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2014 (4) TMI 667 - AT - Income TaxFee treated as capital expenses - Disallowance of Non-compete fee – Fee paid to Executive Director – Held that:- The payee is precluded from making a claim, for the reason that the intellectual property is developed etc. during the course of his employment with the company – the CIT(A) and AO were not right in taking the view that the assessee company has paid the compensation to acquire the intellectual property from the payee permanently - The territorial restriction prescribed in Article 5 does not lead to a conclusion that Mr. Prasrampuria was carrying on any business in those area - he was only prohibited from exercising the activities prescribed in Article 5 in those four countries. All the three reasons cited by the CIT(A) to confirm the addition has failed - the period of prohibition / restriction is for a period of one year only - the period of one year cannot be considered as a long period which would give an enduring benefit to the assessee – relying upon Commissioner of Income Tax Versus M/s Eicher Limited [2008 (3) TMI 15 - HIGH COURT OF DELHI] - the assessee could not be said to have derived any enduring benefit out of the payment of non-compete fee - it is in the nature of restricting only one of the employees of the Company that was taken over by the assessee company – thus, it cannot be considered as a Capital expenditure - the tax authorities were not justified in disallowing the claim of ₹ 80.88 lakhs treating the same as Capital expenditure - thus, the order of the CIT(A) set aside – Decided in favour of Assessee.
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