Sum Received in lieu of relinquishment of right to sue 'Coca-Cola' was capital receipt:

[2015] 57 taxmann.com 194 (Jaipur - Trib.)

IN THE ITAT JAIPUR BENCH

Satyam Food Specialities (P.) Ltd.

v.

Deputy Commissioner of Income-tax, Central Circle-2, Jaipur

 Section 28(ii), read with section 28(va), of the Income-tax Act, 1961 - Business income - Compensation (Non-compete fee v. Business compensation) - Whether relinquishment of right to sue is neither a capital asset nor taxable under section 28 - Held, yes - Assessee-company entered into a franchisee soft-drink bottling agreement with CSBIPL for sale of its soft drinks - Thereafter, CSBIPL transferred its soft drink business to Coca Cola - To avoid competition, Coca Cola was not interested in selling soft drink of CSBIPL - Consequently, assessee incurred loss - Assessee-company filed some suits against Coca Cola - Thereafter, it was settled between them that assessee-company would relinquish all claims and complaints against Coca Cola against consideration as full and final settlement of all its outstanding differences - Assessee claimed said consideration as capital receipt - Assessing Officer held compensation as revenue in nature under section 28(ii)(c), as assessee had received it in consideration of terminating agency - Commissioner (Appeals) held that provisions of section 28(va) were applicable and not section 28(ii)(c) - Whether since real intent, objective and purpose of payment of compensation as per settlement agreement was to ensure withdrawal of all pending litigation by assessee, it was neither in lieu of surrender of any agency or agreement for non-competition and thus, compensation neither fell in ambit of section 28(ii)(c) nor under section 28(va) and it was only capital receipt - Held, yes [Para 2.17] [In favour of assessee]