9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (7) TMI 850 - AT - Income TaxDepreciation u/s 32 - non-compete fee paid to Dr.PV Venugopal is an intangible asset - HELD THAT - We observed that the non compete fee paid to Dr.P.V.Venugopal upon the letter agreeing to refrain for a period of 18 months from entering into agreement as a non-compete fee has been held as capital expenditureand the issue has been examined by the AO and not allowed the depreciation on the capital expenditure incurred by the assessee and ld.CIT(A) has confirmed the order of the AO. We hold that the assessee is eligible to claim of depreciation on non-compete fee as intangible assets. Eligibility of deduction u/s. 80HHC - During the course of arguments the ld. AR undertook that if a chance is given again to the assessee, he would be eligible to produce the details whether it comes u/s. 28(iiib) or 28(iiid). Considering the prayer of the assessee, we are sending back again to the AO for computation of the eligibility deduction u/s.80HHC. In the result, the ground No. 2 is allowed for statistical purposes.
Issues Involved:
1. Eligibility of non-compete fee for depreciation under Section 32(1)(ii) of the Income Tax Act. 2. Eligibility for deduction under Section 80HHC on DEPB (Duty Entitlement Pass Book) benefits. Issue-wise Detailed Analysis: 1. Eligibility of Non-Compete Fee for Depreciation under Section 32(1)(ii): The primary contention was whether the non-compete fee paid to Dr. P.V. Venugopal qualifies as an intangible asset eligible for depreciation under Section 32(1)(ii) of the Income Tax Act. The assessee argued that the non-compete fee, being a capital expenditure, should be eligible for depreciation. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] had disallowed the claim, asserting that the non-compete fee did not qualify as an intangible asset akin to know-how, patents, copyrights, trademarks, licenses, or franchises. The Tribunal revisited the issue, considering various judgments cited by the assessee, including: - SKS Micro Finance Ltd vs DCIT (ITAT, Hyderabad) - ACIT vs. GE Plastics India Ltd. (ITAT, Ahmedabad) - CIT vs. Ingersoll Rand International Ind. Ltd. (Karnataka High Court) - CIT vs. Hindustan Coco Cola Beverages Pvt. Ltd. (Delhi High Court) The Tribunal also considered the judgment of the Delhi Bench in Sagar Ratna Restaurants (P.) Ltd. v. Assistant Commissioner of Income-tax, which held that non-compete fees, being restricted only against the seller, do not qualify as intangible assets under Section 32(1)(ii). After examining the facts, the Tribunal referred to the Madras High Court's decision in Commissioner of Income Tax, LTU, Chennai v. Areva T & D India Ltd., which held that non-compete fees could be considered intangible assets eligible for depreciation. The Tribunal concluded that the assessee is eligible to claim depreciation on the non-compete fee as an intangible asset, thereby allowing the first ground of appeal. 2. Eligibility for Deduction under Section 80HHC on DEPB Benefits: The second issue was whether the DEPB benefits received by the assessee were eligible for deduction under Section 80HHC. The AO had denied the deduction due to the assessee's inability to furnish the purchase price of the DEPB, which was necessary to compute the eligible deduction as per the Supreme Court's principles in Topman Exports vs. Commissioner of Income Tax, Mumbai. The Tribunal noted that the issue had been previously remanded to the AO for re-examination. The assessee's representative argued that the DEPB benefits should fall under Section 28(iiid) and that the assessee could provide the necessary details if given another opportunity. Considering the assessee's request, the Tribunal decided to remand the issue back to the AO for a fresh computation of the eligible deduction under Section 80HHC, following the Supreme Court's guidelines in Topman Exports. The Tribunal allowed the second ground of appeal for statistical purposes. Conclusion: The appeal was partly allowed for statistical purposes. The Tribunal held that the assessee is eligible to claim depreciation on the non-compete fee as an intangible asset and remanded the issue of DEPB benefits back to the AO for re-computation of the eligible deduction under Section 80HHC. The order was pronounced in the Open Court on 08th July, 2022.
|
