DCIT, Coimbatore V. Shri K.Muruganandan, Coimbatore

ITA 1773/CHNY/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0792 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-02-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 08-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA
• Assessee Lawyers: S SRIDHAR
• Keywords: Salary income; Capital receipt
• Section: 143(3); 148

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI. BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT & SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO.1773/MDS/2011 ASSESSMENT YEAR : 2003-04 THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(3), IST FLOOR, OLD BLDG, 63, RACE COURSE, COIMBATORE 641 018. VS. SHRI K. MURUGANANDAN, NO. 149, WEST SAMBANDAM ROAD, R.S. PURAM, COIMBATORE 641 002. [PAN:AEUPM0847D] (APPELLANT) (RESPONDENT) APPELLANT BY : DR. S. MOHARANA, CIT RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE DATE OF HEARING : 1 1 . 0 2 .201 3 DATE OF PRONOUNCEMENT : 18.02.2013 ORDER PER S.S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL IS DIRECTED AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME TAX (APPEALS) I, COIMBATORE DATED 24.08.2011 PASSED IN APPEAL NO. 65/10-11 FOR ASSESSMENT YEAR 2 003-04 IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 [IN SHORT THE ACT]. 2. IN THE COURSE OF HEARING, THE DR ARGUED THAT THE C IT(A) HAS ERRED IN HOLDING THAT THE AMOUNT RECEIVED BY THE ASSESSEE BY WAY OF NON-COMPETE FEE IS NOT TAXABLE. REITERATING THE GROUNDS RAISED, HE SUBMITTED THAT SINCE THE NON-COMPETE FEE IS TAXABLE UNDER SECTION 28(VA) WITH EFFECT FROM I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1773 1773 1773 1773/M/ /M/ /M/ /M/1 11 11 11 1 2 01.04.2003, THEREFORE, EVEN IF THE AGREEMENT IN QUE STION WAS EXECUTED BY THE ASSESSEE WITH THE PAYER ON 28.03.2001, THE SAME WOULD STILL BE WELL TAXABLE. ACCORDINGLY, HE PRAYS FOR ACCEPTANCE OF TH E APPEAL. 3. ON THE OTHER HAND, THE ASSESSEE WOULD CONTEND B EFORE US THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY HOLDING THAT SINCE THE ASSESSEE HAD EXECUTED THE AG REEMENT IN QUESTION ON 28.03.2001, THEREFORE, EVEN IF THE CONSIDERATION IS RECEIVED IN THE PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR, THE SAME WOULD DATE BACK TO THE DATE OF AGREEMENT HAVING ACCRUED AT THAT POI NT OF TIME. THEREFORE, THE CONSIDERATION IN QUESTION WOULD NOT BE TAXABLE IN T HE IMPUGNED ASSESSMENT YEAR. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL HAVING INCOME FROM SALARY AND OTHER SOURCES. ON 17.12. 2003, HE HAD FILED HIS RETURN AND DISCLOSED TOTAL INCOME OF ` .29,24,520/-. 5. IN SCRUTINY PROCEEDINGS, THE ASSESSING OFFICE R NOTICED FROM ASSESSEES STATEMENT OF INCOME ENCLOSED WITH THE R ETURN THAT HE HAD STATED TO HAVE RECEIVED A SUM OF 5,80,875 US DOLLARS FROM AN ENTITY NAMELY, METTLER TOLEDO INC FOR NOT INVOLVING HIMSELF IN ANY BUSINESS ACTIVITY AS PER TERMS OF NON-COMPETE AGREEMENT DATED 28.03.2001. IN SUPPORT THEREOF, THE ASSESSEE CONTENDED THAT THE SAID AMOUNT WAS NOT INC LUDED IN HIS TOTAL I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1773 1773 1773 1773/M/ /M/ /M/ /M/1 11 11 11 1 3 INCOME AS IT WAS A CAPITAL RECEIPT. EARLIER, THE AS SESSEES RETURN WAS PROCESSED SUMMARILY. THEREAFTER, REGULAR ASSESSME NT WAS COMPLETED. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED REOPENIN G NOTICE UNDER SECTION 148 OF THE ACT FOR THE REASON THAT THE ABOVE SAID NON-COMPETE FEE WAS TAXABLE UNDER SECTION 28(VA) AS INTRODUCED IN THE F INANCE ACT, 2002 WITH EFFECT FROM 01.04.2003. THEREAFTER, THE ASSESSING O FFICER COMPLETED REASSESSMENT AND ASSESSED THE TOTAL INCOME AS ` .1,86,48,377/- BY HOLDING THAT THE NON-COMPETE FEE RECEIVED IN THE PREVIOUS Y EAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR TO THE TUNE OF ` .1,57,23,853/- IN FURTHERANCE TO THE AGREEMENT EXECUTED ON 28.03.2001 WAS TAXABLE UN DER SECTION 28(VA) OF THE ACT. 6. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL. THE CI T(A), VIDE ORDER UNDER CHALLENGE HAS DELETED THE ADDITION MADE BY TH E ASSESSING OFFICER BY HOLDING THAT THE AMOUNT IN QUESTION IN THE SHAPE OF NON-COMPETE FEE WHICH HAD ACCRUED TO THE ASSESSEE ON THE DATE OF AGREEMEN T I.E. ON 28.03.2001; IS NOT TAXABLE UNDER SECTION 28(VA) WHICH WAS INCORPOR ATED WITH EFFECT FROM 01.04.2003 IN THE ACT. WHILST HOLDING SO, THE CIT (A) HAS ALSO RELIED UPON THE ORDER OF THE CHENNAI ITAT FOR THE ASSESSMENT YE AR 2004-05 PERTAINING TO THE ISSUE OF TAXABILITY OF NON-COMPETE FEE ARISING FROM THE SAME VERY AGREEMENT. THEREFORE, THE REVENUE IS AGGRIEVED. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1773 1773 1773 1773/M/ /M/ /M/ /M/1 11 11 11 1 4 7. WE HAVE HEARD BOTH PARTIES, PERUSED THE FINDING S OF THE ASSESSING OFFICER, CIT(A) AS WELL AS NON-COMPETE AGREEMENT AN D ORDER OF THE ITAT (SUPRA) AVAILABLE ON RECORD BEFORE US. THE ONLY ISS UE WHICH ARISES FOR OUR CONSIDERATION IS AS TO WHETHER THE AMOUNT IN QUESTI ON IN THE SHAPE OF NON- COMPETE FEE THOUGH RECEIVED IN THE PREVIOUS YEAR RE LEVANT TO THE IMPUGNED ASSESSMENT YEAR IN FURTHERANCE TO THE NON-COMPETE A GREEMENT DATED 28.03.2001 IS TAXABLE IN THE IMPUGNED ASSESSMENT YE AR OR NOT. WE NOTICE THAT THE COORDINATE BENCH IN I.T.A. NO. 797/MDS/200 7 HAS DECIDED THIS ISSUE ON 30.10.2009 IN ASSESSEES OWN CASE FOR THE ASSESS MENT YEAR 2004-05 (SUPRA) AND HELD AS UNDER: 17. IN VIEW OF OUR FOREGOING DISCUSSION WE ARE OF THE CONSIDERED OPINION THAT IN VIEW OF THE FACTS AND THE CIRCUMSTA NCES OF THIS CASE THE NON-COMPETE FEES HAD ACCRUED TO THE ASSESSEE ON THE DATE OF AGREEMENT VIZ. 28.03.2001 AND AS SUCH, IT IS NOT TAXABLE UNDE R THE AMENDED PROVISIONS OF SECTION 28(VA) WHICH WOULD NOT APPLY TO THIS RECEIPT. HENCE, WE REVERSE THE FINDING OF LD. CIT(A) AFTER S ETTING THEM ASIDE AND ACCEPT THE GROUNDS OF APPEAL. WE ORDER TO DELETE TH E IMPUGNED ADDITION. TAKING CUE FROM THE SAME, WE OBSERVE THAT THE ISSU E IS SQUARELY COVERED. IN CLEAR TERMS, THE COORDINATE BENCH HAS H ELD THAT THE RIGHT TO RECEIVE NON-COMPETE FEE IN QUESTION HAD ACCRUED TO THE ASSESSEE ON 28.03.2001. THEREFORE, THE CHARGING SECTION 28(VA), WHICH HAS BEEN INTRODUCED IN THE ACT W.E.F. 01.04.2003 WOULD NOT BE ATTRACTED IN ASSESSEES CASE. THOUGH, THE REVENUE ARGUES THAT TH E ORDER IS DISTINGUISHABLE ON FACTS, IN OUR OPINION, MERELY ON ORAL ASSERTION IN THIS I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1773 1773 1773 1773/M/ /M/ /M/ /M/1 11 11 11 1 5 REGARD AND THAT TOO, IN THE ABSENCE OF ANY WELL FOU NDED REASON CANNOT BE A GROUND NOT TO FOLLOW THE DECISION OF LD. COORDINATE BENCH. THEREFORE, WE AFFIRM THE FINDINGS OF THE CIT(A) IN HOLDING THAT T HE NON-COMPETE FEE RECEIVED BY THE ASSESSEE IS NOT TAXABLE IN THE IMPUGNED ASSE SSMENT YEAR. 7. IN THE RESULT, REVENUES APPEAL STANDS DISMISSE D BEING DEVOID OF MERITS. ORDER PRONOUNCED ON MONDAY, THE 18 TH OF FEBRUARY, 2013 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (S.S. GODARA) JUDICIAL MEMBER CHENNAI, DATED, THE 18.02.2013 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.