SHEKHAR K. SHAH, MUMBAI V. DY. CIT.3(3), MUMBAI

ITA 3809/MUM/2010

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1904 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 20-01-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 12-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CAPT PRADEEP S ARYA
• Assessee Lawyers: S VENKATRAMA N
• Keywords: Opportunity of being heard; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.3809/M/2010 ASSESSMENT YEAR: 2006-07 SHRI SHEKHAR K. SHAH, 42, MIAMI APARTMENTS, 70A, BHULABHAI DESAI ROAD, MUMBAI 400 026 PAN: AAJPS1511P VS. DY. CIT 3(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI S. VENKATRAMAN, A.R. REVENUE BY : CAPT. PRADEEP S. ARYA, D.R. DATE OF HEARING : 21.09.2016 DATE OF PRONOUNCEMENT : 25.11.2016 O R D E R PER AMAR JIT SINGH, JUDICIAL MEMBER: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 01.02.2010 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)]-7, MUMBAI RELEVANT TO ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSEE SUBMITS THAT THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.5 LACS MADE BY THE ASSESSING OFFICER TOWARDS NON-COMPETE FEE. 2. THE ASSESSEE MAY BE PERMITTED TO ADD TO OR AMEND THE ABOVE GROUND OF APPEAL AT THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 31.08.2006 DECLARING TOTAL ITA NO.3809/M/2010 SHRI SHEKHAR K. SHAH 2 INCOME TO THE TUNE OF RS.97486189/-. THE SAME WAS PROCESSED UNDER SECTION 143(1) ON 16.05.07 AND THE RETURNED INCOME WAS ACCEPTED. THEREAFTER THE NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 19.06.2007 AND SERVED UPON THE ASSESSEE. SUBSEQUENTLY, THE NOTICES UNDER SECTION 143(2) AND 143(1) WERE ISSUED ON 06.08.2008 WHICH WERE ALSO SERVED UPON THE ASSESSEE. THE ASSESSEE WAS DRAWING THE SALARY FROM M/S. VOSSLOH-SCHWABE INDIA PVT. LTD. THE ASSESSEE RECEIVED THE NON COMPETE FEES TO THE TUNE OF RS.50 LAKH IN VIEW OF THE AGREEMENT DATED 10.03.1998 FROM M/S. VOSSLOH-SCHWABE INDIA PVT. LTD. THIS AMOUNT WAS PAYABLE TO THE ASSESSEE IN THE TEN ADVANCED YEARS WITH AN AGREEMENT TO PAY AN AMOUNT OF RS.5 LACS PER ANNUM. THE ASSESSEE RECEIVED AN AMOUNT OF RS.5 LACS FROM THE ASSESSMENT YEAR OF 1999-2000 TO 2001-02. IN THE ASSESSMENT YEAR OF 2002-03 HE RECEIVED AN AMOUNT OF RS35 LACS AS INCOME ON ACCOUNT OF NON COMPETE FEES. THE ASSESSEE CLAIMED THE SAID AMOUNT AS CAPITAL RECEIPT. THE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE THE LAW HAS BEEN CHANGED IN VIEW OF INSERTION OF SECTION 28(VA) BY FINANCE ACT 2002 W,E,F 1 ST APRIL 2003.THEREFORE THE ASSESSEE RECEIVED THE ALL AMOUNT I.E 35 LACS IN THE YEAR 2002-03.THEREFORE RELYING UPON THE AGREEMENT THE AMOUNT RECEIVABLE AFTER 2002-03 HAS BEEN TREATED AS INCOME OF THE ASSESSEE 4. THE ASSESSEE FILED THE APPEAL BEFORE THE LD. CIT(A)-7, MUMBAI WHEREIN THE SAID ADDITION WAS CONFIRMED. THEREFORE THE ASSESSEE FILED THE PRESENT APPEAL BEFORE US. 5. ISSUE NO.1 THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE NON COMPETE FEES UP TO THE YEAR W.E.F. 1999-2000 TO 2001-2002 HAS BEEN ACCEPTED AS CAPITAL IN NATURE BUT THEREAFTER THE SAME WAS DECLINED WITHOUT CONSIDERING THE AGREEMENT AND SUPPLEMENTARY AGREEMENT AND MINUTES OF ITA NO.3809/M/2010 SHRI SHEKHAR K. SHAH 3 BOARD DATED 27.02.2002 LIES AT PAGE 47 TO 49 ON RECORD THEREFORE IN VIEW OF THE SAID DOCUMENTS THE ISSUE IN QUESTION IS REQUIRED TO BE EXAMINED IN ACCORDANCE WITH LAW. HOWEVER, ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE HAS RELIED UPON THE ORDER PASSED BY THE LD. CIT(A) IN QUESTION. IT IS NOT IN DISPUTE THAT THE ASSESSEE RECEIVED AN AMOUNT OF RS.50 LACS ON ACCOUNT OF NON COMPETE FEES IN VIEW OF THE AGREEMENT DATED 14.07.1998 AND SUPPLEMENTARY DATED 14.01.2002. THE MINUTES WHICH IS THE PART AND PARCEL OF THE AGREEMENT LIES AT PAGE 47 TO 49 HAS NOT BEEN CONSIDERED PROPERLY WHILE DECIDING THE ISSUE UNDER CONTROVERSY. ANYHOW WHEN ANY SPECIFIC PIECE OF EVIDENCE, IF ANY, WAS NOT CONSIDERED BY THE AUTHORITY BELOW THAN IN THE SAID CIRCUMSTANCES IT CAN BE CLEARLY OBSERVED THAT THE ASSESSEE IS ENTITLED TO GET AN OPPORTUNITY FOR THE CONSIDERATION OF THE SAID PIECE OF EVIDENCE IN ACCORDANCE WITH LAW. THE ASSESSEE RECEIVED THE NON COMPETE FEES RS 50 LACS PAYABLE IN THE INSTALLMENT OF RS 5 LACS PER ANNUM UPTO NEXT 10 YEARS FOR A PERIOD W.E.F 1998-99 TO ONWARDS. SUBSEQUENTLY SUPPLEMENTARY AGREEMENT AND MINUTES OF MEETING REGARDING AGREEMENT CAME INTO IN EXISTENCE. BEFORE DECIDING THE MATTER OF CONTROVERSY ALL THE DOCUMENTS WERE NOT CONSIDERED. IN VIEW OF THE SAID CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE LD. CIT(A) IS NOT CORRECT AND IN ACCORDANCE WITH LAW. THEREFORE, WE SET ASIDE THE FINDING OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DECIDE THE MATTER AFRESH IN VIEW OF THE AGREEMENT DATED 14.07.1998 AND SUPPLEMENTARY AGREEMENT DATED 14.01.2002 AND MINUTES OF BOARD MEETING HELD ON 27.02.2002 OR IF ANY OTHER EVIDENCE FOUND TO BE RELEVENT IN ACCORDANCE WITH LAW AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. ITA NO.3809/M/2010 SHRI SHEKHAR K. SHAH 4 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.11.2016. SD/- SD/- (R.C. SHARMA) (AMARJIT SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 25.11.2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.