TMI Blog2012 (8) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... ss appeals filed by the Revenue and the assessee which are directed against the order of the learned CIT(A)-I, Baroda dated 24-11-2006 for Assessment Year 2003-04. These appeals were heard together and are being disposed of by this consolidated order for the sake of convenience. 2. First we take up the Revenue's appeal i.e. ITA No. 483/Ahd/2007. Ground no. 1 reads as under:- [1] On the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing depreciation on non-compete fee of Rs. 4,55,40,000/-, by treating the same as intangible asset u/s 32(1)(ii), which does not constitute a business or commercial right having connotation of a positive right but a fee paid for a negative act of not carrying on the same business. 3. The learned DR of the Revenue supported the assessment order and placed reliance on the following judicial pronouncements:- ( i ) R.G. Keswani v. Asstt. CIT [2009] 116 ITD 133 (Mum.) ( ii ) Srivatsan Surveyors (P) Ltd. v. ITO [2009] 32 SOT 268 (Chennai) ( iii ) CIT v. Hoogly Mills Co. Ltd. [2006] 157 Taxman 347 (SC) ( iv ) Bharatbhai J Vyas v. ITO [2006] 97 ITD 248 (Ahd). 4. As against this, the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght of no competition in extrusion business and to manufacture poly carbonate sheets and to operate in the entire Asia Pacific Region for a period of 10 years. It has resulted in the acquisition of an unrivaled and non-competed business domain/territory for the appellant for a sufficiently tong period of 10 years. The acquisition of such a business domain/territory with no competition has brought advantages in the capital field. The transaction resulting in the acquisition of the Right to conduct extrusion business and to operate in the Asia Pacific Region without any competition is final and irreversible. This Right has become the ownership right of the appellant. It is this expenditure which has bought this ownership right to the appellant. Under the circumstances, it is held to be an expenditure on capital account incurred for the acquisition of the Non-compete Right, a capital asset. As regards the objection of the Assessing Officer at (a) above, it is apposite to extract the relevant provisions "Section-32. Depreciation. (1) In respect of depreciation of ( i ) Buildings, Machinery . being tangible assets; ( ii ) Know-how, patents, copyrights, trade marks, licen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the present case. Regarding the Tribunal' decision rendered in the case Srivatsan Surveyors (P) Ltd. ( supra ), we find that in this case, the issue was decided against the assessee on the basis that the depreciation on restrictive covenant is 'a right in persona ' and not a 'right in rem ' and hence, depreciation on it is not allowable as per the provisions of section 32(1)(ii). In that case, Rs. 1 crore was paid to one of the Directors on the basis of non-compete covenant entered into between the assessee company and its director Shri R Srivatsan, as per which the said Director agreed not to carry on his individual business of general insurance survey, loss assessment, valuation of assets, etc. for a period of seven years. In the present case also, non-compete fee was paid for the acquisition of Non-Compete Rights from JISL for agreeing for not entering into or participate in any business which directly compete with the business of the assessee company. It shows that the facts are similar and therefore, this Tribunal decision cited by the learned DR of the Revenue is applicable in the present case but at the same time, we find that the subsequent decision of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is ground is also rejected. The appeal of the Revenue is dismissed. 9. Now, we take up the assessee's appeal i.e. ITA No. 573/Ahd/2007. Ground no. 1 reads as under:- "1 The ld. CIT(A) erred in law and on facts in confirming disallowance made by AO of Rs. 24, 54,480/- expenses paid to the consultants and lawyers on account of due diligence and other compliance checks to be capital in nature. Ld. CIT (A) ought to have allowed the expenses as claimed by the assessee holding the same to be revenue in nature." 10. The learned AR on behalf of the assessee submitted that the expenditure is allowable as revenue expenditure and in support of his contention, reliance was placed on the judgment of the Hon'ble Andhra Pradesh High Court rendered in the case of CIT v. Coromandal Fertilizers [2001] 247 ITR 417/[1999] 105 Taxman 490. It was his alternative submission that in case, it is held that the expenditure is not allowable as revenue expenditure, depreciation should be allowed. The learned DR supported the order of the authorities below. 11. We have considered the rival submissions, perused the material on record and have gone through the orders of the authorities below a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee's appeal reads as under:- [3] The Id. CIT (A) erred in law and on facts in confirming the action of AO in computing deduction u/s 80HHC of the Act after setting off of unabsorbed depreciation of Rs. 21,35,96,830/- of earlier years against the total income. Ld. CIT (A) ought to have quashed this action of AO and allowed deduction u/s 80HHC of the Act as claimed by the appellant. 15. It was fairly agreed by the learned AR of the assessee that this issue is covered against the assessee by the decision of the Hon'ble Supreme Court in the case of CIT v. Shirke Construction Equipment Ltd. [2007] 291 ITR 380/161 Taxman 212. By respectfully following this decision of the Hon'ble Apex Court, this issue is decided against the assessee. The ground raised by the assessee is rejected. 16. Ground no. 4 in the assessee's appeal reads as under: [4] The Id. CIT(A) erred in law and on facts in confirming the action of AO in computing deduction u/s 80HHC of the Act after setting off of unabsorbed depreciation of Rs. 21,35,96,830/- of earlier years against income computed under MAT provisions. Ld. CIT(A) ought to have quashed this action of AO and allowed deduction u/s 80HHC of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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