Karnataka High Court
The Commissioner Of Income Tax vs Guffic Chem Pvt Ltd on 29 October, 2009
Bench: V.G Sabhahit, S.N.Satyanarayana
IN THE HIGH COURT OF KARNATAKA CIRCUIT BENCH AT DI-IARWAD DATED THIS THE 29th DAY OF OCTOBER, .21G»lC?V9- A. PRESENT _ L_ O _s THE I-ION'BLE MR JUSTICE V.G.SA;B«1%--.tl:H.I%F'~:: " THE HON'BLE MR JUSTICE s';N.sTé§TYAN2x1éAYANp;:"<...99 I.T.A. Nogsss/2006 V A 3 BETWEEN: V 1. THE COMMISSIOJSTE-R OE KI-IIMJIBHOI COMNI'ERCi.A1;§JO1\«IFLEX_ OPP.CIVIL HOSPITAL" T BELGAUMSQ0 001 T 0 2. THE Ass-Ty <:'O.MMIssiO.NER INOOME TAX cIRcI;E-2:,''aELeA.UM;. '' 9- Z .... ...APPELLANT (By Srl;M;V.SIeIESHl"iC.IHi}3.l%,}t, ADV.) AND; . ., 9' . 1'. ¥is.O"°GU:sFI~c eHE'M"'PVT LTD _ '7Q3',_UDY.AMBAGH ' 'BEJL,(}AUvM f, ~. RESPONDENT
(135: Sri. ATUL;K.ALUR, ADV.) ITA filed u/S.260--A or I.T.Act, 1961 arising out of "Order dated 02-01-2006 passed in ITA No.109/PNJ/2004, the Assessment Year 1997-1998, praying that this I-I0ri'ble Court may be pleased to formulate the substantial questions of law and allow the appeal and set aside the Order passed by the ITAT Panaji Bench, in ITA NO.1O9/ PNJ / 2004 dated 02-01-2006 and confirm the Order passed by the Assessing Officer.
This appeal coming on for orders this day, SAB1-EAHIT, J ., delivered the following:
JUSJGMENT This appeal by the Revenue is filed under Section 260 A of the income Tax Act, 1961 (hereinafter called as .tti.g:'«,A_Cts for short) being aggrieved by the order passed byfiithei _ Tax Appellate Tribunal, Panaji Bench, date_:d*~.
02.01.2006 wherein the Tribunal filed by the revenue and confirmed the iorderggpiassied b_ij,r Commissioner of Income Ta:i§ii'Vv..(lExppeals};-- dated 27.02.2004 in rm No. sf/";i.so.M it We _heard._Tt'he learned Counsel appearing for the appellantsiand"'the:"learned Counsel appearing for the respondent.
_p .3i.V.Thei"~-Substantial question of law that arises for H eoi1.side'1'aI:_ion~in'. this appeal is as to whether the amount of Rsi.i50,0V0.,00'0/- received by the assessee pursuant to non- competition agreement entered into by the assessee with the Fiaribmiy Lab. Ltd., is to be treated as capital receipt and not " 'revenue receipt is contrary to lawiaixd» perverse and arbitrary and calls for interference in this appeal? \,..2s .
4. The assessee filed return of income for the assessment year 1997-98 declaring total Rs.1,0'7,56,900/-- and the same was Sectior1143(1)(a) of the Act on o9.1a»iie997._-"H6wéyeE;~ "
found that Rs.50,00,000/-- which Zhad-:_A_be'eniiiiveceiyefi assessee as advance from Ranbaxy Lab. Ltd.,i'wa's_"tre.atted as: . 0' capital receipt, though the shown as revenue receipt and of the assessee was called for a_;'id_. the Assessing Officer paspsed the said amount of if receipt by rejecting the conteiitionofthe-~asses'see.,...though the assessee was justified in treating?' the of Rs.50,00,000/- as capital recejip't.c_ Being aggrieved by the order of assessment, the 0' a.ssess'ee _p'referred appeal before the Commissioner of .AV.i(-Aippeals), Belgaum (hereinafter called as the 'Appel1ate.iP§nthority' for short) and the Appellate Authority by dated 27.02.2004 accepted the contention of the 0' --,.pas.se*ssee/appellant that the amount of Rs.50,00,000/~ .. ___received pursuant to non--competition agreement entered into by the assessee with the Ranbaxy Lab. Ltd. had been rightly shown as capital receipt and accordingly allowed the \,_)~, appeal in part and set aside the order of assessment, wherein the said income was treated as revenue "re_"'cei'pt. Being aggrieved by the finding of the Appe11ate4"i-"luth:oifi't3* ' the order dated 27.02.2004, treating_the'ltslaiidiifincomie of Rs.50,00,000/-- as capital receipt;
No. 109 /PNJ/2004 before theiilnlcome Tax Appes1late"Frib'una1,'i.L' Panaji Bench, Panaji (i}ereinaAfter:A'eal1e_d aslt'hes_A'A'I'riibunal' for short) and the vthe Other findi1'1gS which are arisvvere-d' it preferred ITA No. 120/PNs«1,'i20é%§s .i;ar1;i_; 1".:il)1:3lel1l1~"e1llt:°iiiiVi;Fribuna1 dismissed both confirming the order Authority impugned before the Tribunallgx the said dismissal of appeal by the; lRe.venue'" ., it ITA No.109/PNJ/2004, Revenue has appeal.
' ll'.Tf'1A1elA'g:=ci;luestion as to whether the amount received pursuant to non--competition agreement should be treated as it ., Lapéitalflreceipt or revenue receipt has been decided in recent :7-:Dlivision Bench decision of this Court in ITA No.-458/2004 it "dated 31.07.2009, wherein under the same circumstances, where the amount had been received pursuant to the non- competition agreement has been held to be revenue receipt EM.
and not capital receipt as contended by the assessee and order passed by the Appellate Tribunal has been set allowing the appeal filed by the Revenue. ' cited by the learned Counsel appearing fo1:'ithe"hav.eii been considered and after detailed "reas__oningll'oni'sin1ilaf.,,fac.ts as in the present case, the Division Bench' of this_j'C--o.1.ir~it hasv. ' held in ITA No.458/2004 that,_the'va_rriount.receivediipursuant to non--competition as revenue receipt and Tribunal. In the presen.t-eca.sei'::_%i,1fSo,» _riot,_«disputediiithat, the amount of Rs.50,00,o0QV _ to non--cornpetition agreeiarient-- if assessee was restrained from manufacturing in Scheduled to the non~ competition "'ag_re'eme:nt. However, the assessee has ,0 'continiu.ed_'to_ manufacture pharmaceutical products other _thl'ani those mevritioned in Schedule~A to the agreement, which has beer;-prohibited by the non-coInpetition agreement in ..consideration of the amount received by the assessee. wast'; PM ii'AAV_i'i'i1erefore, the decision of this Cou§tVin ITA No.458/2004 _:dated 31.07.2009 is applicable on all one to the facts of this appeal and following the reason assigned in the said judgment, we hold that finding of the Tribunal confirming L.) .
the finding of the Appellate Authority that the amonnt of Rs.50,00,000/-- received in consideration of non-comp.e*t.itio'n agreement has to be treated as capital receipt.--Ais' contrar3r:"'t~o law and cannot be sustained. There.fore,.'lthie" tl'?.C"l Tribunal confirming the order passed::'_Al)y"iV of Income Tax is to be setlaslide and orcleri'ipa's.s'ed...by the!' Assessing Officer has to be rest.or'ed."V.Aocordingly_§3ve answer the substantial question of law the revenue and against the assossee an'd"pas's thel'=fo1loWingl order. Appeal is_»a"lld'Ned;{'fi'.': luplassied by the Income Tax Appelilateiv " Panaji in IT A No.l09fP5NJ the order passed by the Appellate .. AL1th'orityil dated 27.02.2004 in ITA /20l02=----C}3"is set aside and the order passed by pi Asséessinéflfficer dated 22.04.2002 is restored. Sd/e lufiga 3d/M ludgfi gab*