TMI Blog2015 (10) TMI 1267X X X X Extracts X X X X X X X X Extracts X X X X ..... avour of assessee. - ITA No.3441/Mum/2012 - - - Dated:- 9-9-2015 - SHRI R.C.SHARMA, AM AND SHRI SANJAY GARG, JM For The Assessee : Shri Dharmesh Shah For The Revenue : Shri Neil Philip ORDER PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order of CIT(A), Mumbai, dated 5-6-2012 for the assessment year 2009-10, in the matter of order passed u/s.143(3) of the I.T.Act, wherein following grounds have been taken by the assessee :- 1. On the facts and circumstances of the case the learned CIT(A) legally erred in not considering the non-compete fees paid of ₹ 2,03,60,737/- as an intangible asset (capital expenditure) and thereby further erred in not allowing the depreciation for the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned expenditure over a period of five years. Accordingly during the previous year the assessee company amortised ₹ 2,94,263/- in the profit and loss account. The AO did not agree with the assessee s contention and disallowed the assessee s claim of revenue expenditure and only allowed the amount of ₹ 2,94,263/- amortised in the profit and loss account. 3. By the impugned order, the CIT(A) confirmed the action of the AO, against which the assessee is in further appeal before us. 4. The additional ground was raised by the assessee to the effect that assessee should be allowed the expenditure as revenue rather than its claim of depreciation. We found that this ground was also raised before the CIT(A), who has rejected the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch payment. The Tribunal has recorded a finding that exit of Mr. Kapadia would have immediate impact on the business of the assessee-company and in order to protect the business interest the assessee had paid the said amount to ward off the competition. In our opinion, the decision of the Tribunal is based on finding of facts and therefore, first question cannot be entertained. 6. Similar issue was decided by the Hon ble Madras High Court in the case of Carborandum Universal Ltd., 26 taxmann.com 268(mad) wherein it was held that where the assessee enters into a non-compete agreement for a period of five years, the payment so made was revenue in nature and not on account of capital. 7. The coordinate bench of ITAT in the case of M/s Cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the same High Court in Carborandum Universal Ltd. Vs. JCIT, Tax appeal no. 244 0f 2006, order dated 10.09.2012 in detail after analyzing the aforesaid Supreme Court judgment and other several judgments. 8. The Hon ble Karnataka High Court in the case of DCIT Vs. Mcdowell Col. Ltd., 291 ITR 107 (Kar) held that non-compete fee is revenue in nature. The precise observation of the Hon ble Court was as under :- Non-competition fee : The Assessing Officer noticed that the assessee claimed an amount of rupees 1 crore as non-competition fee paid to UB Engineering Ltd., for acquiring a distillery at Nasik. It was in the light of the judgment of the Madras High Court in the case of CIT v. Late G. D. Naidu [1987] 165 ITR 63 . The ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and profitability, the assessee paid an amount of ₹ 4 crores to restrain VCPL and V, one of its full time employees, from becoming its potential business rivals and claimed this amount as business expenditure. The Assessing officer disallowed the claim. The Commissioner (Appeals) and the Tribunal held that the payment made was to protect the assessee s business interests with no new asset being created, that its profit-making apparatus was not expanded or increased as it did not suffer any loss or erosion in its capital assets, and that the payment was allowable as a business expenditure. On further appeal : Held, dismissing the appeal, that the assessee did not acquire any capital asset by making the payment of non-compete f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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