Abstract
The article while tracing the history of negative covenant like non-compete fee explains its meaning. It also examines the taxability of such agreements, both at the hands of the payer and receiver. While doing so, it highlights the difference of opinion amongst the courts in India which in turn is dependent on the nature of rights involved in such transactions. It may be noted that the authors are of the view that such rights are akin to intellectual property rights (IPR) and should be taxed accordingly. In this backdrop, the article gives a comprehensive display of the law applicable in taxation of IPR. The article also highlights the importance of transaction in such cases and explains the interplay of various provisions on the outcome of liability of the taxpayer. It concludes that the structure of the transaction is paramount in determining the liability. Last but not least the article concludes that IPR tax regime in India is outdated and needs amendment.
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