In Brief
Shiv Raj Gupta, former Chairman of Central Distillery and Breweries Ltd., sold his controlling share to Shaw Wallace group and received Rs. 6.6 crores as a non-competition fee. The Income Tax Department taxed this as compensation for management termination (revenue receipt), but the assessee contended it was a capital receipt from a restrictive covenant. The Supreme Court allowed the appeal on two grounds: (1) the High Court violated Section 260-A by framing a question limited to Section 28(ii)(a) but answering by treating the amount as capital gains without reformulating the question or giving the assessee notice and opportunity; (2) on merits, following established precedent, payments under non-compete covenants are capital receipts, not revenue receipts, and such receipts were not taxable before the 2003 legislative amendment.
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