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1 - 7 of 7 (0.21 seconds)The Commissioner Of Income-Tax, Madras vs Chari And Chari Ltd on 9 April, 1965
4. Applying the aforesaid test laid down by this Court in the present case, in our view the Tribunal was right in arriving at a conclusion that it was a capital receipt. Reason is that as provided in Article XVIII of the First Agreement assessee was having an option or right or lien, if owner desired to transfer the hotel or lease or part of the hotel to any other person, the same was required to be offered first to the assessee (operator) or its nominee. This right to exercise its option was given up by a Supplementary Agreement which was executed in September, 1975 between the Receiver and assessee. It was agreed that Receiver would be at liberty to sell or otherwise dispose of the said property at such price and on such terms as he may deem fit and was not under any obligation requiring the purchaser thereof to enter into any agreement with the operator (assessee) for the purpose of operating and managing the hotel or otherwise and in its return, agreed consideration was as stated above in Clause X. On the basis of the said agreement the assessee has received the amount in question. The amount was received because the assessee had given up its right to purchase and or to operate the property. Further it is loss of source of income to the assessee and that right is determined for consideration. Obviously therefore, it is a capital receipt and not a revenue receipt.
Commissioner Of Income-Tax, Nagpur vs Rai Bahadur Jairam Valji And Others on 7 October, 1958
5. Learned Counsel for the Revenue relied upon the decision in the case of Commissioner of Income Tax v. Rai Bahadur Jairam Valji and Ors. : [1959] 35 ITR 148 (SC) and submitted that assessee had the business of running the hotels in various countries and the amount which is received by him is for the termination of first contract which was executed in 1970 and, therefore, it should be considered his revenue receipt. In that case the Court was dealing with a trading contract and held that compensation paid in respect of the rights arising under the trading contract would be a revenue receipt and must be referred to the profits which would be made in carrying out of contract. The Court has also observed :
Oberoi Hotel Pvt. Ltd vs Commissioner Of Income Tax on 10 March, 1999
11. Hence, we are of the opinion that, applying the legal principles enunciated by the Supreme Court in Rai Bahadur Jairam Valjis case, Kettlewell Bullen & Co Ltd case, Gillanders Arbuthnot & Co Ltd case, Karam Chand Thapar & Bros case, Oberoi Hotel (P) Ltd case and Guffic Chem (P) Ltd case, the amount equivalent to 4,99,000 pounds paid by the LIG is liable to be treated as a measure of compensation towards the negative covenant of non compete entered into by and between Bio-med Limited and LIG. In our opinion, it is not necessary that the assessee need to shelve all his other sources of income as well, for the receipt of compensation to amount to a capital receipt. Like in the Oberoi Hotels case where assessee has only lost a right to a particular property only a part of several other business activities which it carries on - compensation received for partial impairment of the business activities normally undertaken by the assessee is liable to be treated as a capital receipt. The litmus test is whether the impairment is one of its sources of income or not and if the answer is that the injury has been caused to one of its sources of income, then it is enough to render the compensation received in that process as a capital receipt. At any rate, with effect from 01.04.2003, by virtue of introduction of Section 28(va) to the Act, all monies received pursuant to a negative covenant become liable for the incidence of taxation, thus obliterating the distinction between the two that was available till then.
Gillanders Arbuthnot And Co., Ltd vs The Commissioner Of Income-Tax, ... on 1 May, 1964
11. Hence, we are of the opinion that, applying the legal principles enunciated by the Supreme Court in Rai Bahadur Jairam Valjis case, Kettlewell Bullen & Co Ltd case, Gillanders Arbuthnot & Co Ltd case, Karam Chand Thapar & Bros case, Oberoi Hotel (P) Ltd case and Guffic Chem (P) Ltd case, the amount equivalent to 4,99,000 pounds paid by the LIG is liable to be treated as a measure of compensation towards the negative covenant of non compete entered into by and between Bio-med Limited and LIG. In our opinion, it is not necessary that the assessee need to shelve all his other sources of income as well, for the receipt of compensation to amount to a capital receipt. Like in the Oberoi Hotels case where assessee has only lost a right to a particular property only a part of several other business activities which it carries on - compensation received for partial impairment of the business activities normally undertaken by the assessee is liable to be treated as a capital receipt. The litmus test is whether the impairment is one of its sources of income or not and if the answer is that the injury has been caused to one of its sources of income, then it is enough to render the compensation received in that process as a capital receipt. At any rate, with effect from 01.04.2003, by virtue of introduction of Section 28(va) to the Act, all monies received pursuant to a negative covenant become liable for the incidence of taxation, thus obliterating the distinction between the two that was available till then.
Continental Construction Ltd vs Commissioner Of Income-Tax, Central-1 on 15 January, 1992
Ltd. Vs. Commissioner of Income Tax (2011 (332) ITR 602) examined this very question and in its paragraph 7 held that compensation received for refraining from carrying on competitive business was a capital receipt and that payment received as non-competitive fee under a negative contract was always treated as a capital receipt till the assessment year 2003-2004, i.e. till the introduction of Section 28 (va) by way of an amendment to the Act with effect from 01.04.2003.
Kettlewell Bullen And Co vs Commissioner Of Income-Tax, Calcutta on 1 May, 1964
11. Hence, we are of the opinion that, applying the legal principles enunciated by the Supreme Court in Rai Bahadur Jairam Valjis case, Kettlewell Bullen & Co Ltd case, Gillanders Arbuthnot & Co Ltd case, Karam Chand Thapar & Bros case, Oberoi Hotel (P) Ltd case and Guffic Chem (P) Ltd case, the amount equivalent to 4,99,000 pounds paid by the LIG is liable to be treated as a measure of compensation towards the negative covenant of non compete entered into by and between Bio-med Limited and LIG. In our opinion, it is not necessary that the assessee need to shelve all his other sources of income as well, for the receipt of compensation to amount to a capital receipt. Like in the Oberoi Hotels case where assessee has only lost a right to a particular property only a part of several other business activities which it carries on - compensation received for partial impairment of the business activities normally undertaken by the assessee is liable to be treated as a capital receipt. The litmus test is whether the impairment is one of its sources of income or not and if the answer is that the injury has been caused to one of its sources of income, then it is enough to render the compensation received in that process as a capital receipt. At any rate, with effect from 01.04.2003, by virtue of introduction of Section 28(va) to the Act, all monies received pursuant to a negative covenant become liable for the incidence of taxation, thus obliterating the distinction between the two that was available till then.
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