TMI Blog2022 (8) TMI 1298X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/Mum/2018 for the same assessment year was decided by the Tribunal vide order dated 06/01/2020. Thereafter, the assessee filed Miscellaneous Application u/s. 254(2) of the Income Tax Act, 1961 [in short the Act ] i.e. MA No.229/Mum/2020 in ITA No. 570/Mum/2018 seeking rectification in the order of Tribunal. 2, The Co-ordinate Bench disposed of the said Miscellaneous Application vide order dated 08/03/2021 by observing as under:- 4. Upon careful consideration, we note that in Miscellaneous Application there is no whisper of additional ground remaining un-adjudicated. We note that additional ground was not adjudicated by the ITAT as there was no discussion on the subject. However, since the assessee has submitted photocopy of the ITAT receipt for filing additional ground in the interest of justice, we deem it appropriate that ITA No. 570/Mum/2018 be recalled only to consider the veracity and adjudication of the said additional ground raised by the assessee. 5. In the result, ITA No. 570/Mum/2018 is recalled only to the extent of considering the claim of the assessee claim regarding additional ground as discussed above. 3. The assessee raised additional grounds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 55, Mumbai, inter-alia challenging the disallowance of depreciation on non-compete fees claimed by the Assessee under Section 32 of the Act. During the course of the appellate proceedings, the Assessee also raised an alternate ground before Ld. Commissioner of Income-tax (Appeals), Mumbai for allowance of non-compete fee as deferred revenue expenditure. This claim of the Assessee for allowance of non-compete fee as deferred revenue expenditure was duly allowed by the Ld. Commissioner of Income-tax (Appeals), vide the impugned order-in-appeal dated 08.11.2017. The Ld. Commissioner of Incometax (Appeals) did not record any specific finding regarding the claim of depreciation on non-compete fees under Section 32 of the Act. 5. Against the impugned order-in-appeal dated 08.11,2017 passed by the Ld. Commissioner of Income-tax (Appeals), the Assessee has preferred an appeal (being ITA No. 570/Mum/2018) before this Hon'ble Tribunal, on certain other grounds decided by the Ld. Commissioner of Income-tax (Appeals) against the Assessee. The Revenue has also preferred an appeal (being ITA No, 711/Mum/2018) against the said order-inappeal, challenging the allowance of non-compete fee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation on Non-compete Fee and disallowed assessee s claim of deprecation of Rs.128.38 crores on Noncompete Fee. The assessee carried the issue in appeal before the CIT(A). Before the CIT(A) the assessee made primary claim of depreciation on Noncompete Fee. The assessee also raised an alternate ground without prejudice to the primary contention that Non-compete Fee be treated as deferred revenue expenditure and the same should be allowed to be amortized over a period of eight years. The CIT(A) accepted assessee s alternate prayer and directed the Assessing Officer to treat Non-compete Fee as deferred revenue expenditure for a period of eight years. The Department assailed the findings of CIT (A) including the findings on non-compete fee in appeal before the Tribunal in ITA No.711/Mum/2018 (supra). The Tribunal vide order dated 06/01/2020 dismissed the ground raised by the Revenue assailing the relief allowed by CIT (A) on the issue of non-compete fee. Against the Tribunal order, the Department is in appeal before the Hon ble High Court. 5.2 The ld. Authorized Representative for the assessee submitted that the assessee initially did not raise any ground on the issue of Non-compete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;ble Bombay High Court in the case of Piramal Glass Ltd. vide order dated 11/06/2019 had already held that the assessee is eligible for claiming depreciation u/s. 32 of the Act on Noncompete Fee paid. The ld. Authorized Representative for the assessee further asserted that non-consideration of judgment by a Jurisdictional High Court is a mistake apparent from record. To buttress his submissions he placed reliance on the decision of Hon'ble Supreme Court of India in the case of ACIT vs. Saurashtra Kutch Stock Exchange Ltd. reported as 305 ITR 227. 8. We have heard the submissions made by rival sides. The solitary issue before us for adjudication is with respect to assessee s claim of depreciation amounting to Rs.128,38,65,000/- on Non-compete Fee u/s. 32 of the Act. Since, the issue has been dealt with by the Assessing Officer and the CIT(A), non fresh evidence is required to be adduced for the adjudication of the issue raised by way of additional grounds. Hence, the additional grounds of appeal are admitted and decided as under. 9. The assessee had paid Non-compete Fee to the tune of Rs.513,54,60,000/-. The assessee claimed depreciation u/s. 32 on Noncompete Fee being a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et, no depreciation under Section 32 of the Income Tax Act, 1961 ( the Act for short) was available. 4. We however notice that similar issue has been considered by the different High Courts and held in favour of the Assessee. A reference can be made to the decision of the Division Bench of the Gujarat High Court in the case of Principal Commissioner of Income Tax v. Ferromatice Milacron India (P.) Limited. It was also the case where the Assessee had incurred expenditure pursuant to the non-compete agreement and claimed depreciation on such asset. While dismissing the Revenue s Appeal against the Judgment of the Tribunal, following observations were made : We may recall the Assessing Officer does not dispute that the expenditure was capital in nature since by making such expenditure, the assessee had acquired certain enduring benefits. He was, however, of the opinion that to claim depreciation, the assessee must satisfy the requirement of Section 32(1)(ii) of the Act, in which Explanation 3 provides that for the purpose of the said sub-section the expression assets would mean ( as per clause (b) ) intangible assets, being known-how, patents, copyrights, trade mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfidential information which would include the past and current plan, operation of the existing business, trade secretes lists etc. It can thus be seen that the rights acquired by the assessee under the said agreement not only give enduring benefit, protected the assessee s business against competence, that too from a person who had closely worked with the assessee in the same business. The expression or any other business or commercial rights of similar nature used in Explanation 3 to sub-section 32(1)(ii) is wide enough to include the present situation. 5. No question of law in this respect therefore arises. 12. In the present case payment of non-compete fee in accordance with terms of agreement between the assessee and Piramal Healthcare Ltd. is not disputed by the Revenue. Ergo, in light of the facts of case and the decision by Hon'ble Bombay High Court referred above, we hold that the assessee is eligible for depreciation u/s. 32 of the Act on Non-compete Fees paid being an intangible asset. The additional grounds of appeal raised by the assessee are thus, allowed. Order pronounced in the open court on Tuesday the 2nd day of August, 2022. - - T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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