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2018 (1) TMI 385 - AT - Income TaxNature of expenditure - expenditure incurred on non-compete fee - revenue or capital expenditure - Held that:- In this case non compete fee sounds a negative. However, so far as the seller is concerned, he is selling his business right. Business right implies right to carry on any business in the market place. This is a recognized right. We note that the amendment to section 55(2)(a) by the Finance Act, 2002 with effect from AY 2003-04 also recognized the right to carry on business as capital asset under the head capital gains. The seller in this agreement is voluntarily selling this right to the buyer. As a consequence of this agreement the seller has forfeited his right to conduct business in the territory for a period of 30 months. Therefore, the assessee in effect has acquired a right of the seller. Therefore, this particular payment as per the agreement falls within section 32(1)(ii) as a result, the assessee is entitled for depreciation on the non-compete fee paid to the seller. Hence, Ld. CIT(A) was right in directing the AO to calculate the depreciation accordingly, which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the grounds raised by the Revenue as well as by the Assessee in their respective Appeal and Cross Objection.
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