ACIT, CHENNAI V. M/s. Golden Eagle Communications Limited, CHENNAI

ITA 62/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64519 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-11-2012
• Assessment Year: 1999-2000
• Appeal Filed On: 13-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Block assessment; Capital receipt
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER A ND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO. 62/MDS/2011 ASST. YEAR : 1999-2000 THE ASST. CO MISSIONER OF INCOME TAX, COMPANY CIRCLE II(2), CHENNAI. (APPELLANT) V. M/S. GOLDEN EAGLE COMMUNICATIONS LIMITED, RAYALA TOWERS, GROUND FLOOR, 781, ANNA SALAI, CHENNAI 600 002. PAN : AAACG1213A. (RESPONDENT) APPELLANT BY : SHRI ANIRUDH RAI, CIT (DR) RESPONDENT BY : SHRI R. VIJAYARAGHAVAN, ADVOCAT E DATE OF HEARING : 01 NOV 2012 DATE OF PRONOUNCEMENT : 21 NOV 2012 O R D E R PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE DEPARTMENT AGAINST OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS) XII DATED 29.10.2010 UNDER SEC. 143(3) OF THE I.T. ACT IN ITA NO.234/07- 08 FOR THE ASST. YEAR 1999-2000. THE ONLY ISSUE IN THE GROUNDS OF A PPEAL IS THAT THE ITA 62/MDS/11 2 COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE ADDITION OF B.9 CRORES MADE TOWARDS NON-COMPETE FEE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE, M/S. GOLDEN EAGLE COMMUNICATIONS LTD., (GECL) WAS PROMOT ED BY M/S. MOHAN BREWERIES & DISTILLERIES LTD (MBDL). THE PRO MOTERS OF MBDL AND THE ASSESSEE COMPANY OWNED A SEPARATE CHANNEL BY THE NAME OF GEC NET WORK. OPERATION OF THIS TELEVISION COMP ANY WAS MAINLY FUNDED BY MBDL. WHEN THE AMOUNT GIVEN AS LOAN BY M BDL WAS TRIED TO BE CONVERTED AS EQUITY CAPITAL BY THE ASSESSEE, THE SAME WAS NOT PERMITTED BY THE GOVT. AND, THEREFORE, THE AMOUNT L ENT BY MBDL CONTINUED IN THE FORM OF LOAN. MBDL ENTERED INTO A N AGREEMENT WITH UB GROUP ON 18.12.1995 FOR THE SALE OF THEIR SHARE HOLDINGS WITH THE ASSESSEE FOR A TOTAL CONSIDERATION OF B.12.5 CRORES , OUT OF WHICH B.7.5 CRERES WAS GIVEN BY UB GROUP. HOWEVER, THE G OVT. DID NOT PERMIT ALLOTMENT OF SHARES AND NOMINAL PAID UP SHAR E CAPITAL WAS HELD BY CERTAIN INDIVIDUALS WHO ARE THE PROMOTERS O F MBDL. THE TRANSACTION OF SALE OF SHARES BY MBDL TO UB GROUP D ID NOT TAKE OFF. THEREFORE, THE AGREEMENT DATED 18.12.1995 BETWEEN U B GROUP AND MBDL COULD NOT BE ENFORCED. LATER, ON 21.12.1998 THE ASSESSEE ITA 62/MDS/11 3 ENTERED INTO AN AGREEMENT WITH VIJAY TV PVT. LTD. ( VTPL) FOR TRANSFER OF TELECASTING BUSINESS ALONG WITH ASSETS. AS PER THIS AGREEMENT, TELECASTING BUSINESS ALONG WITH ASSETS OF THE ASSES SEE WERE TRANSFERRED FOR A CONSIDERATION OF B.4.5 CRORES TO VTPL. A SUM OF B.9 CRORES WAS PAYABLE BY VTPL FOR THE ASSESSEE AND TH E MBDL FOR AGREEING NOT TO COMPETE WITH VTPL AND A SEPARATE NO N COMPETE FEE AGREEMENT WAS ENTERED INTO BY THE ASSESSE AND MBDL WITH VTPL. 3. CLAUSE 5.1 OF THE NON-COMPETE AGREEMENT REQUIR ED GECL AND MBDL AND ITS PROMOTERS THAT THEY SHALL NOT COMP ETE WITH THE TELEVISION BUSINESS OF VTPL FOR A PERIOD OF THREE Y EARS. HOWEVER, THIS PERIOD OF THREE YEARS WAS EXTENDED TO TEN YEARS BY AN ADDENDUM TO THE AGREEMENT BY A MOU DATED 21.12.1998. THEREFORE , THE ENTIRE CONSIDERATION OF B.13.5 CRORES OF THE AGREEMENT FOR TRANSFER OF BUSINESS WAS PAYABLE BY VTPL IN TWO COMPONENTS. ( I) B.4.5 CRORES TOWARDS TRANSFER OF ASSETS HELD BY THE ASSESSEE AND (II) B.9 CRORES JOINTLY TO THE ASSESSEE IE. GECL AND MBDL TOWARDS N ON-COMPETE FEE. LATER, THE ASSESSEE AND MBDL BY AN AGREEMENT DATED 4.10.99 ARRIVED AT OPPORTIONMENT OF NON-COMPETE FEE OF B.9 CRORES ALLOCABLE ITA 62/MDS/11 4 BETWEEN THE ASSESSEE AND MBDL IE. NON-COMPETE FEE O F B.7 CRORES ACCRUING TO MBDL AND B. 2 CRORES ACCRUING TO THE AS SESSEE. THE ASSESSEE CLAIMED THE SAID NON COMPETE FEE OF B.2 CR ORES AS CAPITAL RECEIPT NON EXIGIBLE TO TAX FOR THE ASST. YEAR 1999 -2000. 4. THE ASSESSING OFFICER, WHILE COMPLETING THE ASS ESSMENT, CONSIDERED THE ENTIRE CONSIDERATION OF B.13.5 CRORE S, INCLUDING THE NON-COMPETE FEE OF B.9 CRORES AS THE CONSIDERATION RECEIVED FOR TRANSFER OF TELECASTING BUSINESS ALONG WITH THE ASS ETS BY THE ASSESSEE AND BROUGHT TO TAX THE SAID ENTIRE CONSIDE RATION OF B.13.5 CRORES IN THE HANDS OF THE ASSESSEE FOR THE ASST. Y EAR 1999-2000. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) HE LD THAT, AT THE FIRST INSTANCE THE DEPARTMENT ASSESSED THE ENTIRE S UM OF B.9 CRORES IN THE HANDS OF MBDL DURING THE COURSE OF FINALIZIN G BLOCK ASSESSMENT FOR THE PERIOD 01.4.1989 TO 31.3.1990, AND THIS TRIBUNAL, BY ORDER IN ITA NO.199/MDS/2003 DATED 20.10.2005 DE LETED THE ADDITION HOLDING THAT NO PART OF B.9 CRORES CAN BE TREATED AS UNDISCLOSED INCOME AND CANNOT BE ASSESSED IN THE HA NDS OF THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT LATER THE DEPARTMENT ASSESSED B.7 CRORES RECEIVED B Y MBDL AS NON- ITA 62/MDS/11 5 COMPETE FEE IN ITS ASSESSMENT FOR THE ASST. YEAR 2 000-01 TREATING IT AS REVENUE RECEIPT. THE COMMISSIONER OF INCOME TA X (APPEALS) FURTHER OBSERVED THAT THIS TRIBUNAL BY ORDER IN ITA NO.3396/MDS/2004 DATED 10.8.2007 IN THE CASE OF MBD L, WHERE THE ASSESSEE COMPANY, MBDL AND VTPL WERE PARTIES TO TH E TRANSACTION, HELD THAT THE SUM OF B.7 CRORES RECEIVED BY MBDL TOWARDS NON- COMPETE FEE IS CAPITAL RECEIPT NOT EXIGIBLE TO TAX. THE COMMISSIONER OF INCOME TAX (APPEALS), FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF MBDL IN ITA N O.3396/MDS/2004 DATED 10.8.2007, DELETED THE ADDITION OF B. 9 CRO RES MADE TOWARDS NON-COMPETE FEE IN THE HANDS OF THE ASSESSEE. 5. THE DEPARTMENTAL REPRESENTATIVE SUBMITS THAT TH E WHOLE TRANSACTION OF SALE OF BUSINESS HAS TO BE CONSIDERE D AS SLUMP SALE ONLY AS HELD BY THE ASSESSING OFFICER. THE DR SUBM ITS THAT THE AGREEMENT OF NON-COMPETE FEE ENTERED INTO BY THE AS SESSEE IS ONLY TO AVOID TAX LIABILITY. IN OTHER WORDS, HE SUBMIT S THAT THE ENTIRE CONSIDERATION IS TOWARDS SALE OF BUSINESS ONLY. TH E DR STRONGLY SUPPORTS THE ORDER OF THE ASSESSING OFFICER. ITA 62/MDS/11 6 6. THE COUNSEL FOR THE ASSESSEE RELYING ON THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS) SUBMITS THAT T HIS TRIBUNAL HAD ALREADY CONSIDERED THE ISSUE OF TAXABILITY OF N ON-COMPETE FEE OF B.7 CRORES IN THE HANDS OF MBDL, WHICH IS PART OF T HE ENTIRE CONSIDERATION OF B.13.5 CRORES ON ACCOUNT OF SALE O F TELECASTING BUSINESS TO VTPL BY THE ASSESSEE. A COPY OF THE O RDER OF THIS TRIBUNAL IS PLACED BEFORE US. THE COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT THE VIEW OF THE CO-ORDINATE BENCH OF T HIS TRIBUNAL IN THE CASE OF MBDL (SUPRA) IS ALSO AFFIRMED BY THE HON'BL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. M/S. MOHAN BREWERI ES & DISTILLERIES LTD IN TCA NO.319 OF 2008 BY AN ORDER DATED 30.3.20 12. A COPY OF THE ORDER OF HON'BLE HIGH COURT IS PLACED ON RECORD . 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND CASE LAW RELIED ON BY THE ASSESSEE. WE HAVE GONE THROUGH THE ORDER OF THIS TRIBUNAL IN THE CASE OF M BDL AND FIND THAT THIS TRIBUNAL HAS HELD THAT NON-COMPETE FEE OF B.7 CRORES WHICH IS PART OF CONSIDERATION OF B.13.5 CRORES TOWARDS SALE OF TELECASTING BUSINESS AND TOWARDS NON COMPETE FEE WAS HELD AS CA PITAL RECEIPT ITA 62/MDS/11 7 NON-EXIGIBLE TO TAX IN THE HANDS OF MBDL. WHILE HO LDING SO, THE TRIBUNAL OBSERVED AND HELD AS UNDER :- 4. BEFORE US THE ID . COUNSEL FOR THE ASSESSEE VEHEMENTLY A R GUED THAT THE ID . CIT ( A) OUGHT TO HAVE APPRECIATED THAT SINCE THE RECEIPT IS EXEMPT, THE SAME SHOULD NOT BE INCLU DED IN THE ASSESSEE'S TOTAL INCOME BOTH UNDER THE NORMAL PROVI SIONS . OF THE INCOME-TAX ACT AND SINCE IT IS ALSO NOT TAXABLE IT SHOULD BE INCLUDED IN THE COMPUTATION OF BOOK PROFIT U/S 115J A OF THE ACT. THE ID . COUNSEL CONTENDED THAT NON COMPETE FEE IS A CAPITAL RECEIPT WHICH IS NOT CHARGEABLE TO TAX . THE ASSESSEE, PARTICULARLY PROMOTERS OF THE ASSESSEE COMPANY HAVE FORMED A COMPANY BY NAME GOLDEN EAGLE COMMUNICATIONS LTD . (GEC LTD . ) . ORIGINALLY IT WAS CARRYING ON ADVERTISING BUSINES S . LATER ON THE SAID COMPANY FLOATED A TAMIL TV CHANNEL BY N AME ' GEC' . IT COULD NOT RUN THE CHANNEL PROFITABLY AND HENCE IT SOLD THE SAME TO UB GROUP OF BANGALORE. SINCE UB GROUP C OULD NOT PAY THE CONSIDERATION THE CHANNEL WAS ULTIMATELY SOLD TO MLS UTV, MUMBAI FOR A TOTAL CONSIDERATION OF RS.13 . 05 CRORES . OUT OF SALE CONSIDERATION OF RS.13.05 CRORES GEC ITD. HAS PAID RS.7 CRORES TO THE ASSESSEE AS NON-COMPETITION FEE . THIS IS THE WAY BOTH PARTIES ADMITTED BEFORE US THE TRANSACTION ENTERED INTO BETWEEN THEM . HOWEVER , WHILE REJECTING THE CONTENTION OF THE ASSESSEE , THE ID . CIT(A) FOUND THAT THE ASSESSEE IS IN NO WAY CONNECTED WITH THE BUS I NESS OF STARTING A TV CHANNEL AND ITS BUSINESS IS ONLY MANUFACTURING IMFL AND ONLY THE DIRECTORS OF THE ASSESSEE COMPANY HAD STARTED THE SAID COMPANY GEC LTD . WHICH WAS ORIGINALLY IN THE BUSINESS OF PROCURING ADVERTISEME NT AND WHEN ORIGINALLY AN AGREEMENT WAS ENTERED INTO WITH UB GR OUP THE ENTIRE SUM WAS PAID ONLY TO GEC LTD . AND THERE WAS NO MENTION OF ANY PAYMENT OF NON-COMPETITION FEE . AS THE ID . CIT(A) WAS OF THE OPINION THAT IF AT ALL ANY NON-COMPETITION FEE I S TO BE PAID IT HAS TO BE P AID ONLY TO GEC LTD . AND ONLY THE SAID COMPANY HAS CAPACITY TO FLOAT A NEW VENTURE AND START A NEW CHA NNEL . HE THEREFORE , HELD THAT THE ASSESSEE IS NOT ENTIT L ED FOR NON - COMPETITION FEE AND THIS PRACTICE WAS ADOPTED ONLY TO GET SOM E TAX BENEFIT . THE ID.CIT(A) FURTHER OBSERVED THAT THE ASSESSEE HA S NO COM P ETENCE , EXPERTISE AND EXPERIENCE TO START A TAMIL TV CHANNEL . THE ID . COU N SEL F I LED BEFORE A PAPER BOOK CONTAINING 57 PAGES AS ALSO COPIES OF CERTAIN CAS E LAWS . THE I D . COUNSEL TOOK US THROUGH PAGE 6 PARA 4 . 1 OF THE PAPER BOOK WHICH IS ARTICLE V OF THE ASSET TRANSFER AQREERNENT PERTAINING TO 'TRANSFER AND CO N S IDERATION' AND ARGUED THAT THE ID . CIT(A) FAILED TO TAKE INTO CONSIDERATION THIS IMPORTANT DOCUMENT . AGAIN THE ID . COUNSEL INVITED OUR ATTENTION TO PARA 5 . 1 OF ART I C LE 5 OF THE PAPER BOOK CAPTIONED 'NON COMPETITION ITA 62/MDS/11 8 FEE' , WHICH ALSO WAS OMITTED TO BE CONSIDERED BY THE ID . CIT{A) . IT WAS SPECIFICALLY MENTIONED THEREIN THAT GEC LTD. INCLUDING THE PROMOTERS OF GEC , MOHAN BREWERIES & DISTILLERIES LTD . (MBDL) , THE ASSESSEE HEREIN, AND ANY SUBSID I ARIES , ASSOCIATES, AFFILIATES ETC. SH ALL NOT FOR A PERIOD OF THREE YEARS FROM THE DATE O F THE AGREEMENT ENGAGE IN : . ANY OF RELATABLE TO OR PERTAINING TO THE ACQUISITION, P URCHASE ETC . OF SOFTWARE AND OR DISTRIBUTION OF SOFTWARE BY SATELLITE TELEVISION/CABLE TELEVISION , INDULGE OR PARTICIPATE IN SUCH OR SIMILAR BUSINESS INCLUDING THE OPERATION OF PRIVATE TV CHANNEL . THE ID . COUNSEL CONTENDED THAT THE I D . CIT(A) W I THOUT CONSIDERING THESE VITAL ASPECTS , SIMPLY CONFIRMED THE ORDER OF T H E AO . THE GOVERNMENT APPROVAL IS NOT FORTHCOMING AND THAT IS WHY MOU WAS ENT E RED INTO BETWEEN THE ASSESSEE ON THE ONE PART AND ON THE OTHER GEC LTD. INCLUDED IN THE PAPER BOOK PAGES 57 TO 59 , WHEREIN IT WAS CLEARLY MENTIONED THAT OUT OF R S . 9 CRORES RECEIVED TOWARDS NON COMPETITION FEE , THE PARTIES CONSIDERED IT FAIR AND REASONAB L E THAT RS . 7 CRORES WILL BE PAID TO THE ASSESSEE COMPANY AND RS.2 CRORES WILL BE RETAINED BY GEC . IN VIEW OF THEIR NAME . FURTHE R IT IS NOTED THAT THE SHA R E OF NON COMPETITION FEE OF RS . 7 CRORES PAYABLE MBDL BY GEC WILL BE ADJUSTED OUT OF THE PAYMENT ALREADY RECEIVED FROM M BDL . THE ID . COUNSEL THEREFOR E CONTENDED THAT THE TRANSACTION AS SUCH WOULD GO TO SHOW THAT IT IS NOT A NON COMPETITION FEE RECEI VED BY THE ASSESSEE COMPANY AS PER THE VARIOUS MOUS IN RESPE C T OF TRANSACTIONS ENTERED INTO BETWEEN THE PARTIES. 5. NOW WE WOULD LIKE TO MENTION THAT THE FACT THAT ASSESSEE RECEIVED RS . 7 CRORES I S NOT IN DISPUTE . THE DISPUTE BETWEEN THE PARTIES IS WHETHER IT IS A NO COMPETITION FEE AND AS SUCH WHETHER THE ASSESSE WOULD BE ENTITLED TO RECEIVE THE SUCH A F EE . SINCE THE DEPARTMENT WAS OF THE VIEW THAT THE ASSESSEE DID NO T HAVE COMPETE N CE, EXPERTISE AND EXPERIENCE TO START A TAMIL 1V CHANNEL . IN THIS CONNECTION THE ID . COUNSEL INVITED OUR ATTENTION TO PAGES 55 & 56 OF THE PAPER BOOK . WHICH IS ADDENDUM TO ASSET TRANSFER AGREEMENT SIGNED ON 21-12-98 BETWEEN VIJAY TELEVISI O N P. LTD. (VTPL) AND GOLDEN EAGLE COMMUNCIATIONS LTD. (GEC) . A COMBINED READ I NG OF THE SAID ADDENDUM ALONGWITH THE MOU WOULD GO TO SHOW !THAT IT IS T H E AMOUNT OF FEE FOR RESTRICTIVE COVENANTS TO BE IMPOSED ON THE ASSESSEE COMPANY BY WAY OF NON CO MPETITION FEE . THE ID . COUNSEL SUBMITTED THAT IT IS A NON COMPETITION FEE AND IT IS A CAPITAL RECEIPT AND NOT A REVENUE RECEIPT . ONCE IT IS A CAPITAL RECEIPT, IT IS NOT AN INCOME CHARGEBLE TO TAX AND O NCE IT IS NOT AN INCOME CHARGEABLE TO TAX IT CANNOT BE BROUGHT AS TA XABLE RECEIPT EITHER UNDER THE NORMAL PR O VISIONS OF THE INCOME-TAX ACT OR UNDER THE COMPUTATION OF BOOK PROFIT AS , ENVISAGED IN SEC . 115JA OF THE ACT . THE ID . COUNSEL RELIED ON THE FOLLOWING D E CISION: ITA 62/MDS/11 9 1) G ILLANDER ARTHBUTNOT & CO . LTD . V.CIT (53 ITR 283)(SC) 2) C IT VS. BEST & CO. LTD . ( 60 ITR 11 )(SC) 3) C IT VS.SARASWATHI PUBLICITIES . ( 132 ITR 207)(MAD) 4) C IT VS . MILL STORES CO . (9 ITR 642)(SIND.) 5) S AROJ KUMAR PODDAR V , JCIT (77 ITO 326)(CAL . ) 6) IT O VS . ANIL KUMAR RUDRA (71 ITO 96)(BOM . ) 7) C IT VS . BOMBAY BURMAH TRDG. CORN LTD . (161 ITR 382)(SC) 8) C IT VS . LATE G . O . NAIDU & OTHERS (165 ITR 63) (MAD.) 6 . ON THE OTHER HAND, THE ID . DR SUBMITTED THAT THE BOOK PROFIT CAN BE ASSESSED IN VIEW OF THE DECISION OF THE HEN'S SUPRE ME COURT IN THE CASE OF APOLLO TY R ES LTD . V. CIT (255 ITR 273)(SC) . THE RECEIPT AS SUCH IS ONLY A PROFIT SHARING A N D IT IS A REVENUE RECEIPT AND THEREFORE ONLY INCOME , AND THE AUTHORITIES IS T H E CONTENTION OF THE ID . D R . 7. IN R EPLY, THE ID . COUNSEL RELIED ON THE DECISION OF THE TRIBUNAL, A - BENCH, CHENNAI I N THE CASE OF DCIT VS . INDIAN SYNTANS INVESTMENTS P.LTD . (106 TTJ 388) AND DCI T VS. RAMKUMAR GIRI (103 TT J 352) DECIDED BY D-BENCH OF THIS TRIBUNAL, TO WHICH ONE OF US , THE JUDICIAL MEMBER WAS A PARTY . THE OTHER DECISIONS RELIED UPON BY THE ID . COUNSEL IN SUPPORT OF HIS CONTENTIONS WERE THAT OF MUMBAI BENCH D IN THE CASE OF JCIT VS . ALFA LAVAL (I) LTD.(104 TTJ 791) AND OF THE HON'BLE MADR AS HIGH COURT IN THE CASE OF CIT VS . T . I . & M SALES LTD. (259 ITR 116). 8. WE HAVE CARE F ULLY CONSIDERED THE SUBMISSIONS OF THE PARTIES , THE MATERIAL ON R ECORD INCLUDING T HE ASSESSEE ' S PAPER BOOK AND THE DECISIONS RELIED UPON . THE ASS E SSEE COMPANY RECEIVED RS . 7 CRORES FROM GEC L TD . AS NON-COMPETITION FEES IS N OT IN DISPUTE . THE ONLY DISPUTE IS THAT ACCORDING TO REVENUE IT IS A REVENU E RECEIPT AS THERE WAS NO OCCASION FOR THE ASSESSEE TO ENTER INTO A NO N-COMPET I T ION AGREEMENT . THE REASON BEING, THE ASSESSEE COMPANY WAS NEVER IN THE COMPETITIVE BUSINESS AND THEREFORE IT WAS UNNECESSA R Y FOR IT TO ENTER INTO A NON-CONMPETITION AGREEMENT . REVENUE ' S CONTENTION IS THAT IN ORDER TO GET TAX BENEFIT AND TO AVOID TAX SUCH A KI ND OF ARRANGEMENT WAS MADE BY THE ASSESSEE WITH GEC LTD . IN WH I CH ALL THE DIRECTORS OF THE ASSESSEE COMPANY ARE INTERESTED . RS . 7 C R ORES RECEIVED BY THE ASSESSEE COMPANY IS A REVENUE RECEIPT AS IT IS EST ABLISHED THAT THERE IS NO OCCASION FOR THE ASSESSE COMPANY TO ENTER INT O ANYOMPETITION WITH THE ERSTWHILE CHANNEL OPERATORS. IF AT ALL, I T SHOULD BE M/S. GEC LTD. WHICH IN TURN WAS SOLD TO UB GROUP. AT THAT P OINT OF TIME THERE WAS NO MENTION OF NON-COMPETITION FEES. FURTHER, FOR WANT OF GOVERNMENT APPROVAL THE TRANSFER WAS EFFECTED TO VIJAY TELEVIS ION P. LTD. (VPTL) AND FINALLY CULMINATED WITH UTV LTD. THE CONTENTION OF THE DEPARTMENT IS THAT IT COULD ACCEPT THE PLEA OF NON COMPETITION AMONGST THE ITA 62/MDS/11 10 CONTENDERS AND NOT WITH THE PERSON WHOSE BUSINESS W AS ONLY MANUFACTURE OF IMFL . THE ASSESSEE WAS NEVER IN THE TELECASTING BUSINESS AND THEREFORE , IT IS A MAKE BELIEVE AFFAIR SO AS TO AVOID TAX. THE CONTENTION OF THE ASSESSEE THAT THE AGREEMENT A S AVAILABLE IN PAGE NO . 5 OF APB IS AN MOU WITH GEC AND PARTICULARLY AS COULD BE SEEN FROM PAGE 59 OF THE PAPER BOOK GEC HAS AGREED TO PASS ON PART OF NON-COMPETITION FEE TO MBDL . THE PART I ES AGREED THAT SINCE MBDL IS A PRODUCER OF TV CHANNEL AND CONSIDERING THE RES OURCES AND CAPACITY OF THE SAID COMPANY TO START TV CHANNEL IN COMPETITION WITH , VTPL TH I S SUM OF `.7 CRORES PAYABLE WILL BE DJUSTED OUT OF THE PAYMENT ALREADY RECEIVED . FROM VTPL BOTH VTPL AND MBDL AGREED AS PER THEASSET TRANSFER AGREEMENT ENTERED INTO THAT MBDL RESTRAINED THEMSELVES THAT THEY WILL NOT CARRY ON OR ENGAGE IN ANY BUSINESS DIRECTLY OR INDIRECTLY IN CONNECTION WITH RUNNING O F TAMIL TV CHABBEL FOR A PERIOF OF TEN YERS FROM 21-12-1998. THIS DATE I S THE CRUCIAL DATE WHICH IS THE DATE OF ADDENDUM ENTERED INTO BETWEEN VTPL WITH GEC. WE CANNOT IGNORE ONE MOU AND PARTLY ACCEPT THE OTHER . THE AUTHORITIES BELOW FAI L ED TO APPRECIATE THAT WHEN PARTIES ARE AGREED AND T HEY ARE IN MUTUAL AGREEMENT BY ADMITTING THE FACT THAT THE ASS ESSEE COMPANY IS A PROMOTER OF T AMIL TV CHANNAL AND RESOURCES AND C APACITY OF THE ASSESSEE COMPANY TO START A TV CHANNEL IN COMPETITI ON WITH VTPL IS AN ADMITTED FACT BY THE PARTIES THEMSELVES . THE DEPARTMENT CANNOT ASSUME ON THEIR OWN THAT THERE IS NO CAPACITY , EXPERTISE OR COMPETENCE WITH MNDL THE FEAR IN THE MIND OF THE PA RTIES TO AVOID THE COMPETITION IS TO BE JUDGED AS PER THE VIEW POINT O F A BUSINESSMAN. THE DEPARTMENT CANNOT SIT IN THE ARM CHAIR OF THE A SSESSEE TO DECIDE AS TO HOW THE ASSESSEE HAS TO ENTER INTO AGREEMENTS AND AS HOW THE ASSESSEE HAS TO PAY NON COMPETITION FEE . THE PARTIES ENTERING INTO AGREEMENT WILL BE CAUTIOUS AND TO AVOID COMPETITI ON PARTICULARLY IN THE FIELD OF 1V CHANNEL BUSINESS, WHICH IS A CUT THROAT AND TIGHT L INE OF BUS I NESS FIELD AND RUNNING A TV CHANNEL IS ALWAYS SUBJE CTED TO STIFF COMPETITION AND THE RESTRICTIVE COVENANT HELPS THE PERSON ATLEAST FOR A PARTICULAR PERIOD TO AVOID THIS TYPE OF COMPETITION . VIEWED IN THE ASSESSEE ' S ANGLE , IT IS FORGOING THE RIGHT AND _ DESTRUCTION OF THE CAPITAL STRUCTURE AND OF COURSE IN THIS CASE BOTH THE ASSES SEE AS WELL AS GEC LTD . THE AMOUNT RECEIVED FOR THE NON COMPETITION IN OUR VIEW IS A CAPITAL RECEIPT IN VIEW OF THE DECISIONS RELIED UPO N BY THE ID . COUNSEL (SUPRA). THE DECISION OF THE HON ' BLE JURISDICTIONAL HIGH COURT IN T . I . & . SALES LTD . (259 ITR 116) AND THE WELL KNOWN DECISION OF THE HO N'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS . GD . NAIDU (165 ITR 63) AND OTHER DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS . SARASWATHI PUBLICITIES (132 ITR 207) ARE ALL DIRECT LY ON THE POINT , WHICH IN TURN FORTIFIES THE ASSESSEE'S CONTENTION . UNDER THE CIRCUMSTANCES , WE ARE OF THE VIEW THAT THE AMOUNT RECEIVED BY THE ASSESSEE IS NON- COMPETE FEE WHICH IS A CAPITAL RECEIPT AND IT IS NO T AN INCOME RECEIPT SO AS TO ATTRACT THE PROVISIONS OF THE INCOME-TAX ACT. AS WE HAVE HELD ITA 62/MDS/11 11 THAT IT IS NOT A TAXABLE RECEIPT. INCOME-TAX ACT . AS WE HAVE HELD THAT IT IS NOT A TAXABLE RECEIPT. THIS VIEW OF THE TRIBUNAL WAS AFFIRMED BY HON'BLE H IGH COURT BY ITS ORDER DATED 30.3.2012, FOLLOWING THE DECISION OF HO N'BLE SUPREME COURT IN THE CASE OF GUFFIC CHEM. P. LTD V. CIT (3 32 ITR 602). THEREFORE, RESPECTFULLY, FOLLOWING THE ORDER OF THI S TRIBUNAL IN ITA NO.3396/MDS/2004 DATED 10.8.2007 WHICH IS AFFIRMED BY THE HIGH COURT IN THE CASE OF MBDL IN TCA NO.319 OF 2008 DAT ED 30.3.2012, WE UP-HOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION MADE TOWARDS NON-COMPETING FEE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 9. ORDER PRONOUNCED ON WEDNESDAY, THE 21 ST DAY OF NOVEMBER 2012 AT CHENNAI. SD/- SD/- ( ABRAHAM P GEORGE) (CHALLA NAGENDRA PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED : 21 ST NOVEMBER 2012. JLS. ITA 62/MDS/11 12 COPY TO:- (1) APPELLANT (2) RESPONDENT (3) CIT(A)-IV, CHENNAI (4) CIT, CHENNAI (5) D.R. (5) GUARD FILE