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TMI Blog2016 (6) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... te Limited (for brevity, 'KHPL'), as consideration for their not competing with the assessee in setting up new power projects in the State of Andhra Pradesh for a period of three years commencing from 28.12.2001. The payment made, pursuant to the said agreement, was claimed as revenue expenditure and debited to the profit and loss account. The assessing authority held that merely because an agreement was entered into with one person, not to set up a power plant in Andhra Pradesh, did not disable others from establishing power project; several power projects were coming up in the State of Andhra Pradesh; in such a situation there was no basis for the assessee to pay any substantial amount to one person; keeping one person away from the proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order to stall the immediate potential threat, the assessee entered into an agreement to keep Sri K.Raghu Ramakrishna Raju away from all his contacts with the suppliers, funding agencies and other business associates of the assessee, and also to stop him from creating any legal problems; and the non-competition agreement was only for a limited period of three years to ward off competition in the territory of Andhra Pradesh. The Commissioner held that payment was made by the assessee to a rival company to ward off competition in business; by making this payment, the assessee had not derived any advantage of an enduring nature to hold the expenditure as capital in nature; the agreement was only for a limited period of three years; the main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ".....The case which has been set up on behalf of the Revenue is that, as the object of making the payments in question was to eliminate competition of a rival exporter, the benefit which ensured to the respondent was of an enduring nature and, as such, the payment should be treated as capital expenditure. We find ourselves unable to accede to this contention because we find that the arrangement between the respondent and M/s H.V.Lowe & Co.Ltd., not for any fixed term but could be terminated at any time at the volition of any of the parties. Although an enduring benefit need not be of an everlasting character, it should not, at the same time, be so transitory and ephemeral that it can be terminated at any time at the volition of any of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the appeal. The order of the Commissioner was confirmed, and the appeal of the Revenue was dismissed. Sri J.V.Prasad, learned Seniior Standing Counsel for the Income Tax Department, would draw attention of this Court to the findings recorded by the assessing authority in support of his submission that a non-competition fee could not be treated as a revenue expenditure, and no deduction could be claimed of such expenditure in the profit and loss account of the assessee. The non-competition agreement entered into by the assessee with M/s KHPL was to prevent K.Raghu Ramakrishna Raju from establishing a power plant in Andhra Pradesh for a period of three years. As has been held by the Commissioner of Income Tax (Appeals), the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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