« ITAT-Constitution of Benches » Open DEMAT Account in 24 hrs  Mere Securing a House on Rent in USA is not conclusive fact that Assessee is US Resident to Allow DTAA Benefit: ITAT  20 LPA Opening Hiring Qualified CA For Assurance Manager Profile  Non-Filing of Income Tax Return amounts to Escapement of Income: ITAT upholds Reassessment u/s 147  Non Appreciation of facts in true perspective: ITAT sets aside Revision Order  No Evidence of Tax Evasion by showing Fictitious or False Transactions: ITAT deletes Addition of Expenditure u/s 40A(3)  Earning Interest Income from Inter-Corporate Deposit is Business Income: ITAT  Income Tax Penalty u/s 271E cannot be levied in the absence of Regular Assessment: ITAT  ITAT deletes Addition u/s 68 of Income Tax Act Firm not Taxable for Capital introduced by Partner  Payment for Facebook Ads and Other Digital Advertising Companies not subject to TDS as per DTAA: ITAT  No Service Tax Leviable on Goods component of Composite Works Contract as VAT has been paid: CESTAT  ITAT deletes Addition on Account of Investment made from Undisclosed Sources as all Transactions were made through Banking Channels «  INCOME TAX APPELLATE TRIBUNAL,NEW DELHI Constitution of... Ahmedabad Benches - Constitution from 21 Feb - 01 Mar 2012. ... » ACIT vs. Dr. B.V. Raju (ITAT Hyderabad Special Bench) February, 16th 2012 Law on taxing non-compete fee u/s 28(va) & 55(2)(a) explained   In AY 2000-01, the assessee received Rs. 11 crores pursuant to a non-compete agreement which was for 5 years. The AO held that there was a transfer by way of relinquishment of the assessees right to manufacture and that the same was chargeable to capital gains by taking Nil cost u/s 55(2)(a). This was reversed by the CIT (A) on the ground that the personal skills of the assessee were placed under restraint and as the said personal skills were not a capital asset, capital gains was not chargeable. On appeal to the Tribunal, the matter was referred to the Special bench. HELD by the Special Bench: (i) The taxability of a non-compete fee depends on the purpose for which it is paid. A non-compete fee can be divided into two categories: (a) consideration received by the transferor of a business for agreeing not to carry on the same business; (b) consideration received by other persons associated with the transferor to ensure that they do not indulge in competing business. For AY 2003-04 & onwards, non-compete fee received by the transferor of a business is taxable as a capital gains in view of s. 55(2)(a) which provides that the cost of a right to carry on business shall be Nil. Though s. 55(2)(a) as amended by the FA 1997 w.e.f. 1.4.1998 referred to a right to manufacture, produce or process any article or thing, that would not cover a non-compete covenant. For AY 2003-04 & onwards, a non-compete fee received by a person associated with the transferor is taxable as business profits u/s 28(va)(a) as being a payment for not carrying out any activity in relation to any business. A non-compete fee received in an earlier year is not chargeable to tax in view of Guffic Chem vs. CIT 320 ITR 602 (SC);   (ii) On facts, the consideration of Rs. 11 crores received by the assessee was not for sale of any business nor was it for not carrying on any business which he was carrying on, which he had transferred. It was also not a payment for a right to manufacture, produce or process any article or thing. The sum was not paid for transfer of any intangible right in respect of manufacture, production or process of cement. Accordingly, the capital gains provisions were not attracted. The amount was paid for not carrying out any activity in relation to any business and would fall within the ambit of s. 28(va)(a). However, as s. 28(va) came into effect in AY 2003-04, the receipts was not chargeable to tax in AY 2000-01.