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2017 (4) TMI 1387 - HC - Income TaxCategorization of expenditure of non-compete fee - either capital or revenue - nature of expenditure - Held that:- The test of enduring benefit cannot be applied blindly without regard to the facts and circumstances that arise in the given case. Conclusion of the Tribunal that the payment has an enduring benefit and is capital in nature does not take into account the commercial benefit received by the company. In fact, the Tribunal appears to have been guided solely by an earlier decision rendered by it in the case of Asianet Communication[2005 (1) TMI 620 - ITAT CHENNAI ]. The assessee would incidentally point out that a copy of this decision was not circulated and hence reliance by the Tribunal on this decision is in itself incorrect. He would urge us to consider, as an alternate submission, the remand of the matter to the tribunal in order that he meet and distinguish this decision in full. The advantage of restraining the individuals from engaging in competition is in the field of facilitating its own business and rendering it more profitable. Since there is no increase in fixed capital, the payment does not encroach in the capital field. Though there was no actual or impending threat of the Directors severing their ties with the company or starting competing businesses, the possibility was always real and prudence dictates that the company protect itself against such a probability. This assumed particular significance at a time when the company was proposing to go public and it thus becomes vital that the public continued to see that the company was associated with, and had the benefit of services and loyalty of the individuals who had been, and were continuing to be, fundamental to the growth of the company. Thus we hold that the payments towards non-compete fee to Mr.Raja KSP Ganesan and Mr.R.G.Chandramogan constitute revenue expenditure in the hands of the appellant. The substantial questions of law are answered in favour of the appellant and against the revenue.
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