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2015 (8) TMI 843 - AT - Income TaxClaim of depreciation on non-compete right as intangible asset - Held that:- The Tribunal in assessee’s own case for the assessment years 2003-04 to 2006-07 [2015 (8) TMI 750 - ITAT MUMBAI] held that the non compete clause under agreement should be read as a supporting clause to the transferor of the copy rights and patents rather to strengthen the commercial right, which was transferred in favour of the assessee. Rejected the argument of revenue that non-compete fee is in the nature of a negative right and it cannot be of a commercial right of similar nature and the expression 'similar nature' shall be relatable to patents, copy rights and trade mark license or franchise or any other business - the assessee is entitled for depreciation for non-compete payment for acquiring non-compete right which is intangible asset - Decided in favour of assessee. Disallowance of contractual payment - Held that:- Even if the assessee was under contractual obligation to compensate for income-tax liability, then also same cannot be claimed as deduction, because it tantamounts to paying of sum on account of any rate or tax levied on the profits and gains of any business or profession as stipulated in section 40(a)(ii). Either the assessee pays the income-tax liability of the other person or pays by itself or compensates the same, will not make a difference as there cannot be distinction between such discharge of liability. That it cannot be held to be a allowable expenditure. Thus, the finding of the CIT(A) that income-tax liability cannot be allowed as deduction is upheld. Similarly, regarding payment of excise duty, it has not been rebutted before us that same is not towards penalty for evasion of excise duty and that such a penalty is not “penal” but compensatory in nature. Thus, without any detail to controvert this finding of CIT(A), it can be inferred as relating to the evasion of duties and penal in nature. Accordingly, the said amount of ₹ 15,90,229/- being amount of penalty and additional duty cannot be held to be allowable within the ambit of section 37(1). Thus, on this score also the decision of the Hon’ble CIT(A) is upheld. - Decided against assessee. Determining the ALP u/s 92C(2) after granting 5% sale harbour - Held that:- The standard adjustment of ± 5% as given by the CIT(A) cannot be allowed as this controversy has been set at rest by Finance Act, 2012 with insertion of sub-section (2A) to section 92C with retrospective effect. With this amendment, it has been clarified that where variation by way of arithmetic mean comprised at which transaction has actually been undertaken, exists by 5% of the arithmetic mean, the assessee shall not be entitled to exercise the option. Accordingly, we hold that Ld. CIT(A) has not justified in granting standard adjustment of 5%. - Decided in favour of revenue.
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