| Citation(s) |
|---|
| 2015 SLG 2059 2015 SLD 2059 (2015) 374 ITR 695 |
Punjab and Haryana High Court
IT APPEAL Nos. 557 OF 2006, 262 TO 264 AND 351 TO 353 OF2010 MAY 15, 2015
S.J. VAZIFDAR, ACTG. C.J. AND G.S. SANDHAWALIA, J
Ms. Urvashi Dhugga, Adv., for the Appellant. Ms. Radhika Suri, Sr. Adv. and Ms. Rinku Dahiya, Adv. for the
Respondent
IT APPEAL Nos. 557 OF 2006, 262 TO 264 AND 351 TO 353 OF2010 MAY 15, 2015
S.J. VAZIFDAR, ACTG. C.J. AND G.S. SANDHAWALIA, J
Ms. Urvashi Dhugga, Adv., for the Appellant. Ms. Radhika Suri, Sr. Adv. and Ms. Rinku Dahiya, Adv. for the
Respondent
Commissioner of INCOME TAXI, Chandigarhv.Smt. Usha Saboo
Law: Income Tax Act, 1961
Section: 48
Section 4, read with section 48, of the Income-tax Act, 1961 - Income - Chargeable as (Non-compete fee) - Assessment year 1994-95 - Assessees were members of Saboo group which was holding 40 per cent shares in a company while other GB group held 60 per cent shares in said company - Dispute arose between two groups which was ultimately settled in terms of Share Purchase Agreement under which members of Saboo group agreed to sell all their shares to GB group at price of Rs. 400 per share - Share Purchase Agreement contained negative covenant preventing members of Saboo group from engaging in similar business or in competition with business of company - Assessees claimed that out of sum of Rs. 400 per share, a sum of Rs. 100 per share ought to be apportioned as consideration on account of negative covenants stipulated in Share Purchase Agreement and same being capital in nature was not chargeable to tax - Whether since agreement between parties indicated that lump sum consideration was in respect of two independent assets, viz., negative covenant and shares, it was liable to be bifurcated and apportioned between each of assets - Held, yes - Whether amount apportioned as consideration on account of negative covenant stipulated in agreement would be treated as capital receipt not chargeable to tax - Held, yes [Para 31] [In favour of assessee] FACTS â– The assessees were members of the Saboo group. The Saboo group and GB group of Germany respectively held 40 per cent and 60 per cent shares of the equity capital of a company. Disputes arose between two groups leading to the Saboo group filing a petition for oppression and mismanagement under sections 397 and 398 of the Companies Act, 1956. The petition was dismissed. The matter was ultimately settled in terms of a Share Purchase Agreement under which each of the members of Saboo group agreed to sell, transfer, assign and deliver to the GB group their shares having a nominal value of Rs. 10 per share at the price of Rs. 400 per share. â– The Share Purchase Agreement stipulated that for a period of five years after the closing date, Saboo group would not directly or indirectly engage anywhere in India in…