Law:

Section:

Income tax--Capital or revenue receipt Compensation paid for agreeing to refrain from carrying on competitive business Compensation so paid, held, capital receipt not liable to tax. Blaze & Central (P.) Ltd. v. C. I. T. (1979) 120 I T R 33; Gillanders Arbuthnot & Co. Ltd. v. C. I. T. (1964) 53 I T R 283 (S C) and Kettlewell Bullen & Co. Ltd. v C. I. T. (1964) 53 I T R 261 (S C) ref. C. I. T. v. Best & Co. (P.) Ltd. (1966) 60 I T R 11 (S C) applied. JUDGMENT SETHURAMAN, J. In this reference under section 256(1) of the I.-T. Act, 1961, the following question has been referred: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that no part of the amounts received by the assessee amounting in the aggregate to Rs. 1,50,000 from Blaze in terms of the agreement of April 1, 1966, was liable to be assessed in any of the assessment years 1968 69, 1969 70 and 1970 71 ?" The assessee is a registered firm of five partners. The previous years are the calendar years preceding the relevant assessment years. The firm came into existence in January, 1960, and started carrying on the business of arranging exhibition of advertisement films of Messrs Lintas Ltd., originally done under a letter dated 15th January, 1960. By this letter, the rights for distribution and exhibition of films had been secured for the calendar years 1960 to 1962 for the areas, Madras and Rajasthan. Subsequently, there was a formal contract on 22nd April, 1961, which reduced the terms of the informal arrangement obtaining previously into a formal character. The agreement was as between principal and principal and the rates at which the assessee, was to be paid were stipulated in the agreement. Lintas was to provide the assessee with the necessary prints, etc. The prints were to be of films in the Indian languages. The terms of the contract, as reduced to writing. on 22nd April, 1961, were continued for the calendar year 1962 and also for 1963. On 26th June, 1963, the arrangement was again reduced to writing, but it was to be enforced up to 31st December, 1963. In the last mentioned agreement, there was a new clause that Lintas, during the period…

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