COMMISSIONER OF INCOME TAX -XIII Vs. KANWALJIT SINGH

JUDGEMENT

(1.) THE revenue claims to be aggrieved, in these three appeals, by a common judgment of the Income Tax Appellate Tribunal, and prefers these appeals under Section 260-A of the Income Tax Act. The substantial question of law urged, and which arises for consideration is whether the income from amount earned in terms of a non-Compete Agreement with Uzind Corporation falls under the head of income from salary or income from business.

(2.) THE brief facts are that the assessee was a General Sales Agent (GSA) of Uzbekistan Airways (UA)- Uzind Corporation (UC) and received a salary of '.1,32,000 per annum in that capacity. By a non-compete agreement (NCA) dated 15-03-2002, the assessee received an amount of 7% of the cargo freight and cost of tickets payable by UC to UA in addition to his regular salary. Under Clause 4 of the agreement, the commission payable to the assessee is separate from the remuneration given to him for other services provided by him to UC. It further stipulated that the relationship was on principal-to-principal basis, not intended to be construed as either a partnership or agency.

(3.) THE Tribunal, by its impugned order, reversed the findings of the CIT (A). The Tribunal felt that none of the lower authorities disputed that commission received was for carrying out any activity that was related to the business. Thus the amount could only be assessed under the head of income from business. Further, an arrangement where the source follows the mercantile system of accounting and the recipient follows the cash system is well recognized and followed, and was thus not a colourable device to evade taxes. Since it is specifically assessable under Section 28 (va), it will be classifiable as income from business and not salary. Further, if UC continued to only show that the amount was credited without the assessee receiving the amount, the revenue has a right to enforce other remedial provisions in the hand of the firm to bring the amount not paid to tax. The Tribunal also based its finding on the contractual clauses of the Non-compete agreement which stated that the relationship was not employer- employee relationship.