY PERSON, CORPORATION, FIRM OR INDIVIDUAL BECOME ENGAGED OR CONCERNED OR INTEREST IN OR AID IN THE BUSINESS OR ACTIVITY IN ANY MANNER SIMILAR TO THE BUSINESS NOR PERMIT THEIR NAMES TO BE USED IN CARRYING ON OR IN CONNECTION WITH THE BUSINESS OF ANY THIRD PARTY OR SOLICIT ANY CUSTOMER, DISTRIBUTOR, SUPPLIER, DEALER OR AGENT OF THE PURCHASER AT ANY TIME PROVIDED HOWEVER THE VENDOR SHALL BE ENTITLED TO ENGAGE IN THE BUSINESS TO THE LIMITED EXTENT OF MANUFACTURING, PRODUCING OR PROCESSING THE PRODUCTS IN PURSUANCE OF PURCHASE ORDERS PLACED BY THE PURCHASER. 6. MR. VOHRA SUBMITTED THAT, THE AFORESAID CLAUSE CLEARLY PROVIDES THAT THE AMOUNT IS BEING PAID FOR LOSS OF BUSINESS WITH A NEGATIVE COVENANT, NOT TO ENGAGE IN THE BUSINESS FOR PERIOD OF 2 YEARS AND THEREFORE, IN VIEW OF THE SUPREME COURT IN THE CASE OF GUFFIC CHEM PVT. LTD. VS. CIT (SUPRA), IT WAS NOT TAXABLE; AND IF SUCH A CLAIM OF NON TAXABILITY IS BASED ON LAW OF THE SUPREME COURT, THEN SAME TANTAMOUNT TO A LEGAL CLAIM WHICH DESERVES TO BE ADMITTED AND ALLOWED, IN VIEW OF THE PRINCIPLE LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF NTPC VS. CIT (SUPRA). ON MERITS, IT WAS SUBMITTED THAT PRIOR TO AMENDMENT U/S 28 (VA) I.E., PRIOR TO 1.4.2003, SUCH RECEIPT IS PURELY A CAPITAL RECEIPT AND THIS HAS BEEN REITERATED BY THE HONBLE SUPREME COURT IN THE CASE OF SHIV RAJ GUPTA VS CIT REPORTED IN 425 ITR 420. LD. DR ON THE ISSUE OF THE MERITS FAIRLY ADMITTED THAT THE SAME IS COVERED BY THE JUDGMENT OF HONBLE SUPREME COURT. 7 7. SINCE THIS TRIBUNAL HAS ALREADY ADMITTED THE SAID GROUND AND OTHERWISE ALSO IT IS PURELY A LEGAL CLAIM BASED ON FACTS AND MATERIAL ALREADY ON RECORD, THEREFORE, IT DESERVES TO BE ADMITTED. THE ONLY ISSUE BEFORE US IS, WHETHER THE SAID NON-COMPETE FEE ON ACCOUNT OF EXECUTING OF NEGATIVE COVENANT IS TAXABLE OR NOT,, I.E. WHETHER IT IS A CAPITAL RECEIPT. AS EVIDENT FROM THE AFORESAID CLAUSES OF SALE AND PURCHASE AGREEMENT, THE ASSESSEE WAS PAID SUM OF RS. 1,50,00,000/- THAT ASSESSEE WILL NOT FOR A PERIOD OF TWO YEARS FROM THE CLOSING DATE, DIRECTLY OR INDIRECTLY OR OTHERWISE CARRY OUT ANY BUSINESS OR ACTIVITY IN ANY MANNER SIMILAR TO THE BUSINESS WHICH WAS TRANSFERRED. THUS, THERE WAS A CLEAR CUT NEGATIVE COVENANT FOR WHICH ASSESSEE HAD RECEIVED NON-COMPETE FEE. SINCE THE PAYMENT OF NON-COMPETE FEE HAS BEEN MADE IN ASSESSMENT YEAR 1998-99, THEREFORE, SAME IS PRIOR TO THE AMENDMENT BROUGHT TO SECTION 28 (VA). THE HONBLE SUPREME COURT IN THE CASE OF GUFFIC CHEM VS CIT REPORTED IN 332 ITR 602 (SC ) HAD OBSERVED AND HELD AS UNDER :- 5 THE POSITION IN LAW IS CLEAR AND WELL-SETTLED. THERE IS A DICHOTOMY BETWEEN RECEIPT OF COMPENSATION BY AN ASSESSEE FOR THE LOSS OF AGENCY AND RECEIPT OF COMPENSATION ATTRIBUTABLE TO THE NEGATIVE/RESTRICTIVE COVENANT. THE COMPENSATION RECEIVED FOR THE LOSS OF AGENCY IS A REVENUE RECEIPT WHEREAS THE COMPENSATION ATTRIBUTABLE TO A NEGATIVE/RESTRICTIVE COVENANT IS A CAPITAL RECEIPT. 6. THE ABOVE DICHOTOMY IS CLEARLY SPELT OUT IN THE JUDGMENT OF THIS COURT IN GILLANDERS ARBUTHNOT & CO. LTD. 'S CASE (SUPRA) IN WHICH THE FACTS WERE AS FOLLOWS. THE ASSESSEE IN THAT CASE CARRIED ON BUSINESS IN DIVERSE FIELDS BESIDES ACTING AS MANAGING AGENTS, SHIPPING AGENTS, PURCHASING AGENTS AND SECRETARIES. THE ASSESSEE ALSO ACTED AS IMPORTERS AND DISTRIBUTORS ON BEHALF OF FOREIGN PRINCIPALS AND BOUGHT AND SOLD ON ITS OWN ACCOUNT. UNDER AN AGREEMENT WHICH WAS TERMINABLE AT WILL ASSESSEE ACTED AS A SOLE 8 AGENT OF EXPLOSIVES MANUFACTURED BY IMPERIAL CHEMICAL INDUSTRIES (EXPORT) LTD. THAT AGENCY WAS TERMINATED AND BY WAY OF COMPENSATION THE IMPERIAL CHEMICAL INDUSTRIES (EXPORT) LTD., PAID FOR FIRST THREE YEARS AFTER THE TERMINATION OF THE AGENCY TWO- FIFTHS OF THE COMMISSION ACCRUED ON ITS SALES IN THE TERRITORY OF THE AGENCY OF THE APPELLANT AND IN ADDITION IN THE THIRD YEAR FULL COMMISSION WAS PAID FOR THE SALES IN THAT YEAR. THE IMPERIAL CHEMICAL INDUSTRIES (EXPORT) LTD., TOOK A FORMAL UNDERTAKING FROM THE ASSESSEE TO REFRAIN FROM SELLING OR ACCEPTING ANY AGENCY FOR EXPLOSIVES. 7. TWO QUESTIONS AROSE FOR DETERMINATION, NAMELY, WHETHER THE AMOUNTS RECEIVED BY THE APPELLANT FOR LOSS OF AGENCY WAS IN NORMAL COURSE OF BUSINESS AND THEREFORE WHETHER THEY CONSTITUTED REVENUE RECEIPT? THE SECOND QUESTION WHICH AROSE BEFORE THIS COURT WAS WHETHER THE AMOUNT RECEIVED BY THE ASSESSEE (COMPENSATION) ON THE CONDITION NOT TO CARRY ON A COMPETITIVE BUSINESS WAS IN THE NATURE OF CAPITAL RECEIPT? IT WAS HELD THAT THE COMPENSATION RECEIVED BY THE ASSESSEE FOR LOSS OF AGENCY WAS A REVENUE RECEIPT WHEREAS COMPENSATION RECEIVED FOR REFRAINING FROM CARRYING ON COMPETITIVE BUSINESS WAS A CAPITAL RECEIPT. THIS DICHOTOMY HAS NOT BEEN APPRECIATED BY THE HIGH COURT IN ITS IMPUGNED JUDGMENT. THE HIGH COURT HAS MISINTERPRETED THE JUDGMENT OF THIS COURT IN GILLANDERS ARBUTHNOT & CO. LTD. 'S CASE (SUPRA). IN THE PRESENT CASE, THE DEPARTMENT HAS NOT IMPUGNED THE GENUINENESS OF THE TRANSACTION. IN THE PRESENT CASE, WE ARE OF THE VIEW THAT THE HIGH COURT HAS ERRED IN INTERFERING WITH THE CONCURRENT FINDINGS OF FACT RECORDED BY THE CIT(A) AND THE TRIBUNAL. ONE MORE ASPECT NEEDS TO BE HIGHLIGHTED. PAYMENT RECEIVED AS NON-COMPETITION FEE UNDER A NEGATIVE COVENANT WAS ALWAYS TREATED AS A CAPITAL RECEIPT TILL THE ASSESSMENT YEAR 2003- 9 04. IT IS ONLY VIDE FINANCE ACT, 2002 WITH EFFECT FROM 1-4-2003 THAT THE SAID CAPITAL RECEIPT IS NOW MADE TAXABLE [SEE : SECTION 28(VA)]. THE FINANCE ACT, 2002 ITSELF INDICATES THAT DURING THE RELEVANT ASSESSMENT YEAR COMPENSATION RECEIVED BY THE ASSESSEE UNDER NON-COMPETITION AGREEMENT WAS A CAPITAL RECEIPT, NOT TAXABLE UNDER THE 1961 ACT. IT BECAME TAXABLE ONLY WITH EFFECT FROM 1-4- 2003. IT IS WELL-SETTLED THAT A LIABILITY CANNOT BE CREATED RETROSPECTIVELY. IN THE PRESENT CASE, COMPENSATION RECEIVED UNDER NON-COMPETITION AGREEMENT BECAME TAXABLE AS A CAPITAL RECEIPT AND NOT AS A REVENUE RECEIPT BY SPECIFIC LEGISLATIVE MANDATE VIDE SECTION 28(VA) AND THAT TOO WITH EFFECT FROM 1-4-2003. HENCE, THE SAID SECTION 28(VA) IS AMENDATORY AND NOT CLARIFICATORY. LASTLY, IN CIT V. RAI BAHADUR JAIRAM VALJI [1959] 35 ITR 148 IT WAS HELD BY THIS COURT THAT IF A CONTRACT IS ENTERED INTO IN THE ORDINARY COURSE OF BUSINESS, ANY COMPENSATION RECEIVED FOR ITS TERMINATION (LOSS OF AGENCY) WOULD BE A REVENUE RECEIPT. IN THE PRESENT CASE, BOTH CIT(A) AS WELL AS THE TRIBUNAL, CAME TO THE CONCLUSION THAT THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH RANBAXY LED TO LOSS OF SOURCE OF BUSINESS; THAT PAYMENT WAS RECEIVED UNDER THE NEGATIVE COVENANT AND THEREFORE THE RECEIPT OF RS. 50 LAKHS BY THE ASSESSEE FROM RANBAXY WAS IN THE NATURE OF CAPITAL RECEIPT. IN FACT, IN ORDER TO PUT AN END TO THE LITIGATION, PARLIAMENT STEPPED INTO SPECIFICALLY TAX SUCH RECEIPTS UNDER NON-COMPETITION AGREEMENT WITH EFFECT FROM 1-4-2003. 8. THIS PRINCIPLE WAS REITERATED BY THE HONBLE SUPREME COURT IN THE CASE OF SHIV RAJ GUPTA VS. CIT, WHEREIN THEIR LORDSHIP FOLLOWING THE PRINCIPLE LAID DOWN IN THE CASE OF GUFFIC CHEM VS CIT (SUPRA) HELD THAT PRIOR TO THE AMENDMENT BROUGHT BY THE FINANCE ACT 2002 W.E.F. 1.4.2003 IN SECTION 28(VA), THE COMPENSATION RECEIVED BY THE ASSESSEE UNDER NON COMPETE AGREEMENT WAS A CAPITAL RECEIPT NOT 10 TAXABLE. THUS, ISSUE AS RAISED IN THE CROSS OBJECTION IS SQUARELY COVERED BY THE JUDGMENT OF HONBLE APEX COURT. 9. ACCORDINGLY, FOLLOWING THE LAW AND PRINCIPLE LAID DOWN BY THE HONBLE APEX COURT, AS ABOVE, WE HOLD THAT THE PAYMENT OF NON- COMPETE FEE OF RS. 1,50,00,000/- RECEIVED BY THE ASSESSEE COMPANY HAS NOT COMPETE FEE IS A CAPITAL RECEIPT AND NOT LIABLE TO BE TAXED. THUS, THE GROUND RAISED BY THE ASSESSEE IN CROSS OBJECTION IS ALLOWED. 10. IN THE RESULT THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/10/2021. SD/- SD/- (G.S. PANNU) (AMIT SHUKLA) PRESIDENT JUDICIAL MEMB ER DATED: 13/10/2021 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DEL HI