“section 28(va)”
The decision most relied on for section 28(va) is CIT v. Vinay Cements Ltd. (213 CTR 268), cited in 422 judgments on BharatTax.
Leading authorities on section 28(va)
Employees' contributions to provident fund and ESI are allowable as a deduction under Section 36(1)(va) read with Section 2(24)(x) if deposited by the assessee before the due date for filing the income tax return.
Compensation received for a non-compete covenant or for not carrying on a specific business activity is a capital receipt and not liable to tax as business income.
Receipt of a non-compete fee, even if it does not alter the assessee's business structure, impairs the carrying on of their activity, constituting a loss of a source of income.
Compensation received for the cancellation of an agency agreement is a capital receipt if it impairs the assessee's trading structure or results in the loss of a source of income. However, if the contract is terminated in the ordinary course of business, the compensation may be considered a revenue receipt, with classification depending on the specific facts of each case.
This case is authority for the principle that deductions under section 36(1)(viii) of the Income-tax Act may be granted in respect of certain categories of receipts. The court's decision in this case is relied upon when interpreting the scope of business activities for tax purposes.
A non-compete fee paid as part of an agreement to prevent competition or induce employees to stay is to be treated as a revenue expenditure.
Expenditure incurred for acquiring a non-compete right is capital in nature and eligible for depreciation under section 32(1)(ii) of the Income Tax Act as it constitutes an intangible asset.
Non-compete fees are taxable under Section 28(va) only when the assessee is carrying on a business, not when the consideration is embedded in the purchase price of shares and the assessee is merely a shareholder.
