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TMI Blog2017 (2) TMI 1117X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment, we hold that even if the right acquired by the assessee is held to be non compete right then also, it is eligible for depreciation u/s 32 (1) (iii). - Decided in favour of assessee - ITA No. 1185 & 1186 (Bang) 2016 - - - Dated:- 3-11-2016 - Shri A. K. Garodia, Accountant Member And Smt Asha Vijayaraghavan, Judicial Member Assessee by : Shri V. Srinivasan, C. A. Revenue by : Shri S. Sundar Rajan, JCIT ORDER Per Shri A. K. Garodia, AM Both these appeals are filed by the assessee. These are directed against two separate orders of learned CIT (A) 6 Bengaluru, both dated 21.03.2016 for A. Ys. 2010 11 2011 12. 2. Both these appeals were heard together and are being disposed of by this common order for the sake of convenience. 3. The assessee has raised several grounds in both years but effective grievances are only two common grievances in both years. First grievance is about disallowance of depreciation of ₹ 131,30,361/- in A.Y. 2010 11 and ₹ 229,78,131/- in A. Y. 2011 12 being depreciation on Goodwill. The second grievance is about disallowance of depreciation of ₹ 890,704/- in A.Y. 2010 11 and ₹ 565,953/- in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In support of this contention, he placed reliance on the judgment of Hon ble Karnataka High Court rendered in the case of CIT vs. M/s Ingersoll Rand International Ind. Ltd. in ITA No. 452 of 2013 dated 30.06.2004 (227 Taxman.com 176), copy on pages 181 to 205 of the paper book. He further submitted that Para 8 of this judgment on pages 200 to 205 of the paper book is relevant as per which it is held by Hon ble Karnataka High Court that the right acquired by the assessee on payment of non compete fees is a commercial or a business right which is similar in nature to know how, patents, copyrights, licenses, franchises etc and it falls in the category of Intangible Assets and consequently depreciation is allowable u/s 32 (1) (iii). 5. As against this, learned DR of the revenue supported the orders of the authorities below. He also submitted that it is noted by the learned CIT (A) in Para 14 of his order that in the Remand Report (Copy on pages 142 to 144 of the paper book), the A.O. has distinguished the facts of the present case with the facts in the case of CIT vs. M/s Ingersoll Rand International Ind. Ltd. (supra). At this juncture, a query was raised by the bench asking t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess in a more efficient manner or to put it differently in a best possible manner. The object of entering into a non- compete agreement is also the same ie., to carry on business in a more efficient manner by avoiding competition, atleast for a limited period of time. On payment of non-compete, the payer acquires a bundle of rights such as restricting receiver directly or indirectly participating in a business which is similar to the business being acquired, from directly or indirectly soliciting or influencing clients or customers of the existing business or any other person either not. to do business with the person who has acquired the business and paid the non-compete tee or to do business with the per-son receiving the non-compete fee to do business with a person who is directly or indirectly in competition with the business which is being acquired. The right is acquired for carrying on the business and therefore, t is a business right. The word commercal is defined in Black s Law Dictionary as related to or connected with trade and commerce in general commerce is defined as the exchange of goods, productions or property of any kind, the buying, selling and exchanging of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... go through this judgment in full and Para 8 as reproduced above in particular, we reach to the conclusion that the main basis of the judgment of Hon ble Karnataka High Court is this that on payment of non compete fees, the payer acquires a bundle of rights such as restricting receiver directly or indirectly participating in a business which is similar to the business being acquired, from directly or indirectly soliciting or influencing clients or customers of the existing business or any other person either not to do business with the person who has acquired the business and paid non compete fees or to do business with a person who is directly or indirectly in competition with the business which is being acquired. These rights are held to be business rights. Thereafter, it is noted by Hon ble Karnataka High Court that this right can be transferred to any other person in the sense that the acquirer gets the right to enforce the performance of the terms of agreement under which a person is restrained from competing. In the present case also, it is specified in Para 11 of the agreement page 102 of the paper book that unless permitted by the assessee i.e. SMPL, WAVE and Mr. V. F. John ..... X X X X Extracts X X X X X X X X Extracts X X X X
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