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2015 (8) TMI 750 - ITAT MUMBAI

2015 (8) TMI 750 - ITAT MUMBAI - TMI - Depreciation on the non-compete rights - Held that:- No merit in the action of lower authorities declining the claim of depreciation on non-compete payment made for acquiring non-compete right which is an intangible asset eligible for claim for depreciation u/s 32(1)(ii) of the Act. See Commissioner of Income-tax, Bangalore Versus Ingersoll Rand International Ind. Ltd. [2013 (11) TMI 1057 - MADRAS HIGH COURT ] wherein held the commercial right comes into ex .....

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15 - SHRI I.P. BANSAL AND SHRI R.C. SHARMA, JJ. For the Appellant : Shri Jiger Saiya For the Respondent : Shri Sachidanand Dube ORDER PER R.C. SHARMA, A.M. : These are the appeals filed by the assessee against the orders passed by the ld. CIT(A) -4, Mumbai for the assessment years 2002-03, 2003-04 & 2004-05 in the matter of order passed u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961. 2. Common grievance of the assessee in all the years relates to the decline of claim of depreciation on th .....

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e non-compete fee agreement the assessee company not only prevented Mr. Shekhar Shah from carrying on competetitive business but also employed him for carrying on its business. Thus the assessee company had not only obtained a restrictive advantage but also employed Mr. Shekhar Shah to promote and carry on such business for the assessee company, which was essentially an enhancement of business right. The amount so paid to Mr. Shekhar Shah was capitalized in the books of account and depreciation .....

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h by entering non-compete agreement so as to prevent him from starting a business in India in completion with that of the assessee company. The assessee company, in addition to prevent him from carrying on competitive business also employed Mr. Shekhar Shah for carrying on its business. The genuineness of the agreement has not been doubted and actual payment has also been made. Thus by entering the non-compete agreement, the assessee company not only obtained a restrictive advantage but also emp .....

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iation. In this regard, it is necessary to notice that the intangible assets enumerated in section 32 effectively confer a right upon an assessee for carrying on a business more efficiently by utilizing an available knowledge or by carrying on a business to the exclusion of another assessee. A non-compete right encompasses a right under which one person is prohibited from competing in business with another for a stipulated period. It would be the right of the person to carry on a business in com .....

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ly 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 and therefore the non-compete fee vests a right in the assessee to carry on business without competition which in turn confers a commercial right to carry on business smoothly. 7. This issue is also covered by the decision of Hon ble Madras High Court in the case of Pentasoft Technologies Ltd. vs. DCIT, 264 CTR 187 (Mad HC .....

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