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TMI Blog2018 (10) TMI 1217X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 The assessee-company, a dealer in mobile phones and accessories, filed its return of income for Assessment Year 2013-14 on 29.10.2013 declaring income of ₹ 14,60,30,820. The return was processed under Section 143(1) of the Income Tax Act, 1961 (in short 'the Act') and the case was subsequently taken up for scrutiny. The assessment was completed under Section 143(3) of the Act vide order dt.28.3.2016, wherein the assessee's income was determined at ₹ 15,89,56,000 in view of the addition / disallowance on account of Depreciation on goodwill amounting to ₹ 1,29,25,1999. 2.2 Aggrieved by the order of assessment dt.28.03.2016 for Assessment Year 2013-14, the assessee preferred an appeal before the CIT (Appeals) 6, Bangalore. The learned CIT (Appeals) allowed the assessee's appeal vide order dt.13.10.2017, following the decision of the co-ordinate bench of this Tribunal in the assessee's own case in ITA Nos.1185 1186/Bang/2016 dt.3.11.2016 for Assessment Years 2010-11 2011-12. 3. Revenue, being aggrieved by the order of the CIT (Appeals) 6, Bangalore dt.13.10.2017 for Assessment Year 2013-14 has filed this appeal, wherein it has raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative for Revenue was heard in support of the grounds raised. 5.2 Per contra, the learned Authorised Representative for the assessee submitted that the issue in question has considered and held in favour of the assessee and against revenue by co-ordinate bench of this Tribunal in the assessee's own case for Assessment Years 2010-11 and 2011-12 in ITA No.1185 1186/Bang/2016 dt.3.11.2016 and Assessment Year 2012- 13 in ITA No.715/Bang/2017 dt.15.6.2018 wherein the decision of the Hon'ble Karnataka High Court in the case of Ingersoll Rand International Ind. Ltd. (supra) was followed after considering the decision of the Hon'ble High Court of Delhi cited (supra). 5.3.1 We have heard the rival contentions, perused and carefully considered the material on record; including the judicial decisions cited. We find that the issue of allowing depreciation on the additional amount paid by the assessee as goodwill has been considered and decided in favour of the assessee by co-ordinate benches of this Tribunal in the assessee's own case for Assessment Years 2010-11, 2011-12 and 2012-13 (supra), wherein the co-ordinate bench of this Tribunal has followed the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the A. O. is accepted that this is not Goodwill but Non Compete Fee then also depreciation is allowable at same rate i.e. applicable to intangible assets. 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 fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was earlier associated. The object of acquiring a know-how, patents, copyrights, trademarks, licences, franchises is to carryon business against rivals in the same business in a more efficient manner or to put it differently in a best possible manner. The object of entering into a noncompete 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the present case to see as to whether the rights acquired by the assessee by way of non compete can be transferred to any other person or not. When we carefully 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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