HARSHIT FINLEASE & INVESTMENTS P.LTD, MUMBAI V. ADDL CIT 1(1), MUMBAI

ITA 4989/MUM/2011

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 6612 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2006-2007
• Appeal Filed On: 23-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M RAJAN
• Assessee Lawyers: IKSHU SHAH; J D MISTRY SHRI HARSH KOTHARI
• Keywords: Business income; Share purchase agreement; Earning of tax free income; Capital expenditure; Rule 8D; Set aside; Liquidation; Capital Gains
• Section: 234B; 14A; 115JB; 250; 54EC; 13; 22; 54; 37; 28; 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H , MUMBAI BEFORE SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND SHRI PAWAN SINGH , JUDICIAL MEMBER ITA NO. 4989 /MUM/201 1 : A.Y : 20 06 - 07 M/S. HARSHIT FINLEASE & INVESTMENTS PVT. LTD., (FORMERLY M/S. HARSHIT FINLEASE & INVESTMENTS LTD.) THE INTERNATIONAL, 5 TH FLOOR, 16, NEW MARINE LINES CROSS ROAD NO. 1, CHURCHGATE, MUMBAI 400 020. PAN : AAACH8737 Q (APPELLANT) VS. ADDL. COMMISSIONER OF INCOME TAX - 1(1) , MUMBAI (RESPONDENT) ITA NO. 4991/MUM/2011 : A.Y : 2006 - 07 M/S. HARSHIT FINLEASE & INVESTMENTS PVT. LTD., (FORMERLY M/S. HARSHIT FINLEASE & INVESTMENTS LTD.) THE INTERNATIONAL, 5 TH FLOOR, 16, NEW MARINE LINES CROSS ROAD NO. 1, CHURCHGATE, MUMBAI 400 020. PAN : AAACH8737Q (APPELLANT) VS. INCOME TAX OFFICER - 1(1)(4), MUMBAI (RESPONDENT) APPELLANT BY : SHRI J.D. MISTRY, SHRI HARSH KOTHARI & MS. IKSHU SHAH RESPONDENT BY : SHRI M. RAJAN DATE OF HEARING : 0 9/ 09 /2019 DATE OF PRONOUNCEMENT : 03 /1 2 /2019 2 M/S. HARSHIT FINLEASE & INVESTMENTS PVT. LTD. ITA NOS. 4989 & 4991/MUM/2011 O R D E R PER SHAMIM YAHYA , ACCOUNTANT MEMBER THESE ARE APPEALS BY THE ASSESSEE BOTH PERTAINING TO ASSESSMENT YEAR 2006 - 07. ITA NO. 49 8 9/MUM/ 2011 IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) DATED 29.01.2009 WITH RESPECT TO ASSESSMENT ORDER PASSED UNDER SECTION 1 4 3(3) OF THE IN COME TAX ACT, 1961 (IN SHORT THE ACT) AND ITA NO. 4 991/MUM/ 2011 IS DIRECTED AGAINST ORDER OF LEARNED CIT(A) DATED 06.03.2009 WITH RESPECT TO ORDER PASSED UNDER SECTION 1 5 4 OF THE ACT . ITA NO. 4989 /MUM/2011 : - 2. THE G ROUNDS RAISED BY THE ASSESSEE IN THIS APPEAL READ AS UNDER : - GROUND 1 : ASSESSING THE CONSIDERATION RECEIVED FOR NON - COMPETE FEES AS BUSINESS INCOME INSTEAD OF CAPITAL GAINS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (A PPEAL) - 1 MUMBAI (CIT(A)) ERRED IN UPHOLDING THE ACTION OF THE ADDL. COMMISSIONER OF INCOME TAX 1(1), MUMBAI (THE AO') IN ASSESSING THE AMOUNT DESIGNATED AS NON - COMPETE FEES OF RS.6,17,05,193 UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION INSTEAD OF CAPITAL GAIN CLAIMED BY THE APPELLANT. 2. THE APPELLANT PRAYS THAT THE SAID AMOUNT DESIGNATED AS NON - COMPETE FEES BE TAXED AS CAPITAL GAINS. GROUND 2 : DISALLOWANCE OF INTEREST PAYMENT OF RS.26,86,883/ - 1. ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE CIT(A) ERRED IN THE UPHOLDING THE ACTION OF THE AO IN DISALLOWING INTEREST EXPENSES OF RS.26,86,883/ - ON THE ALLEGED GROUND THAT THE INTEREST EXPENSE HAS NOT BEEN INCURRED 3 M/S. HARSHIT FINLEASE & INVESTMENTS PVT. LTD. ITA NOS. 4989 & 4991/MUM/2011 FOR BUSINESS PURPOSE AS THE BORROWED FUNDS WERE UTILIZED FOR INVESTING IN THE CAPITAL BONDS AS SPECIFIED U/S. 54EC OF THE ACT, EVEN THOUGH THE INTEREST ON THE SAID CAPITAL BONDS HAS BEEN TAXED UNDER THE HEAD BUSINESS INCOME. 2. THE APPELLANT PRAYS THAT THE DISALLOWANCE OF INTEREST OF RS.26,86,883/ - BE DELETED AS ONLY THE NET INCOME CAN BE SUBJECTED TO TAX AND NOT THE GROSS REVENUE. GROUND 3 : DISALLOWANCE U/S. 14A 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE DIRECTION OF THE CIT(A) TO RECOMPUTE THE DISALLOWANCE UNDER SECTION 14A IN THE LIGHT OF THE DECISION OF GODREJ & BOYCE V. DCIT (328 ITR 81) IS VOID AB - INITIO OR/AND BAD IN LAW AS THE CIT(A) DOES NOT HAVE POWER TO SET ASIDE ANY MATTER TO THE FILE OF THE AO. 2. THE APPELLANT PRAYS THAT THE ACTION OF THE CIT(A) BE QUASHED AND HELD TO BE VOID - AB - INITIO. GROUND 4 : WITHOUT PREJUDICE TO THE GROUND 3 : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN DISALLOWING RS.38,82,081/ - U/S 14A OF THE ACT. 2. THE APPELLANT PRAYS THAT THE DISALLOWANCE OF RS.38,82,081/ - U/S 14A BE DELETED. GROUND 5 : ADDITION OF AMOUNT DEPOSITED IN THE ESCROW ACCOUNT TO BOOK PROFITS U/S. 115JB OF THE ACT 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN ADDING THE AMOUNT DEPOSITED IN THE ESCROW ACCOUNT TO THE BOOK PROFIT COMPUTED U/S. 115JB OF THE ACT. 4 M/S. HARSHIT FINLEASE & INVESTMENTS PVT. LTD. ITA NOS. 4989 & 4991/MUM/2011 2. THE APPELLANT PRAYS THAT THE ADDITION OF THE AMOUNT DEPOSITED IN THE ESCROW ACCOUNT WHILE COMPUTING BOOK PROFIT FOR THE PURPOS E OF SECTION 115JB OF THE ACT BE DELETED. GROUND 6 : LEVY OF INTEREST U/S 234B AND 234C OF THE ACT : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN LEVYING INTEREST UNDER SECTION 234B AND 234C OF THE ACT . 2. THE APPELLANT PRAYS THAT THE INTEREST LEVIED U/S 234B AND 234C BE DELETED. 3. THE FIRST ISSUE RAISED RELATES TO NON - COMPETE FEE. THE ASSESSEE IS A COMPANY AND IT HAS MENTIONED ITS NATURE OF BUSINESS AS INVESTMENT IN FORM 3CD. IN TH E RETURN OF INCOME, THE NATURE OF BUSINESS HAS BEEN STATED AS FINANCI AL SERVICE SECTOR. THE ASSESSING OFFICER OBSERVED THAT IN SCHEDULE 7 OF THE ANNUAL REPORT IT IS MENTIONED THAT ASSESSEE SOLD ITS INVESTMENT IN SHAW WALLACE AND COMPANY LTD. (SWCL). OUT O F THE SALE PROCEEDS RECEIVED FROM THE SALE, AN AMOUNT OF RS.20,66,25,000/ - WAS DEPOSITED IN A SEPARATE ESCROW ACCOUNT IN ACCORDANCE WITH THE SHARE PURCHASE AGREEMENT, THAT DUE TO UNCERTAINTY WITH RESPECT TO ACTUAL AMOUNT PAYABLE OUT OF THE ESCROW ACCOUNT, THE DIFFERENCE BETWEEN THE TOTAL SALE VALUE OF THE SAID SHARES AND THE AMOUNT WITHHELD IN THE ESCROW ACCOUNT HAS BEEN RECOGNISED AS PROFIT ON SALE OF SHARES IN THE PROFIT & LOSS ACCOUNT. 4. THE ASSESSING OFFICER FURTHER OBSERVED THAT IN THE COMPUTATION OF INCOME THE ASSESSEE HAS COMPUTED LONG TERM CAPITAL GAINS ON SALE OF SWCL SHARES AT RS.23,86,53,840/ - . FROM THE COMPUTATION SUBMITTED, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS TAKEN PER SHARE PRICE OF RS.322.01 FOR SALE 5 M/S. HARSHIT FINLEASE & INVESTMENTS PVT. LTD. ITA NOS. 4989 & 4991/MUM/2011 CONSIDERATION OF THESE SHARES. THE ASSESSING OFFICER ALSO NOTED THAT ASSESSEE SUBMITTED ONLY THREE PAGES OF THE THIRD AMENDMENT AND SUPPLEMENT TO THE PURCHASE AGREEMENT IN SUPPORT OF THE TOTAL CONSIDERATION RECEIVED FROM VIJAY MALLYA GROUP OF COMPANIES. THE ASSESSING OFFICER FURTHER OBSERVED THAT ON INDEPENDENT INQUIRY FROM SEBI WEBSITE IT WAS FOUND THAT OPEN OFFER WAS MADE TO ALL THE SHAREHOLDERS OF SWCL BY VIJAY MALLYA GROUP OF COMPANIES TO PURCHASE SHARES @ RS.260/ - P ER SHARE. IT WAS MENTIONED IN THE BACKGROUND OF THE OFFER THAT THE ACQUIRER HAS MADE ACQUISITION OF SWCL AT A PRICE OF RS.260/ - PER SHARE. 5. IN ADDITION TO THIS, THE ACQUIRER PAID RS. 65/ - PER SHARE TO THE PROMOTER GROUP OF SWCL REPRESENTING 25% OF TH E OFFER OF RS.260/ - PER SHARE TOWARDS A FIVE YEAR WORLDWIDE NON - COMPETE AGREEMENT BY THE PROMOTER GROUP OF SWCL. THE ASSESSING OFFICER ASKED THE ASSESSEE WHY THE NON - COMPETE FEE SHOULD NOT BE TREATED AS INCOME FROM BUSINESS AND PROFESSION . IN RESPONSE, ASSESSEE RELIED UPON THE PROVISO TO SECTION 28(VA) OF THE ACT AND SUBMITTED THAT HIS CASE WAS FALLING UNDER THE EXCEPTION CARVED OUT IN THE PROVISO TO THAT SECTION. 6. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH A COPY OF THE SHA RE PURCHASE AGREEMENT AND FURTHER SHOW - CAUSED THE ASSESSEE. THE ASSESSEE DID NOT SUBMIT THE SHARE PURCHASE AGREEMENT CITING REASONS OF CONFIDENTIALITY. THE ASSESSING OFFICER REJECTED THE ASSESSEES ARGUMENT THAT ITS CASE IS COVERED BY THE PROVISO TO SECT ION 28(VA) OF THE ACT. HE OBSERVED THAT AS PER THE NON - COMPETE CLAUSE, THE NON - COMPETE FEE RECEIVED BY THE ASSESSEE IS NOT ON ACCOUNT OF TRANSFER OF RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THING BUT FOR UNDERTAKING FIVE YEAR WORLDWIDE NON - COMPETE, THAT ASSESSEES BUSINESS IS MENTIONED IN FORM 3CD AS INVESTMENT, THAT ASSESSEE - COMPANY 6 M/S. HARSHIT FINLEASE & INVESTMENTS PVT. LTD. ITA NOS. 4989 & 4991/MUM/2011 WAS NEITHER IN THE BUSINESS OF LIQUOR MANUFACTURING NOR HOLDING ANY LICENCE FOR THE SAME, TRANSFER OF WHICH COULD BE CHARGEABLE UNDER CAPITAL GAINS. THEREFOR E, HE HELD THAT PROVISO TO SECTION 28(VA) OF THE ACT IS NOT APPLICABLE TO THE ASSESSEE. HENCE, THE ASSESSING OFFICER ADDED THE SUM OF RS.6,17,05,193/ - BEING NON - COMPETE FEE AS BUSINESS INCOME. 7. UPON ASSESSEES APPEAL, THE LEARNED CIT(A) REFERRED TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS COAL SHIPMENT (P.) LTD. , 82 ITR 902 (SC) AND HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS G.D. NAIDU, 165 ITR 63 (MAD) . THE CIT(A) PROCEEDED TO DISCUSS SEVERAL CASE LAWS. HE HELD THAT A PLAIN READING OF THE ENTIRE AGREEMENT AS WELL AS PROVISION OF LAW CLEARLY INDICATE S THAT ASSESSEE IS NOT COVERED BY THE PROVISO TO SECTION 28(VA) OF THE ACT F OR THE REASON THAT ASSESSEE HAD RECEIVED THE AMOUNT FOR NOT CARRYING OUT ANY ACTIVITY IN RELATION TO BUSINESS OF THE CONCERN, WHOSE SHARE APPELLANT HAD SOLD AND , SECONDLY, APPELLANT DOES NOT HAVE THE RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THING OR ANY RIGHT TO CARRY ON ANY BUSINESS WHICH IS CHARGEABLE UNDER THE HEAD CAPITAL GAINS; TH AT THE ASSESSEE POSS ESSES SHAREHOLDING OF SWCL AND IT CANNOT BE SAID THAT IT IS HOLDING ANY RIGHT AS ENVISAGED IN PROVISO TO SECTION 28(VA) OF THE ACT. HENCE, HE UPHELD THE ACTION OF THE ASSESSING OFFICER. AGAINST THIS ORDER, ASSESSEE IS IN APPEAL BEFORE US. 8 . WE HAVE HEARD BOTH THE COUN S EL S AND PERUSED THE RECORDS. THE LEARNED COUNSEL OF THE ASSESSEE , SHRI J . D . MISTRY FIRSTLY SUBMITTED THAT THE ENTIRE AMOUNT RECEIVED WAS TOWARDS PURCHASE CONSIDERATION AND NO PART WAS ATTRIBUTABLE TO NON - COMPETE FEE. H E FURTHER SUBMITTED THAT EVEN IF A PART IS TREATED AS NON - COMPETE FEE, THE ASSESSEE WOULD FALL UNDER THE PROVISO TO S ECTION 28 ( VA ) OF THE ACT . H E SUBMITTED THAT THE ASSESSEE IS AN INVESTMENT 7 M/S. HARSHIT FINLEASE & INVESTMENTS PVT. LTD. ITA NOS. 4989 & 4991/MUM/2011 COMPANY AND THE ASSESSEES CASE FALLS UNDER THE PROVISO TO S ECT ION 28 ( VA ) OF THE ACT IN AS MU CH AS, AS PER THE NON - COMPETE AGREEMENT , ASSESSEE HAS UNDERTAKEN NOT TO MAKE INVESTMENT AS SHAREHOLDER IN SUCH COMPANIES WHICH ARE ENGAGED IN SPECIFIED ACTIVITIES IN THE AGREEMENT. HENCE , THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE AMOUNT IS NOT AT ALL TAXABLE IN THE HANDS OF THE ASSESSEE. THE LEARNED COUNSEL OF THE ASSESSEE FURTHER RELIED UPON SEVERAL CASE LAWS IN SUPPORT OF HIS POSITION , INCLUDING THE FOLLOWING . I) CIT VS AM ALGAMATION (P.) LTD., 226 ITR 188 (SC) II) CIT VS DISTRIBUTORS (BARODA) (P.) LTD., 83 ITR 377 (SC) III) CIT VS SHIV RAJ GUPTA, 372 ITR 337 (DELHI) IV) CIT VS GOVINDLAL C. MANDHANA (HUF), ITA NOS. 1221 & 1222 OF 2012 DATED 14.11.2014 (BOMBAY HIGH COURT) V) ACIT VS SAVITA N. MANDHANA, ITA NO. 3900/MUM/2010 DATED 07.10.2011 VI) SHUKLENDU A. BAJI VS DCIT, ITA NO. 5209/MUM/2017 DATED 05.02.2018 VII) TECUMSEH INDIA (P.) LTD. VS ADDL. CIT , [2010] 127 ITD 1 (DELHI)(SB) T HE LEARNED DR, ON THE OTHER HAND , SUBMITTED THAT THE AUTHORITIES BELOW HAVE RIGHTLY HELD THAT ASSESSEES CASE DOES N O T FALL UNDER THE PROVISO TO S ECTION 28 ( VA ) OF THE ACT . HE RELIED UPON THE ORDERS OF AUTHORITIES BELOW. H E FURTHER SUBMITTED THAT THE CASE LAWS REFERRED BY THE LEARNED COUNSEL OF T HE ASSESSEE ARE NOT APPL ICABLE ON THE FACTS HERE . 9. W E HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS . F IRSTLY , WE SHALL ADDRESS THE DECISION OF THE AUTHORITIES BELOW THAT THE ASSESSEES CASE DOESNT FALL UNDER THE PROVISO TO S ECTION 28 ( VA ) OF THE ACT . IN 8 M/S. HARSHIT FINLEASE & INVESTMENTS PVT. LTD. ITA NOS. 4989 & 4991/MUM/2011 THIS REGARD , WE MAY GAINFULLY REFER TO THE PROVISIONS OF S ECTION 28 ( VA ) OF THE ACT AS UNDER : - 28. THE FOLLOWING INCOME SHALL BE CHARGEABLE TO INCOME - TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', ............. ................ (VA) ANY SUM, WHETHER RECEIVED OR RECEIVABLE, IN CASH OR KIND, UNDER AN AGREEMENT FOR (A) NOT CARRYING OUT ANY ACTIVITY IN RELATION TO ANY BUSINESS OR PROFESSION; OR (B) NOT SHARING ANY KNOW - HOW, PATENT, COPYRIGHT, TRADE - MARK, LICENCE, FRANCHISE OR ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF SIMILAR NATURE OR INFORMATION OR TECHNIQUE LIKELY TO ASSIST IN THE MANUFACTURE OR PROCESSING OF GOODS OR PROVISION FOR SERVICES: PROVIDED THAT SUB - CLAUSE (A) SHALL NOT APPLY TO (I) ANY SUM, WHETHER RE CEIVED OR RECEIVABLE, IN CASH OR KIND, ON ACCOUNT OF TRANSFER OF THE RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THING OR RIGHT TO CARRY ON ANY BUSINESS OR PROFESSION, WHICH IS CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS'; (II) ANY SUM RECEIVED AS COMPENSATION, FROM THE MULTILATERAL FUND OF THE MONTREAL PROTOCOL ON SUBSTANCES THAT DEPLETE THE OZONE LAYER UNDER THE UNITED NATIONS ENVIRONMENT PROGRAMME, IN ACCORDANCE WITH THE TERMS OF AGREEMENT ENTERED INTO WITH THE GOVERNMENT OF INDIA. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, (I) 'AGREEMENT' INCLUDES ANY ARRANGEMENT OR UNDERSTANDING OR ACTION IN CONCERT, (A) WHETHER OR NOT SUCH ARRANGEMENT, UNDERSTANDING OR ACTION IS FORMAL OR IN WRITING; OR (B) WHETHER OR NOT SUCH ARRANGEMENT, UNDERSTANDING OR ACTION IS INTENDED TO BE ENFORCEABLE BY LEGAL PROCEEDINGS; (II) 'SERVICE' MEANS SERVICE OF ANY DESCRIPTION WHICH IS MADE AVAILABLE TO POTENTIAL USERS AND INCLUDES THE PROVISION OF SERVICES IN CONNECTION WITH BUSINESS OF ANY INDUSTRIAL OR C OMMERCIAL NATURE SUCH AS ACCOUNTING, BANKING, COMMUNICATION, CONVEYING OF NEWS OR INFORMATION, ADVERTISING, ENTERTAINMENT, AMUSEMENT, EDUCATION, FINANCING, INSURANCE, CHIT FUNDS, REAL ESTATE, 9 M/S. HARSHIT FINLEASE & INVESTMENTS PVT. LTD. ITA NOS. 4989 & 4991/MUM/2011 CONSTRUCTION, TRANSPORT, STORAGE, PROCESSING, SUPPLY OF ELECTRIC AL OR OTHER ENERGY, BOARDING AND LODGING; I N THIS REGARD IT WILL ALSO BE RELEVANT TO REFER TO THE PORTION OF NON - COMPETE AGREEMENT AT P APER B OOK PAGE 6 7 AT 8.1 AND 8.2 AS UNDER : - SECTION 8.1 NON - COMPETE UNDERTAKING . IN CONSIDERATION OF THE SALE OF THE PALMER SHARES, THE M&P II SHARES (OR, UNDER CERTAIN CIRCUMSTANCES, THE PRIMO ORDINARY SHARES AND M&P II - OWNED SWC SHARES, THE MONTROSE SHARES, THE DANDVATI - OWNED SWC SHARES, THE FIRESTORM - OWNED SWC SHARES AND THE HARS HIT SHARES (TO THE EXTENT NOT TENDERED IN THE OPEN OFFER) AND THE GOODWILL ASSOCIATED THEREWITH, FOR A PERIOD COMMENCING ON THE CLOSING AND ENDING ON THE FIFTH ANNIVERSARY THEREOF, JUMBO SHALL NOT, AND SHALL CAUSE EACH OF ITS AFFILIATED ENTITIES NOT TO, AN YWHERE IN THE WORLD WHERE SWC , SWDI, PRIMO AND MONTROSE SELL DISTILLED SPIRITS, WINE AND COUNTRY LIQUOR CARRY ON OR BE ENGAGED IN, WHETHER AS FINANCIER, PROPRIETOR, PRINCIPAL, PARTNER, SHAREHOLDER, CONSULTANT, OR INVESTOR, THE BUSINESS OF PRODUCING, PROCES SING, SELLING, MARKETING, BRANDING, BOTTLING OR DISTRIBUTING DISTILLED SPIRITS AND OTHER NON - BREWED ALCOHOLIC BEVERAGES OR UTILISE ANY BRANDS OWNED BY SWC OR SWDL AND/OR ANY DERIVATIVES THEREOF IN RELATION TO ANY OTHER PRODUCTS. SECTION 8.2 NON - COMPETE CO NSIDERATION . IT IS ACKNOWLEDGED BY THE PARTIES THAT TWENTY PERCENT (20%) OF EACH OF THE PALMER PURCHASE PRICE, INVESTMENT COMPANY SWC SHARES PURCHASE PRICE, THE HARSHIT PURCHASE PRICE, THE M&P II - OWNED SWC SHARES PURCHASE PRICE (IF PAID HEREUNDER), AND T HE PORTION OF THE M&P II PURCHASE PRICE REPRESENTING THE VALUE OF THE M&P II - OWNED SWC SHARES (IF APPLICABLE) CONSTITUTES THE CONSIDERATION FOR THE NON - COMPETE UNDERTAKING UNDER SECTION 8.1 HEREOF. I N THIS REGARD , THE LEARNED COUNSEL OF THE ASSESSEE HAS EMPHASISED THAT THE SAID AGREEMENT ALSO PUTS RESTRICTION ON AGREEING PARTY NOT TO BECOME SHAREHOLDER INVESTOR IN THE BUSINESS AS SPECIFIED THEREIN . I N THIS REGARD , WE NOTE THAT IT IS UNDISPUTED THAT THE ASSESSEE IS AN INVESTMENT COMPANY. THE A UDITORS RE PORT IN THIS REGARD MAKES IT CLEAR THAT THE ASSESSEE IS AN INVESTMENT 10 M/S. HARSHIT FINLEASE & INVESTMENTS PVT. LTD. ITA NOS. 4989 & 4991/MUM/2011 COMPANY AND IT IS ALSO NOT TRADING IN SHARES . A READING OF S ECTION 28 ( VA ) OF THE ACT PROVIDES THAT ANY SUM RECEIVED OR RECEIVABLE IN CASH OR KIND UNDER AN AGREEMENT FOR NOT CARRYING ON ANY ACTIVITY IN RELATION TO ANY BUSINESS OR PROFESSION WOULD BE TAXABLE AS BUSINESS INCOME . HOWEVER , THE PROVISO TO THE SAID SECTION PROVIDES THAT THIS C LAUSE SHALL NOT APPLY TO ANY SUM WHICH IS RECEIVED ON ACCOUNT OF TRANSFER OF THE RIGHT TO MANUFACTURE PRODUCE OR PROCESS ANY ARTICLE OR THING OR RIGHT TO CARRY ON ANY BUSINESS OR PROFESSION WHICH IS CHARGEABLE UNDER THE HEAD C APITAL G AINS . A READING OF THE A RTICLE 8 OF THE AGREEMENT WHICH IS CAPTIONED N ON - C OMPETE , (SECTION 8.1) SHOWS THAT AFTER NARRATING THAT THE SUM IS BEING PAID IN CONSIDER ATION OF THE SALE OF THE SHARES, IT PROVIDES THAT THE AGREEING PARTIES SHALL NOT ANYWHERE IN THE WORLD ENGAGE IN THE SPECIFIED ACTIVITIES INCLUDING ENGAGING INTO THE SPECIFIED BUSINESS WHETHER AS FINANCIER , PROPRIETOR , PRINCIPAL , PARTNER , SHAREHOLDER , CONSULTANT OR INVESTOR. S ECTION 8.2 PROVIDES THAT 20% OF THE PURCHASE PRICE SHALL CONSTITUTE OF NON - COMPETE FEE . T HE ABOVE MAKES IT AMPLY CLEAR THAT THE AMOUNT RECEIVED AS NON - COMPETE FEE IS IN FACT FULLY F ALLING UNDER S ECTION 28 ( VA ) OF THE ACT. T HE AMOUNT RECEIVED IS IN CONSIDERATION OF ASSESSEE UNDERTAKING NOT TO ENGAGE IN THE SPECIFIED BUSINESS AS INVESTOR OR SHAR EHOLDER. SINCE THE ASSESSEE IS AN INVESTMENT COMPANY , THIS CLAUSE OF THE NON - COMPETE AGREEMENT IS FULLY APPLICABLE TO IT. 10. THE PROVISO TO S ECTION 28 ( VA ) OF THE ACT BRINGS AN ASSESSEE OUT OF THE AMBIT OF ABOVE SAID PROVISION OF SECTION 28 ( VA ) OF THE ACT IF THE SAME IS ON ACCOUNT OF TRANSFER OF ANY RIGHT TO MANUFACTURE, PRODUCE, PROCESS OR RIGHT TO CARRY ON ANY BUSINESS WHICH IS CHARGEABLE UNDER THE HEAD C APITAL G AINS . HERE , WE NOTE THAT BY NO STRETCH OF IMAGINATION IT CAN BE SAID THAT BY WAY OF THE SE CLAUSES THE ASSESSEE IS TRANSFERRING ITS RIGHT TO INVEST IN SUCH TYPE OF 11 M/S. HARSHIT FINLEASE & INVESTMENTS PVT. LTD. ITA NOS. 4989 & 4991/MUM/2011 BUSINESS. ASSESSEE HAS SOLD THE SHARES AND A SSESSEE IS PLAINLY UNDERTAKING NOT TO ENGAGE IN SUCH ACTIVITY AND IT IS NOT AT ALL TRANSFERRING ITS RIGHT TO INVEST IN SUCH BUSINESS TO ANYBODY WHATSOEVER. IN THIS VIEW OF THE MATTER , IN OUR CONSIDERED OPINION , THE ASSESSEES CASE DOESNT FALL UNDER PROVISO TO S ECTION 28 ( VA ) OF THE ACT . HENCE , THE AUTHORITIES BELOW ARE CORRECT IN HOLDING THAT THE NON - COMPETE FEE RECEIVED BY THE ASSESSEE DOESNT FALL UNDER THE PROVISO TO S ECTION 28 ( VA ) OF THE ACT. 11. N OW WE REFER TO THE ARGUMENT OF THE LEARNED COUNSEL OF THE ASSESSEE THAT NO PART OF THE SALE CONSIDERATION HAS BEEN RECEIVED AS NON - COMPETE FEE. WE FIND THAT THE SUBMISSION IS NOT AT ALL ACC EPTABLE IN VIEW OF THE EXPRESS PROVISIONS OF THE AGREEMENT UNDER THE ARTICLE NON - COMPETE REPRODUCED HEREIN ABOVE. THE ABOVE AGREEMENT MAKES IT AMPLY CLEAR THAT 20% OF THE SALE CONSIDERATION WAS TOWARDS A SPECIFIED NON - COMPETE AGREEMENT. THIS IS FURTHER SUPPORTED BY THE ASSESSING OFFICERS FINDING FROM THE SEBI WEBSITE WHERE HE FOUND THAT OPEN OFFER WAS MADE TO ALL SHAREHOLDERS OF SWCL BY VIJAYA MALLAYA GROUP OF COMPANIES TO PURCHASE SHARE @ 260 / - PER SHARE. THAT I N ADDITION TO IT , THE A CQUIRER PAID RS. 65 / - PER SHARE TO THE PROMOTER GROUP OF SWCL REPRESENTING 25% OF THE OFFER OF RS. 60 / - PER SHARE TOWARDS FIVE YEAR WORLDWIDE NON - COMPETE AGREEMENT BY PROMOTER GROUP OF SWCL. 12. IN THIS REGARD , THE ASSESSING OFFICER HAD ASKED THE ASSESSEE WHY THE NON - COMPETE FEE SHOULD NOT BE TREATED AS INCOME FROM BUSINESS . TO THIS , THE ASSESSEES RESPONSE WAS THAT ASSESSEES CASE WAS FALLING UNDER THE EXCEPTION TO THE PROVISIONS OF S ECTION 28 ( VA ) OF THE ACT PROVIDED IN THE PROVISO THEREOF . T HE ABOVE MAKES IT AMPL Y CLEAR THAT THE IMPUGNED AMOUNT WAS RECEIVED AS NON - CO MPETE FEE AS PER THE AGREEMENT. WE FURTHER NOTE THAT THE PRINCIPLE OF 12 M/S. HARSHIT FINLEASE & INVESTMENTS PVT. LTD. ITA NOS. 4989 & 4991/MUM/2011 APPROBATE AND REPROBATE DEBARS THE ASSESSEE FROM TAKING SHIFTING STAND ON THE PURPORT OF A DOCUMENT WHICH IS BEING RELIED UPON BY THE ASSESSEE ITSELF. THE ASSESSEE IS RELYING UPON THE SALE AGREEMENT IN SUPPORT OF THE SALE , BUT AT THE SAME TIME REJECTING THE NON - COMPETE CLAUSE MENTIONED THEREIN IN DENYING THAT THE SALE PRICE DID NOT CONTAIN NON - COMPETE FEE. THIS IS NOT PERMISSIBLE U NDER THE AFORESAID LEGAL MAXIM. THIS PRINCIPLE OF APPROBATE AND REPROBATE WAS REITERATED BY THE HON'BLE APEX COURT IN THE CASE OF SUZUKI PARASRAMPURIA SUITINGS PVT. LTD. VS THE OFFICIAL LIQUIDATOR OF MAHENDRA PETROCHEMICALS LTD. (IN LIQUIDATION) AND OTHERS IN CIVIL APPEAL NO. 10322 OF 2017 DATED 08.10.2018 . TO CONCLUDE, AS FOUND OUT BY US HEREINABOVE, ASSESSEE HAD FACTUALLY RECEIVED THE IMPUGNED AMOUNT OF SALE CONSIDERATION AS NON - COMPETE FEE AS MADE OBVIOUS BY THE READING OF T HE SPECIFIED CLAUSES OF THE AGREEMENT UNDER THE HEAD NON - COMPETE . 13. AS REGARDS THE DECISIONS REFERRED BY THE LEARNED COUNSEL FOR THE ASSESSEE, WE FIND THAT THEY DO NOT FRUCTIFY THE CASE OF THE ASSESSEE ON THE FACTS OF THIS CASE. AS REFERRED HEREIN ABOVE, THE AGREEMENT IN THIS CASE CLEARLY PROVIDED FOR PART OF THE SALE CONSIDERATION AS NON - COMPETE FEE. THIS WAS DULY CORROBORATED BY ASSESSING OFFICERS FINDING FROM SEBI WEBSITE MENTIONED ABOVE. 14. T HE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS SHIV RAJ GUPTA, 52 TAXMANN.COM 425 HAS GIVEN A FINDING THAT ON THE TRUE AND REAL NATURE OF THE TRANSACTION CAMOUFLAGED AS 'NON - COMPETE FEE', WE HAVE NO HESITATION AND RESERVATION THAT THE RESPONDENT ASSESSEE HAD INDULGED IN TAX AVOIDANCE . IN THE PRESENT CASE, IT IS NOT AT ALL THE CASE THAT THE NON - COMPETE FEE IS A CAM OUFLAGED. EVEN THE ASSESSEE NEVER SAID SO BEFORE THE AUTHORITIES BELOW. 13 M/S. HARSHIT FINLEASE & INVESTMENTS PVT. LTD. ITA NOS. 4989 & 4991/MUM/2011 THE FACTS OF THE CASE AND THE AGREEMENT MENTIONED HEREINABOVE AMPLY MAKE IT CLEAR THAT PART OF THE SALE CONSIDERATIO N WAS SPECIFIED AS NON - COMPETE FEE. 15. IN THE CASE OF HON'BLE JURISDICTIONAL HIGH COURT DECISION IN CIT VS GOVINDLAL C. MANDHANA (HUF) , IT WAS A CASE WHERE NO SPECIFIC CONSIDERATION WAS PAID AS NON - COMPETE FEE AND THE ASSESSING OFFICER HAD CARRIED OUT AN EXERCISE TO DETERMINE NON - COMPETE FEE. AS MENTIONED ABOVE, THIS IS NOT AT ALL THE CASE HERE. 16. IN THE CASE OF SHUKLENDU A. BAJI VS DCIT (SUPRA) , THE SMC BENCH OF THE TRIBUNAL HAD LOST SIGHT OF THE WORD TRANSFER IN THE PROVISO TO SECTION 28(VA) OF TH E ACT. HENCE, THIS DECISION LO O SES ANY VALUE AS PRECEDENT. 17. IN THE CASE OF TECUMSEH INDIA (P.) LTD. VS ADDL. CIT (SUPRA) , THERE WAS A FINDING THAT IT WAS APPARENT FROM RECORD THAT NON - COMPETE AGREEMENT WAS PART AND PARCEL OF WHOLE TRANSACTION, IT COUL D BE CONCLUDED THAT NON - COMPETE FEE WAS PAID AS PART O F INITIAL OUTLAY AND THEREFORE IT WAS TO BE DISALLOWED BEING IN THE NATURE OF CAPITAL EXPENDITURE. HERE, AS NOTED ABOVE, NON - COMPETE FEE HAS BEEN SPECIALLY IDENTIFIED AND CARVED OUT IN THE AGREEMENT IT SELF. MOREOVER, A S A MATTER OF FACT, THAT CASE WAS FOR ASSESSMENT YEAR 1998 - 99, WHE N SECTION 28(VA) OF THE ACT WAS NOT AT ALL IN THE STATUTE BOOK. 18. IN THE BACKGROUND OF AFORESAID DISCUSSION, WE HOLD THAT THE AUTHORITIES BELOW ARE CORRECT IN BRINGING TO TAX THE IMPUGNED AMOUNT UNDER SECTION 28(VA) OF THE ACT. 14 M/S. HARSHIT FINLEASE & INVESTMENTS PVT. LTD. ITA NOS. 4989 & 4991/MUM/2011 19. THE SECOND ISSUE RAISED RELATES TO DISALLOWANCE OF INTEREST PAYMENT. 20. ON THIS ISSUE, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS TAKEN LOAN OF RS.15,40,00,000/ - FROM DANDVATI INVESTME NTS AND TRADING CO. PVT. LTD. AND PAID INTEREST OF RS.26,86,883/ - . THE ASSESSEE EXPLAINED THAT THE PURPOSE OF LOAN WAS TO MAKE INVESTMENT IN BOND TO CLAIM BENEFIT UNDER SECTION 54EC OF THE ACT ON THE LONG TERM CAPITAL GAINS. THE ASSESSING OFFICER HELD TH AT THE INTEREST IS TO BE DISALLOWED AS IT HAS NOT BEEN TAKEN FOR THE PURPOSE OF THE BUSINESS OF ASSESSEE, BUT FOR THE PURPOSE OF AVAILING BENEFIT UNDER SECTION 54EC OF THE ACT. HENCE, THE ASSESSING OFFICER DISALLOWED THE SAID EXPENDITURE. UPON ASSESSEES APPEAL, THE CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER THAT THE PURPOSE OF LOAN WAS NOT TO DO ANY BUSINESS, RATHER, TO TAKE ADVANTAGE OF THE PROVISIONS OF SECTION 54EC OF THE ACT. FURTHER, HE HELD THAT ASSESSEE CANNOT GET DOUBLE DEDUCTION, I.E. DE DUCTION UNDER SECTION 54EC AS WELL AS UNDER SECTION 3 7 OF THE ACT, HENCE, HE UPHELD THE ADDITION. THE LEARNED COUNSEL FOR THE ASSESSEE IN THIS REGARD CONTENDED THAT WHILE INTEREST ON BORROWINGS HAS NOT BEEN ALLOWED, THE INCOME HAS BEEN TAXED AS BUSINESS INCOME. IN THIS REGARD, HE REFERRED TO PAGE 13 OF THE PA PER BOOK, AND REFERRED TO THE PROFIT & LOSS ACCOUNT WHERE THE INTEREST ON CAPITAL GAIN BOND HAS BEEN TAKEN AS INCOME FOR COMPUTING THE PROFITS FOR THE YEAR. 21. UPON HEARING BOTH THE COUNSEL AND PERUSING THE RECORDS, WE ARE OF THE OPINION THAT IF INTEREST FROM THE IMPUGNED BONDS HAVE BEEN TAXED AS BUSINESS INCOME, THEN THE INTEREST EXPENDITURE FOR FUNDS TO MAKE THOSE INVESTMENT OUGHT TO BE ALLOWED AS BEING EXPENDI TURE. WE DIRECT ACCORDINGLY. 15 M/S. HARSHIT FINLEASE & INVESTMENTS PVT. LTD. ITA NOS. 4989 & 4991/MUM/2011 22 . ANOTHER ISSUE RAISED IS WITH REGARD TO DISALLOWANCE UNDER SECTION 14A OF THE ACT. ON THIS ISSUE, THE ASSESSING OFFICER PROCEEDED TO COMPUTE THE DISALLOWANCE UNDER SECTION 14A OF THE ACT R.W.R. 8D OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES ) AND COMPUTED THE DISALLOWANCE AT RS.38,82,081/ - . UPON ASSESSEES APPEAL, THE LEARNED CIT(A) REFERRED TO THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS DCIT, 328 ITR 81 (BOM.) AND NOTED THAT AS PER THE SAID JUDGMENT, RULE 8D OF THE RULES IS APPLICABLE FROM ASSESSMENT YEAR 2008 - 09 . HENCE, HE HELD THAT THE ASSESSING OFFICER S ACTION APPLYING RULE 8D OF THE RULES WAS NOT JUSTIFIED IN THE PRESENT ASSESSMENT YEAR, I.E. 2006 - 07. HOWEVER , HE HELD THAT IN THE SAID ORDER, THE HON'BLE BOMBAY HIGH COURT HAD HELD THAT THE ASSESSING OFFICER SHOULD PROVIDE REASONABLE OPPORTUNITY TO THE ASSESSEE FOR WORKING OUT EXPENSES, DIRECT/INDIRECT, RELATED TO THE EXEMPT INCOME . HENCE, HE DIRECTED THE ASSES SING OFFICER TO PROVIDE OPPORTUNITY TO THE ASSESSEE AND WORK OUT THE DISALLOWANCE UNDER SECTION 14A OF THE ACT IN ACCORDANCE WITH THE DECISION OF THE HON'BLE BOMBAY HIGH COURT. 23 . AGAINST THIS ORDER, ASSESSEE IS IN APPEAL BEFORE US. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO THE POWERS OF CIT(A) PROVIDED IN SECTION 250 OF THE ACT AND SUBMITTED THAT THE CIT(A) HAS NO POWER WHATSOEVER TO REMAND THE MATTER TO THE FILE OF ASSESSING OFFICER AND HENCE, THE CIT(A)S ACTION IS NOT AT ALL SUSTAINABLE. HOW EVER, THE LEARNED COUNSEL FAIRLY AGREED THAT DISALLOWANCE OF 0.5% MAY BE DONE TO MEET THE ENDS OF JUSTICE. 24. WE AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE CIT(A) HAS NO POWER TO REMAND THE MATTER AND HENCE, HIS ORDER IS NOT 16 M/S. HARSHIT FINLEASE & INVESTMENTS PVT. LTD. ITA NOS. 4989 & 4991/MUM/2011 AT ALL SUSTAINABLE. HOWEVER, TO MEET THE ENDS OF JUSTICE, WE DIRECT THAT 0.5% MAY BE DISALLOWED FOR EARNING THE EXEMPT INCOME. 25 . ANOTHER GROUND RELATES TO ADDITION OF AMOUNT DEPOSITED IN THE ESCROW ACCOUNT TO BOOK PROFIT UNDER SECTION 115JB OF T HE ACT. ON THE ISSUE OF INCOME UNDER SECTION 115JB OF THE ACT, THE ASSESSING OFFICER HELD AS UNDER : - ASSESSEE IS A COMPANY REQUIRED TO PREPARE ACCOUNTS AS PER PROVISIONS OF COMPANY ACT 1956. ASSESSEE HAS TRANSFERRED 994984 SHARE OF SWC AS PER AGREEMEN T DATED JUNE 14, 2005 AND TRANSFERRED THE SHARES THROUGH DMAT ACCOUNT DURING THE FINANCIAL YEAR. ASSESSEE AS PER ACCOUNTING STANDARD IS REQUIRED TO RECOGNIZE PROFIT ON SALE OF SHARES IN THE BOOKS OF ACCOUNT. ASSESSEE HAS RECOGNIZED ONLY PART OF IT IN THE P & L ACCOUNT. A SHOW CAUSE TO THIS EFFECT WAS ISSUED TO ASSESSEE ON 18.8.2008, IN RESPONSE TO WHICH ASSESSEE SUBMITTED THAT IT HAS SHOWN ENTIRE SALE CONSIDERATION OF RS.32,04,01,033/ - WHILE COMPUTING THE CAPITAL GAIN UNDER NORMAL PROVISIONS OF THE I T ACT. THE COST AS PER BOOKS OF THESE SHARES IS RS.5,97,34,381/ - , ACCORDINGLY PROFIT ON SALE OF INVESTMENT WORKS OUT TO BE RS.26,06,66,652. ASSESSEE HAS SHOWN PROFIT OF RS.5,47,53,144/ - ONLY ON SALE OF SWC INVESTMENT. ASSESSEE HAS NOT PREPARED ACCOUNTS AS PER TO THE EXTENT THAT PROFIT ON SALE OF INVESTMENT HAS BEEN SHOWN AT RS.5,47,53,144/ - IN PLACE OF RS.25,79,05,216. AS PER SECTION 115JB(2) EVERY ASSESSEE COMPANY IS MANDATORY REQUIRED TO PREPARE ITS PROFIT AND LOSS ACCOUNT IN ACCORDANCE WITH THE PROVISIONS OF PART II AND SCHEDULE VI TO THE COMPANIES ACT 1956. THE BOOK PROFIT OF ASSESSEE U/S 115JB IS THEREFORE RECOMPUTED AS RS.25,79,05,216/ - . 26 . UPON ASSESSEES APPEAL, THE LEARNED CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER. AGAINST THIS ORDER, ASSESSEE IS IN AP PEAL BEFORE US. 27 . THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDERS OF HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD. VS CIT, 255 ITR 273 (SC) , WHICH WAS DULY FOLLOWED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS ADBH UT TRADING CO. (P.) LTD., 338 ITR 94 (BOM) FOR THE PROPOSITION THAT THE 17 M/S. HARSHIT FINLEASE & INVESTMENTS PVT. LTD. ITA NOS. 4989 & 4991/MUM/2011 ASSESSING OFFICER CANNOT TINKER WITH THE BOOK PROFIT SHOWN IN THE PROFIT & LOSS ACCOUNT WHICH IS DULY AUDITED AND ACCEPTED IN THE AGM. HENCE, THE LEARNED COUNSEL PRAYED THAT THIS ADDI TION SHOULD BE DELETED. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 28. UPON CAREFUL CONSIDERATION, WE FIND THAT THE PROPOSITION CANVASSED BY THE LEARNED COUNSEL FOR THE ASSESSEE IS CORRECT. AS HELD BY THE HONBLE APEX COURT AND HON'BLE BOMBAY HIGH COURT REFERRED ABOVE, THE ASSESSING OFFICER HAS NO POWER TO TINKER WITH THE BOOK PROFIT WHICH HAS BEEN AUDITED AND ADOPTED IN THE ANNUAL GENERAL MEETING EX CEPT AS PROVIDED IN THE ACT. T H E ASSESSING OFFICER, IN THE PRESE NT CASE, IS DOUBTING THE CORRECTNESS OF THE BOOK PROFIT , WHICH IS NOT SUSTAINABLE. HENCE, WE SET - ASIDE THE ORDER OF AUTHORITIES BELOW ON THIS ISSUE. 29 . THE ISSUES RAISED IN ITA NO. 4991/MUM/2011 READ AS UNDER : - GROUND 1 : VALIDITY OF THE ORDER U/S. 154 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 1 MUMBAI *CIT(A)+ ERRED IN PASSING ORDER UNDER SECTION 154 OF THE ACT INTER ALIA, ON THE ALLEGED GROUND THAT THE VALUE OF NON - COMPETE F EES WAS RS.6,40,80,206 INSTEAD OF RS.6,17,05,193 AND IT IS MISTAKE APPARENT FROM RECORD. 2. THE APPELLANT PRAYS THAT THE ORDER PASSED U/S. 154 OF THE ACT BE TREATED AS VOID AB INITIO AND BE QUASHED. GROUND 2 : ASSESSING THE CONSIDERATION RECEIVED FOR NO N - COMPETE FEES AS BUSINESS INCOME 18 M/S. HARSHIT FINLEASE & INVESTMENTS PVT. LTD. ITA NOS. 4989 & 4991/MUM/2011 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN ASSESSING THE NON - COMPETE FEES OF RS.6,40,80,206 UNDER THE INCOME FROM BUSINESS AND PROFESSION INSTEAD OF AS CAPITAL GAINS. 2. THE APPELLANT PRAYS THAT THE NON - COMPETE FEES BE TAXED AS CAPITAL GAIN. 30. AS REGARDS GROUND NO. 1, WE HOLD THAT THIS IS A FACTUAL ISSUE AND THE ASSESSING OFFICER SHALL GIVE EFFECT TO THE SAME AFTER VERIFYING THE RECORD. 31. AS REGARDS GROUND NO. 2, WE HAVE ALREADY HELD IN ITA NO. 4989/MUM/2011 ABOVE THAT THE IMPUGNED AMOUNT IS TAXABLE UNDER SECTION 28(VA) OF THE ACT. HENCE, THE GROUND STANDS DISMISSED ON SAME REASONING. 32. IN THE RESULT, THIS APPEAL IS PARTLY ALLOWED. 33. I N THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 R D DECEMBER , 2019. SD/ - SD/ - ( PAWAN SINGH ) JUDICIAL MEMBER (SHAMIM YAHYA) ACCOUNTANT MEMBER MUMBAI, DATE : 3 R D DECEMBER , 2019 *SSL* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, H BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI