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2011 (6) TMI 507 - AT - Income TaxNon compete fees paid to HUF - Capital or revenue expenditure - Held that:- Assessee company entered into separate agreements effective from 01.09.1996 with the proprietors of two sister concerns which were engaged in trading of chemicals in earlier years for a long period. It may be seen that in clear terms, the proprietary concerns have undertaken not to compete with the assessee company in any way for a period of 15 years & that the assessee company would also get the benefit of the exclusive use of trademarks as also the tenanted premises, which are inseparable part of the proprietary business as a going concern. Thus since the payment was composite payment at the time of acquiring the business, even though payable over a period of 15 years in monthly installments the amount has to be treated as capital expenditure - bifurcating the amount towards use of trade name and use of non-compete clause are not relevant for considering the items as eligible for deduction. It is also on record that assessee acquired the business as a going concern including its right to use trade mark and this agreement entered in as early as 01.09.1996 was interpreted and the payments were considered as capital expenditure - against assessee. Claim of depreciation - Held that:- Section 32(1) (ii) allowed depreciation on intangible assets acquired on or after 1st of April 1998. Since the assets / so called intangible assets were acquired before the aforesaid date, provisions of section 32(1)(ii) are not applicable to the facts of the case . Thus the grounds on allowance of depreciation on the non compete fees also stand dismissed - appeal decided against assessee.
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