TMI Blog2016 (6) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that the assessee did not acquire any capital asset by making payment of a non-competition fee; and it merely eliminated competition in its business for a while thus to be treated as revenue expenditure - Decided in favour of assessee. - I.T.T.A.No.164 of 2015 - - - Dated:- 3-11-2015 - SRI RAMESH RANGANATHAN AND SRI M.SATYANARAYANA MURTHY, JJ. FOR THE PETITIONER : PRASAD (SC FOR INCOME TAX) ORDER : (per Hon ble Sri Justice Ramesh Ranganathan) This appeal, under Section 260-A of the Income Tax Act, 1961 (for brevity, the Act ), is preferred by the Revenue aggrieved by the order passed by the ITAT, Hyderabad Bench in I.T.A.No.1228/Hyd/2005 dated 08.06.2012 for the assessment year 2002-03. The respondent-claimant claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment or the identity of the payee; the only dispute was whether the said non-competition fee paid by the assessee was revenue expenditure or capital expenditure; the facts relevant to decide the issue were: the assessee was initially promoted by three companies including M/s KHPL and associates, represented by Sri K.Raghu Ramakrishna Raju; because of certain disputes, among the Directors, it was decided that Sri K.Raghu Ramakrishna Raju would exit from the company and set up his own power project; Sri K.Raghu Ramakrishna Raju was already setting up a power project in Tamilnadu under the banner of his group company M/s R.K.Energies Limited; in the said background the assessee felt that, if Sri K.Raghu Ramakrishna Raju competed with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such expenditure could not, therefore, be held to be capital expenditure; and, since payment was made wholly and exclusively for the purposes of the business, the same had to be allowed as revenue expenditure in terms of provisions of Section 37 (1) of the Act. The Commissioner held that non-competition fee of ₹ 3.25 Crores paid by the assessee was allowable as revenue expenditure of the business of the assessee. Aggrieved thereby the Revenue carried the matter in appeal to the ITAT. In the order under appeal, the Tribunal relied on the judgment of the Supreme Court in CIT v. Coal Shipments Private Limited 82 ITR 902 and the Delhi High Court in CIT v. Eicher Limited 302 ITR 249 . The extracted portion of the order of the Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y making payment of a noncompeting fee; it merely eliminated competition in its business for a while; from the record it was not clear how long the restrictive covenant was to last, but it was neither permanent nor ephemeral; in that sense, the advantage was not of an enduring nature; and, on a cumulative appreciation of the facts, it must be held that the CIT (A) and the Tribunal did not err in concluding that payment of non-compete fee by the assessee was a business expenditure, and not a capital expenditure. The Tribunal held that the assessee did not acquire any capital asset by making payment of the non-competition fee; it merely eliminated competition for a while, for which it had paid the amount; and, on a cumulative appreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, justified in holding that the assessee did not acquire any capital asset by making payment of a non-competition fee; and it merely eliminated competition in its business for a while. The Tribunal is the final Court of fact. As an appeal, under Section 260-A of the Act, can be entertained only on a substantial question of law, this Court would not re-appreciate the findings recorded either by the Tribunal or the Commissioner of Income Tax (Appeals). Save findings based on no evidence, or a perverse finding, no interference is called for in proceedings under Section 260-A of the Act. Neither the order of the Tribunal, nor that of the Commissioner of Income Tax (Appeals), suffer from any such patent error necessitating interference in ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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