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2017 (8) TMI 1474 - AT - Income TaxNature of expenditure - non-compete fee - revenue or capital - Held that:- Various clauses in the first agreement itself demonstrate that the agreement was initially for a period of 5 years and even the consideration is an annual payment based on the annual turnover. Therefore, it appears to be a payment for loss of revenue to Kapil Chit Funds (P) Ltd and is dependent upon the business carried on by the assessee. Therefore, in our opinion, the decision of the jurisdictional High Court in the case of Andhra Fuels (P) Ltd [2016 (6) TMI 103 - ANDHRA PRADESH HIGH COURT] is clearly applicable to the facts of the case before us. The restrictive covenant is only for a period of 5 years and is extendable by a further period as mutually agreed to by both the parties. The agreement is also liable to be terminated with prior notice of 10 months. The agreement also includes various other services to be provided by Kapil Chit Funds (P) Ltd to the assessee company and the payment was not just for non competition. The payment made by the assessee to Kapil Chit Funds (P) Ltd is revenue expenditure as without the said payment, the assessee could not have carried on its business more efficiently and profitably. Thus the payment is in the nature of revenue expenditure and is an allowable deduction u/s 37(1)- Decided in favour of assessee
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