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2023 (8) TMI 827 - HC - Income TaxNature of expenses - payment made for premature termination of Advertising Sale Agreement - revenue or capital expenditure - HELDT HAT:- Apex Court in Commissioner of Income Tax V/s. Ashok Leyland Ltd. [1972 (10) TMI 1 - SUPREME COURT] held that a payment made for termination of contract by way of compensation would be an allowable deduction in computing the total income of assessee. By terminating the services, assessee not only saved the expense that it would have had to incur in the relevant previous year but also for few more years to come. Therefore, it will not be correct to say that by avoiding certain business expenditure, the company can be said to have acquired enduring benefits or acquired any income yielding asset. In the case at hand also, by paying the compensation under ASTA, assessee not only saved the expense that it would have had to incur in the relevant previous year but also for few more years to come. Therefore, CIT(A) as well as the ITAT, in our view, was correct in allowing this amount paid on account of termination of agreement to SIPL as revenue expenditure. Amount paid under RCA - Tribunal upholding the decision of CIT(A) that the amount being paid under RCA was in the nature of capital expenditure and intangible asset entitling assessee to claim depreciation - HELD THAT:- As decided in Piramal Glass Ltd. [2019 (6) TMI 891 - BOMBAY HIGH COURT] rights acquired by the assessee under the said agreement not only give enduring benefit, protected the assessee's business against competence, that too from a person who had closely worked with the assessee in the same business. The expression "or any other business or commercial rights of similar nature" used in Explanation 3 to sub-section 32(1)(ii) is wide enough to include the present situation Thus by paying the amount as non-compete fees under the RCA, the rights acquired by assessee was not only giving it enduring benefit but also protected assessee's business against competition, that too from a person who had closely worked with assessee. Tribunal has not committed any perversity or applied incorrect principles to the given facts. We do not think that the questions as proposed raised any substantial question of law.
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