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2015 (12) TMI 1375 - ITAT HYDERABAD

2015 (12) TMI 1375 - ITAT HYDERABAD - TMI - Rectification of error u/s 254 - Depreciation in respect of non-compete fee paid - Held 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.

Thus we reject the contentions of the assessee on this issue, and direct the Assessing Officer to disallow the claim .....

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plication 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 accordingly notified in the present Miscellaneous Application. 2. It is stated in the present Miscellaneous Application that in Ground no .....

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07-08. The Tribunal in paras 19 and 20 of the impugned order dated 10.12.2014, has decided the above two sub-grounds, following the order of the Tribunal in assessee s own case for assessment year 2008-09 dated 16.1.2014,confirming disallowance of (a) above and allowing (b) above. However, by the above order of the Tribunal dated 16.1.2014, depreciation in respect of item (a) has been allowed and disallowance of depreciation in respect of item (b) has been confirmed. As such there is a mistake a .....

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ould 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 .....

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lue of ₹ 35,59,570/- in respect of non-compete fee paid to M/s. Medispan Ltd by Medicorp Technolgoies Ltd. in previous year relevant to assessment year 2002-2003. Consequent to merger of the Medicorp Technologies Ltd. with the assessee-company, the depreciation was claimed on the written down value. Even though the assessee's claim was crystallized by the Orders of the ITAT in ITA.No.201/2004- 2005 dated 25.06.2007, wherein the payment of fee was considered eligible for depreciation, t .....

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y the Hon'ble High Court. In view of this, to that extent of claim of depreciation 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 amount .....

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ssessment year 2007-08 to Sudhir Vaid in relation to Concord Biotech Limited, learned representatives of both the sides have agreed that this issue is squarely covered in favour of the Revenue and against the assessee by the order of the Tribunal dated 16.1.2014 in assessee s own case for assessment year 2008-09 cited supra, wherein a similar issue, raised by way of ground no.15(a), was considered and decided, vide paras 48 to 52 thereof, which read as follows- 48. The next claim i.e., Ground No .....

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that the said amount of ₹ 40 lakhs is capitalized as intangible asset in the books of accounts of the assessee during the year and depreciation at 25% is claimed under section 32 in the impugned assessment year. There is contradiction in this assessee's claim. If the amount of ₹ 40 lakhs is capitalized 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 .....

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the assessee's ground i.e., claim of depreciation on the brought forward written down value seems to be not correct. Be that as it may, we have proceeded to examine the issue as if the claim was made in this year only. 49. Before the Assessing Officer and DRP, the assessee relied on the decision of the CIT vs. Medicorp Technologies India Ltd. which was upheld by the ITAT, Chennai Bench (supra). The learned Assessing Officer relying on the decisions of the ITAT, Chennai Bench in the case of .....

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tories Ltd.) the same has to be upheld for the other amount also. As far as the claim of depreciation on carry forward non-compete fee is concerned, we have already directed the Assessing Officer to follow ITAT Orders given in that case which is binding, being the claim of depreciation on the written down value. However, for the fresh claim to be entertained on the payment made for Concord Biotech Limited to Mr. Sudhir Vaid, the issue has to be examined afresh. 51. After considering the rival su .....

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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.2212/Mad/2006 dated 13.01.2012 has held, as under : "From the decision of the hon'ble Delhi High Court in the case of CIT v. Hindustan Coco Cola Beverages (P.) Ltd. [2011] 331 ITR 192 .....

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ages P. Ltd. noncompete agreement would not create an asset of intangible nature eligible for depreciation under section 32(1)(ii) of the Act. The decision of the Tribunal, Chennai Bench in the case of ITO (OSD) v. Medicorp Technologies India Ltd.[2010] 2 ITR (Trib) 367 (Chennai) was rendered prior to the decision of the hon'ble Delhi High Court in the case of Hindustan Coca Cola Beverages P. Ltd. Hence it renders no help to the assessee. Therefore, we are not in agreement with the arguments .....

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