JUDGMENT judgment of court was delivered by R. Sudhakar J.-This tax case (appeal) filed by Revenue as against order dated October 5, 2007, made in I. T. A. No. 1183/Mds/2002 on file of Income-tax Appellate Tribunal, Madras "A" Bench, for assessment year 1996-97 was admitted on following substantial question of law: "(i) Whether, on facts and in circumstances of case, Tribunal was right in holding that no part of consideration should be apportioned towards goodwill and that entire amount should be treated as non-compete fee contrary to ruling of this court in case of CIT v. G. D. Naidu (Late) [1987] 165 ITR 63 (Mad)? brief facts of case in nut-shell are as follows: assessee-company entered into agreement with Machinenfabrik Reinhausen GmBH Germany (MR) to sell plant and machinery in respect of tap changer division of company. business of assessee-company consisted of two divisions, viz., transformer division manufacturing power transformers and tap changer division. As per agreement, assessee undertook not to engage either directly or indirectly in manufacture of existing range of products. On basis of agreement for cessation of manufacturing activity, especially D and V type tap changers including MA2 and MA9 drive mechanism, sum of Rs. 6.89 crores (approximately) was received by assessee as consideration for complying with terms of agreement and claimed same as exempt as capital receipt. However, Assessing Officer held that there was absolute transfer of business's independent unit with all tangible and intangible assets. Assessing Officer further held there was separate consideration received for sale of plant and machinery and related equipment, and, hence, receipt should be attributed to transfer of goodwill and restrictive covenants. Accordingly, Assessing Officer brought to tax amount from capital gains in respect of transfer of goodwill to extent of Rs. 403.89 lakhs by adopting cost of acquisition at nil. Aggrieved by said order of Assessing Officer, assessee pursued matter before Commissioner of Income-tax (Appeals), who accepted contention of assessee, thereby allowed appeal holding that there was no element of goodwill in agreement entered into by assessee with MR in regard to transfer of business and non-compete clause in agreement and, hence, entire receipt should be attributed to restrictive covenants/non-compete fee. Accordingly, Commissioner of Income-tax (Appeals) deleted addition. Not satisfied with order of Commissioner of Income-tax (Appeals), Revenue pursued matter before Income-tax Appellate Tribunal. Tribunal, by following decision in case of Deputy CIT v. Indian Syntans Investments (P.) Ltd. [2007] 293 ITR (AT) 177 (Chennai); [2007] 106 TTJ 388, dismissed appeal holding as follows: "3. In this case, there is no dispute that assessee-company has transferred technical know-how or any other advantage to joint venture comprising assessee-company and MR. Under similar circumstances, this Tribunal, to which one of us Accountant Member was party, has held in case of Deputy CIT v. Indian Syntans Investments (P.) Ltd. [2007] 293 ITR (AT) 177 (Chennai); [2007] 106 TTJ 388 (Chennai) held that assessee-company surrendered all its trade names, customers list, suppliers list, licences, permits, approval under agreement with another company, and latter having continued business using its own logo and trade names, there was no intention to acquire goodwill of assessee and, therefore, non- compete fee received by assessee cannot be treated as goodwill and it is not taxable as income. recourse to section 55(2) can be made only from assessment year 1998-99 in respect of consideration received for transfer thereof, which includes extinguishment or curtailment of such right. In this connection, learned counsel for assessee has relied on Central Board of Direct Taxes Instruction No. 1964, dated March 17, 1999. appeal before us for assessment year 1996-97 and on this count also we are of opinion that Assessing Officer was not justified in charging goodwill as taxable income. On above reasoning and in facts and circumstances of case, we are in full agreement with findings of learned Commissioner of Incometax (Appeals) that this compensation was not at all taxable." Aggrieved by said order of Tribunal, Revenue has filed present tax case (appeal). Learned counsel appearing for assessee submitted that issue involved in this appeal has been considered by Supreme Court in case of Guffic Chem. P. Ltd. v. CIT reported in [2011] 332 ITR 602 (SC), wherein, issue was held in favour of assessee on ground that compensation attributable to negative/restrictive covenants is capital receipt. Heard learned standing counsel appearing for Revenue and learned counsel appearing for assessee and perused materials placed before this court. assessment in this case relates to assessment year 1996-97. It is seen that Commissioner of Income-tax (Appeals) as well as Tribunal came to hold that agreement does not contain any clause which could be referred to transfer of goodwill since payment is in relation to cessation of certain manufacturing activity of assessee-company giving exclusive right to M/s. MR. appellate authority as well as Tribunal accepted assessee's plea that it is not payment in respect of goodwill. admitted fact in this case is assessee-company has transferred technical know-how and other advantages to joint venture company consisting of assessee company and MR and assessee continued its business using its own logo, trade name, licences, permits and approval under agreement with another company. Tribunal came to hold that there was no intention to acquire goodwill of assessee and, therefore, non-compete fee received by assessee could not be treated as goodwill and it is not taxable as income. We find, on facts, that there is no reason to differ with said finding. reliance placed by Assessing Officer on section 55(2)(a) of Income-tax Act was repelled by Tribunal rightly on plea that said provision came into effect in year 1998-99, whereas assessment year in present case is 1996-97. Therefore, there was no basis to fall back on said provision. As has been recorded by Commissioner of Income-tax (Appeals) and Tribunal, we find, in facts of present case, that non-compete fee received by assessee is capital in nature. As rightly relied on by learned counsel appearing for assessee, similar issue was considered by Supreme Court in case of Guffic Chem. P. Ltd. v. CIT reported in [2011] 332 ITR 602 (SC). facts therein are assessee carrying on business of manufacturing, selling and distribution of pharmaceutical and medical preparations received sum of Rs. 50 lakhs during assessment year 1997-98, from Ranbaxy as noncompetition fee. Tribunal held that said amount was capital receipt. On appeal, High Court reversed said decision. However, On further appeal, Supreme Court held as follows (page 607): "Two questions arose for determination, namely, whether amounts received by appellant for loss of agency was in normal course of business and therefore whether they constituted revenue receipt? second question which arose before this court was whether amount received by assessee (compensation) on condition not to carry on competitive business was in nature of capital receipt? It was held that compensation received by assessee for loss of agency was revenue receipt whereas compensation received for refraining from carrying on competitive business was capital receipt. This dichotomy has not been appreciated by High Court in its impugned judgment. High Court has misinterpreted judgment of this court in Gillanders's case [1964] 53 ITR 283 (SC). In present case, Department has not impugned genuineness of transaction. In present case, we are of view that High Court has erred in interfering with concurrent findings of fact recorded by Commissioner of Income-tax (Appeals) and Tribunal. One more aspect needs to be highlighted. Payment received as non-competition fee under negative covenant was always treated as capital receipt till assessment year 2003-04. It is only vide Finance Act, 2002, with effect from April 1, 2003, that said capital receipt is now made taxable (see section 28(va)). Finance Act, 2002, itself indicates that during relevant assessment year compensation received by assessee under non-competition agreement was capital receipt, not taxable under 1961 Act. It became taxable only with effect from April 1, 2003. It is well settled that Act. It became taxable only with effect from April 1, 2003. It is well settled that liability cannot be created retrospectively. In present case, compensation received under non-competition agreement became taxable as capital receipt and not as revenue receipt by specific legislative mandate vide section 28(va) and that too with effect from April 1, 2003. Hence, said section 28(va) is amendatory and not clarificatory. Lastly, in CIT v. Rai Bahadur Jairam Valji reported in [1959] 35 ITR 148 (SC) it was held by this court that if contract is entered into in ordinary course of business, any compensation received for its termination (loss of agency) would be revenue receipt. In present case, both Commissioner of Income-tax (Appeals) as well as Tribunal, came to conclusion that agreement entered into by assessee with Ranbaxy led to loss of source of business; that payment was received under negative covenant and therefore receipt of Rs. 50 lakhs by assessee from Ranbaxy was in nature of capital receipt. In fact, in order to put end to litigation, Parliament stepped in to specifically tax such receipts under non- competition agreement with effect from April 1, 2003." (emphasis supplied) In abovesaid decision, Supreme Court emphasised fact that Finance Act, 2002, which came into effect from April 1, 2003, makes capital receipt as taxable under section 28(va) and held that liability cannot be created retrospectively. Similar is issue in respect of section 55(2)(a) of Income-tax Act. said principle will apply to provision under section 55(2)(a), which came into effect only from assessment year 1998-99. assessment year in this case is 1996-97. Accordingly, following abovesaid decision of Supreme Court, issue is answered in favour of assessee and against Revenue. In result, this tax case (appeal) stands dismissed. No costs. *** Commissioner of Income-tax v. Hackbridge Hewittic and Easun Ltd