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2008 (2) TMI 490 - AT - Income TaxDepreciation on Non-compete fee considered as intangible assets u/s 32? - Doctrine of ejusdem generis - Reopening of the assessment Depreciation on non-compete fee - Nature of intangible asset listed u/s 32 namely know-how, copyrights, patents - construed as commercial right of similar nature or not - Doctrine of ejusdem generis - HELD THAT:- When by payment of non-compete fee, the businessman gets his right what he is practically getting is kind of monopoly to run his business without bothering about the competition. It is just like separating big plant from other plants affecting the growth of the big plant. Generally, non-compete fee is paid for a definite period which in this case is five years. The idea is that by that time, the business would stand firmly on its own footing and can sustain later on. This clearly shows that the commercial right comes into existence whenever the assessee makes payment for non-compete fee. Here, the doctrine of ejusdem generis would come into operation. The term "or any other business or commercial rights of similar nature" has to be interpreted in such a way that it would have same similarities as other assets mentioned in cl. (b) of Expln. 3. The other assets mentioned are know-how, patents, copyrights, trademarks, licences, franchises, licence, etc. In all these cases no physical asset comes into possession of the assessee. What comes in is only a right to carry on the business smoothly and successfully and in our view even the right obtained by way of non-compete fee would also be covered by the term "or any other business or commercial rights of similar nature" because after obtaining non-compete right, the assessee can develop and run his business without bothering about the competition. Tribunal has already held in the case of Radaan Media Works India Ltd. that the assessee would be entitled to depreciation even in respect of non-compete fee which was held to be in the nature of intangible asset. Therefore, we find nothing wrong with the order of the CIT(A) on this issue and accordingly confirm the same. The appeal of the Revenue is dismissed. Reopening of the assessment and confirmation of disallowance of payment towards non-compete fee as capital expenditure - HELD THAT:- In the case before us the original return was processed under s. 143(1)(a) and therefore in view of the decision of the Hon'ble Supreme Court n the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. [2007 (5) TMI 197 - SUPREME COURT], the same is available for reassessment. Thus, we find nothing wrong with the order of the learned CIT(A) and accordingly confirm the same. As far as the other issue is concerned, we find that this issue is also squarely covered against the assessee by the decision of Hon'ble High Court in the case of Chelpark Co. Ltd. vs. CIT[1990 (12) TMI 292 - MADRAS HIGH COURT]. Therefore, we decide this issue against the assessee. In the result, both the appeal filed by the Revenue as well as the cross-objection filed by the assessee are dismissed.
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