COMMISSIONER OF INCOME TAX Vs. A S WARDEKAR

JUDGEMENT

(1.) The instant IT Appeal preferred by the Revenue under Section 260A of the IT Act, 1961, against the order passed by the learned Tribunal, Calcutta for the asst. yr. 1989-90 was admitted on 19th Dec., 2000 on the following questions :

(2.) The facts found by the learned Tribunal are that the assessee promoted a partnership firm called M/s Western India Erectors (P) Ltd. Later another company known as Western India Erector (P) Ltd. (WIEL) was promoted in 1970 and most of the contracts were taken over by the company but the firm continued. Subsequently, this company was converted into a limited company. Most of the shares were held by the assessee and his close relatives. The company made public issues. The assessee through good offices of his friends and in terms of agreement dt. 28th Oct., 1988 negotiated the sale of all the shares to United Breweries Ltd. (for short "UBL"). The agreement was between the assessee acting for himself and his associates and the UBL. The agreement also had authorised the assessee to enter into the agreement on behalf of the other shareholders who were his relatives, friends and associates. There was also an agreement or reconstitution of WIEL and how after the sale of shares the affairs of WIEL would be managed. The agreement also provided that the assessee would continue on the board of directors as chairman. The assessee agreed to sign such documents and carry out acts and things as would be reasonably required to give effect of the terms of that agreement. The UBL, however, thought it expedient to bind the assessee by written agreement refraining him from undertaking any business similar to the business of the said company as the assessee was carrying on before and could have carried on in future as in the past once he was free from WIEL. Therefore, the assessee and the UBL entered into another agreement whereby the assessee undertook not to engage himself directly or indirectly for a period of five years from the date of agreement in any activity industrial, commercial or otherwise, which in any manner competes or comes into conflict with the existing business and activity of WIEL. In consideration of such undertaking, the UBL agreed to pay to the assessee a sum of Rs. 175 lakhs. The said sum was duly paid by UBL and its associate companies. It was in this background that the assessee had received the aforesaid amount of Rs. 175 lakhs.

(3.) The AO held that the receipt was of casual and non-recurring nature subject to exemption prescribed under Section 10(3) of the IT Act, 1961. Being aggrieved the assessee preferred an appeal. The CIT(A) allowing the appeal held as under :