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May 2023

Sum received towards undertaking restrictive covenant of non-imparting service to any other person and not to share associated goodwill of medical practice, being in the nature of non-compete fee, is a capital receipt and not taxable as business or professional income. Non-compete fee related to profession is made taxable only w.e.f. A.Y. 2017-18 and the non-compete fee in relation to profession for period prior to A.Y. 2017-18 would be treated as capital receipt. Changing of Section from 28(va) to 28(i) without confronting the Assessee is a fatal mistake.

By Jagdish Punjabi, Chartered Accountant
Devendra Jain, Advocate
Reading Time 4 mins

7. Nalini Mahajan vs. ACIT TS-180-ITAT-2023(DEL) A.Y.: 2014-15 Date of Order: 06th April, 2023 Sections: 28(i), 28(va)

Sum received towards undertaking restrictive covenant of non-imparting service to any other person and not to share associated goodwill of medical practice, being in the nature of non-compete fee, is a capital receipt and not taxable as business or professional income.

Non-compete fee related to profession is made taxable only w.e.f. A.Y. 2017-18 and the non-compete fee in relation to profession for period prior to A.Y. 2017-18 would be treated as capital receipt.

Changing of Section from 28(va) to 28(i) without confronting the Assessee is a fatal mistake.

FACTS

The assessee, a doctor by profession was running a clinic by the name of Mother & Child, New Delhi. On 28th October, 2012, the assessee, executed a `Service Agreement’ with Nova Pulse IVF Clinic Pvt Ltd (“the Company”) whereunder the assessee agreed to be exclusively engaged with the Company for providing her professional services. Under the agreement, the consideration was a fee for her professional services, an amount for

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