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TMI Blog2011 (2) TMI 703X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs for interest free advances to sister concerns without appreciating the facts brought on record by the A.O. and ignoring that Rs.3.19 crores was given to Shreya Biotech Ltd. on account of share application money. 4. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs.145A of Rs.51.73 lakhs on account of unutilised Modvat credit." 2. We have heard the learned CIT-DR and learned counsel in detail and their arguments were considered. 3. Ground No.1: The issue in this ground is with reference to the amount of Rs.2.50 crores being 1/4th of Rs.10 crores paid as 'non-compete fees' allowed by the CIT(A), whereas the Assessing Officer treated the same as capital expenditure 3.1. Briefly stated the facts of the case are that the assessee acquired the pharma business undertaking of Rallis, including all the assets, properties, rights, benefits and liabilities, as a going concern, w.e.f. 12-6-2001. The consideration of Rs. 49 crores paid by it was duly apportioned into various asset heads and accounted in the books of the assessee, under the respective heads of account such as plant and mach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was his submission that the Assessing Officer in earlier two years allowed the amounts as revenue expenditure on examination and there is no change in facts to take a different view. It was his submission that even the Hon'ble Bombay High Court in the case of CIT vs. Zodiac Clothing Co. Ltd. in ITA. No. 576 of 2008 has followed the principle of consistency and so the order of CIT(A) has to be upheld. Invoking Rule 27, it was alternate contention that the assessee is entitled for depreciation on the 'intangible asset' and if the entire amount of Rs. 10 crores is considered as cost, the same amount has to be allowed as depreciation @ 25% as the right to non-compete was only for 4 years. He placed on record the Order of the Chennai Bench in the case of ACIT vs Real Image Tech P Ltd 120 TTJ 983 (Che.) for the proposition that the non-compete fees can be considered as intangible asset as it is a business right. The Ld. Counsel also relied on the decision of Techno Shares and Stocks Ltd 327 ITR 323. 3.5. The learned CIT-DR in reply submitted that the noncompete fee does not result in any asset and depreciation cannot be allowed on the same and relied on ITAT decision AB Mauria I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be concluded that non-compete fee was paid as a part of initial outlay, and, therefore, it was to be disallowed being in nature of capital expenditure - Held, yes. Section 37 (1) of the Income Tax Act, 1961, business expenditure, allowability of assessment year 1998-99, whether an expenditure incurred on warding off competition in business from a rival dealer will constitute a capital expenditure and to hold it as capital expenditure, it is not necessary that non-compete fee is paid to create monopoly rights. Held, yes. 3.7. As the facts are similar, respectfully following the above decision of the Special Bench which is binding on us, and further as the non-compete fee was part and parcel of whole transaction of acquiring the pharma business, it could be concluded that noncompete fee was paid as part of initial outlay and therefore, it was to be disallowed being in capital expenditure. 3.8. Rule of consistency as a principle has to be followed but the judicial forum like this cannot allow a wrong claim on the principle of consistency. Since the Assessing Officer made out a case for disallowance of the claim made in this year, the claim to the extent of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IC paid within the grace period. While upholding the disallowance of payments made beyond grace period, the CIT(A) allowed the delayed payment of PF/ESIC which are paid within the grace period. This issue is crystallised by the jurisdictional High Court in the case of CIT vs WMI Cranes Ltd 326 ITR 523 (Bom.). Respectfully following, the ground raised by the Revenue is rejected. 5. The ground No.3 pertains to the issue of disallowance of interest under section 36 (i) (iii). On noticing that the assessee had advanced an amount of Rs.11,25,77,000/- to sister concerns out of the borrowals of Rs.51,08,40,000/- the interest claim to an extent of Rs.51,89,780/- was disallowed by the A.O. It was the contention that the assessee had own reserves and funds and the advances are trade advances but not interest free loans and made detailed submissions before CIT(A). Similar issue was also considered by the Assessing Officer in assessment year 2003-2004. On examination of facts and arguments the CIT(A) allowed claim of the assessee by stating as under: 7.4. "I have considered the facts of the case findings of the A.O. as also submission made by the appellant. The facts of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; 5.2. Respectfully following the findings in earlier years, as the CIT(A) examined the facts and as Revenue failed to counter the facts as stated, the Order of the CIT(A) is upheld. The ground is rejected. 6. Coming to ground No.4 of the Revenue it is against the deletion of an addition on account of unutilised modvat credit of Rs.51,73,812. The first appellate authority has verified the entries made by the assessee and as the assessee reduced the unutilised modvat credit from the purchase account, the addition to the closing stock does not survive. At paragraph 8.2 the first appellate authority has rightly observed that by virtue of the regular accounting policy being followed by the assessee and on verification of the entries passed, there is no warrant for adding the amount in question. We agree with these findings and uphold the same. It was submitted that similar issue came up in earlier year on same facts and the findings of the CIT(A) were upheld by the ITAT in ITA. No. 4011/Mum/2007 dated 3/2/2009. Respectfully following the finding in earlier year, as the CIT(A) examined the facts and Revenue failed to counter the facts as stated, the Order of the CIT(A) is u ..... 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