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Issues Involved:
The first issue relates to the allowability of depreciation on a restrictive covenant. Issue 1: Allowability of Depreciation on Restrictive Covenant The assessee claimed depreciation on a non-compete fee paid under a restrictive covenant. The amount of Rs. 1 crore was paid to a director in consideration of him not engaging in certain business activities that could harm the assessee's interests. The director was already restricted by the Insurance Regulatory and Development Authority (IRDA) from practicing certain professions while associated with the assessee company. The IRDA had imposed conditions on directors in similar professions to surrender their licenses. The payment for the non-compete fee was deemed a subterfuge by the Revenue authorities as there was no actual competition faced by the assessee from the director. The legal provision under Sec. 32(1)(ii) allows depreciation for specific intangible assets but does not include non-compete fees. The Tribunal applied the principles of Ejusdem Generis and Noscitur a Sociius to interpret the law, concluding that a right in a restrictive covenant is not of a similar nature to the assets listed under Sec. 32(1)(ii), hence depreciation on a restrictive covenant is not allowable. The Tribunal upheld the CIT(A)'s decision to disallow the depreciation, ultimately dismissing the appeal of the assessee.
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