TMI Blog2015 (12) TMI 1375X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to Concord Biotech Limited. - Decided against assessee - Misc. Appln. No.121/Hyd/2015, ITA No.611/Hyd/14 - - - Dated:- 18-12-2015 - Shri D. Manmohan, Vice President And Shri Rifaur Rahman, Accountant Member For the Applicant : Shri S. Raghunathan For the Respondent : Shri M. Sitaram, DR ORDER Per S. Rifaur Rahman, Accountant Member By this application under S.254(2) of the Act, assesseeapplicant seeks rectification of the common consolidated order of this Tribunal dated 10.12.2014 in cross-appeals for assessment year 2009-10, insofar as it related to appeal filed by the assessee, being ITA No.611/Hyd/2014, on the ground that certain mistakes apparent from record have been noted by the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 10.12.2014 need to be rectified. We accordingly modify those paras and direct that on due rectification paras 19 and 20 of this Tribunal dated 10.12.2014 should be read as follows- 19. As for the first issue, against (a) above, relating to depreciation @ 25% amounting to ₹ 6,67,420 on brought forward written down value of ₹ 26,69,678 in respect of non-compete fee of ₹ 200 lakhs paid to Medispan Ltd. by Medicorp Technologies Ltd. (amalgamating company) in the previous year relevant to assessment year 2002-03, learned representatives of both the sides have agreed that this issue is squarely covered by the order of the Tribunal dated 16.1.2014 in assessee s own case for assessment year 2008-09 cited supra, wherein a si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation amounting to ₹ 8,89,893/- on brought forward written down value, Assessing Officer is directed to allow the depreciation after verifying the WDV figures. Part of the ground (b) is accordingly allowed. Respectfully following the above decision of the Tribunal, we accept the contention of the assessee on this issue and direct the Assessing Officer to allow the claim for the assessee for depreciation amounting to ₹ 6,67,420 in respect of non-compete fee paid to Medispan Ltd. by Medicorp Ltd. (amalgamating company) in the previous year relevant to assessment year 2002-03 as per the direction of the DRP and allow this part of ground No.7 of the assessee in this appeal. 20. As for the second issue, against (b) above, relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the year, the 25% claim of depreciation should come to ₹ 10 lakhs but not ₹ 8,75,000/-. Without examining the year of payment or the year of capitalization, the Assessing Officer also records the same in his order vide para 8.1 in page 9 of the order wherein it was stated that assessee entered into an investment agreement with Concord Biotech Limited on 10.02.2006 and accordingly, as per the terms of agreement, it paid an amount of ₹ 40 lakhs towards noncompete fee to one of the promoters i.e., Mr. Sudhir Vaid in the present assessment year i.e., 2008-2009. Since the Assessing Officer has given the finding that amount is capitalized in this year, the assessee's ground i.e., claim of depreciation on the brought f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee are more in number and there is a consistent view of the ITAT in not allowing the depreciation on non-compete fee. This issue which was originally considered in the case of Tecumse India Pvt. Ltd. Addl. CIT 5 ITR TRIB 50 (Del.) wherein the proposition canvassed by the assessee that non-compete fee is revenue expenditure was rejected and held that noncompete fee for acquisition of business has been held as capital expenditure as the same was incurred for the initial outlay of the business. Following the above principles and the decision of the Hon'ble Delhi High Court in the case of Hindustan Coco Beverages Pvt. Ltd. 331 ITR 192 (Del), the ITAT, Chennai Bench 'A' in Arkema Peroxides India (P) Ltd. vs. ACIT vide ITA.No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision in the case of Medicorp relied by the assessee itself, which is reported at (2010) 2 ITR (Trib.) 367 (Chennai). In view of this, we are of the opinion that the depreciation cannot be allowed on an amount of non-compete fee, which was in fact paid to the Managing Director of the Company for not taking any employment. This cannot be considered under section 32(1) as an intangible asset. Accordingly, the claim of depreciation on the item (a) is not allowed and to that extent ground is rejected. Respectfully following the above decision of the Tribunal, we reject the contentions of the assessee on this issue, and direct the Assessing Officer to disallow the claim of the assessee for depreciation @ 25% amounting to ₹ 6, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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