COMMISSIONER OF INCOME TAX Vs. K. CHANDRAKANTH KINI

JUDGEMENT

(1.) This appeal is by the revenue challenging the order passed by the Tribunal which has set aside the finding recorded by the Commissioner of Appeals that the amount received by the Assessee under non-competition agreement constitutes capital gains and as such they are liable to pay tax.

(2.) The Assessee is the legal heir of Dr. K. Bhaskar Kini Who along with his two brothers was the promoter/director/shareholder of various companies which were manufacturing and trading in carbon dioxide gas. The said businesses were sold vide the agreement dated 9.2.1998 to M/s. Praxair Carbon Dioxide Private Limited, Bangalore. By a separate agreement of even date, Dr Bhaskar Kini and his brothers entered into non-competition agreement with M/s. Praxair Calbon Dioxide Private Limited. The consideration paid under the said agreement was Rs. 3 Crores. In terms of the said agreement they agreed net to engage in similar business in any capacity for a period of 10 years. In the return filed by him, the said amount was disclosed and exemption was claimed as capital receipt. The return filed by the Assessee under Section 143(1) of the Act and refund claimed as per the return was granted. Subsequently, a notice dated 31.3.2004 was issued under Section 148 on the ground that the income escaped assessment. The Assessee preferred an appeal. The Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer. Aggrieved by the same, the Assessee preferred an appeal to the Tribunal.

(3.) The Tribunal following its judgment in ITA No. 958/Bang/04 in case of the Assessee's brother allowed the appeal. Aggrieved by the said order, the revenue has preferred this appeal.