- (1.) This appeal under Section 260A of the Income-tax ( Act ), 1961 is at the instance of an assessee and is directed against an order dated September, 2002, passed by the Income-tax Appellate Tribunal, B Bench, Kolkata in Income-tax Appeal bearing ITA No.1449 (Cal)/2000 for the Assessment Year 1997-98 and thereby dismissing the appeal preferred by the assessee.
(2.) Being dissatisfied, the assessee has come up with the present appeal.
(3.) The facts leading to the filing of this appeal may be summed up thus: a) The appellant was one of the promoters and a Director of Ghaghra Sugar Limited (hereinafter referred to as the company) which has a factory for the manufacture of sugar. The assessee is also Director of Ganges Sugar Mills Pvt. Ltd. which had applied for and received a license to set up a new sugar factory in the region in which the company had its sugar factory. According to assessee, he had the requisite technical and financial expertise required for setting up and running a sugar factory and the Ganges Sugar Mills Pvt. Ltd. had obtained the license in view of the assessee's association with it intending to utilise the assessee's technical and financial assistance. b) According to the assessee, if he set up the new factory by Ganges Sugar Mills Pvt. Ltd., it would have posed a serious problem to the company inasmuch as the availability of sugarcane to the company would have been adversely affected. In such circumstances, the company negotiated with the assessee and on December 27, 1996 entered into an agreement so as to prevent the assessee from competing with the sugar business of the company directly or indirectly for a period of five years and in consideration of the respective covenant, the company agreed to pay to the assessee a sum of Rs.25 lakh. c) On receipt of the said sum of Rs.25 lakh, the assessee resigned from the office of the Director of Ganges Sugar Mills Pvt. Ltd. and upon resigning from the said office of Director, the Ganges Sugar Mills Pvt. Ltd. decided not to go ahead with the setting up of the new sugar factory. d) In the assessment proceeding for the Assessment Year 1997-98, the assessee claimed that the said amount of Rs.25 lakh received for non-competition with the said company was a capital receipt not liable for tax. The assessee drew the attention of the Assessing Officer to the amendment made to the Income-tax Act by the Finance Act, according to which non-competition fee could be subjected to tax only from the Assessment Year 1998-99 under the head Capital Gains. The assessee also drew the attention of the Assessing Officer to the circular being instruction No.1964 dated March 17, 1999 issued by the Central Board of Direct Taxes to the effect that noncompetition fee could not be subjected to tax prior to the Assessment Year 1998-99. e) The Assessing Officer, however, subjected the said amount to tax under the head other sources vide order dated March 3, 2000 for the Assessment Year 1997-98. f) Being dissatisfied, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), who by order dated August 29, 2000 allowed the same. The Commissioner of Income-tax (Appeals) accepted the contention of the assessee that the said sum or Rs.25 lakh was a capital receipt and would not be subject to tax. g) Against the said order dated August 29, 2000, the Assessing Officer preferred an appeal before the Tribunal below and the Tribunal below while passing the order impugned proceeded as if the claim of non-competition fee was not a genuine one and allowed the appeal of the Assessing Officer by disbelieving the transaction of acceptance of the non-competition fees of Rs. 25 lakh. h) Being dissatisfied, the assessee has come up with the present appeal.;