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TMI Blog2021 (4) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty for the other. Hence, we have no hesitation in accepting the plea of the assessee, thereby rejecting the Revenue's contention raised in all these Tax Cases. Depreciation u/s 32 on non compete fee - whether it is an asset in the nature of patents, copyrights, trademark, licence, franchises or any other business or commercial right of similar nature? - HELD THAT:- Before us, a chart has been filed showing the issue relating to depreciation on non compete fee. From the chart, we find that for the assessment year 2001-02, the Assessing Officer himself allowed it, which was confirmed by the CIT(A) and the decision of the CIT(A) was accepted by the Department. For the assessment year 2002-03, no scrutiny assessment had been carried out. For the assessment year 2003-04, the CIT(A) allowed it and the Assessing Officer gave effect to the order passed by the CIT(A). For the assessment year 2004-05, no scrutiny assessment was carried out and for the assessment year 2005-06, the claim was allowed by the CIT(A) and it was given effect to by the Assessing Officer. Thus, the Assessing Officer was bound to be consistent with the earlier decisions.Therefore, we find that the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property even though no cost was involved in acquiring the ownership of new property and therefore its written down value is to be taken as NIL ? ii. Whether the Tribunal was right in holding that non compete fee is an asset in the nature of patents, copyrights, trade mark, licence, franchises or any other business or commercial right of similar nature and therefore is eligible to claim depreciation under Section 32 of the Income Tax Act ? iii. Whether the Tribunal was right in holding that the excess of net book value of the entity taken over by the assessee over and above the consideration paid for acquiring three companies would not fall within the ambit of provision of Section 28(iv) of the Income Tax Act and therefore, not taxable ? And iv. Whether the Tribunal ought to have applied the decision of the Madras High Court in the case of Aries Advertising Co. Ltd., reported in 255 ITR page 510 wherein it was held that any amount transferrred by the assessee to the general reserve alone was to be treated as profit of the assessee as per Section 28(iv) ? 3. We have elaborately heard Mrs.R.Hemalatha, learned Senior Standing Counsel for the appellant/Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was not accepted and the Assessing Officer held that the said amount had to be charged to income tax under the head 'profit and gain of business' under Section 28(iv) of the Act. 7. Aggrieved by the above findings, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), Large Taxpayer Unit, Chennai [for short, the CIT(A)]. By order dated 31.1.2011, the appeal was partly allowed and the assessee got relief in respect of depreciation on the property at Lucknow and depreciation on non compete fee and in respect the amount credited to reserve and surplus. As against that, the Revenue filed an appeal before the Tribunal and it was dismissed by the impugned order. 8. The first question of law is as to whether the depreciation is allowable in respect of the property acquired in exchange of relinquishment of tenancy right in another property. 9. This issue was considered by the Hon'ble Division Bench of this Court in the assessee's own case in the decision reported in (2012) 26 Taxmann.com 266 , the relevant portions of which read thus: 6. We have perused the order passed by this Court dated 30.03.2012 in the Tax Cases file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s placed reliance on the decision of the Delhi High Court in the case of Sharp Business System Vs. CIT-III [reported in (2012) 27 Taxmann.com 50] in support of her contention that the amount paid as non compete fee did not qualify for depreciation under Section 32(1)(ii) of the Act. 14. In the decision in the case of Asianet Communications Ltd. Vs. CIT, Chennai [reported in (2018) 257 Taxman 473], a Division Bench of this Court, to which, one of us (TSSJ) was a party, had considered the same issue as to, where the non compete fee paid by the assessee was for the purpose of its business and it did not entail an enduring benefit to the assessee in its business, whether the payment of such fee was to be allowed as revenue expenditure. In this decision, the Court took note of the decision of the Delhi High Court in the case of Sharp Business System and it has been held as follows : 36. So far as the decision in Sharp Business System (supra) is concerned, as pointed out earlier, in paragraph 5 of the judgment, it has referred to the decision of this Court in G.D.Naidu. The discussion is in paragraph 9 and the conclusion is in paragraph 10. 37. In paragraph 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king any business in India, of selling, marketing and trade of electronic office products for seven years and this amount was treated as deferred revenue expenditure in the assessees books of accounts and written-off over corresponding period of seven years. 40. There is a marked difference in the factual position in Sharp Business System (supra) and the factual position in the case on hand where the assessee's business continues to remain the same, and this is also one more reason to hold that the decision in Sharp Business System (supra) is not applicable to the facts of the case apart from the reservation expressed by us above. 15. In the decision of this Court in the case of Asianet Communications Ltd., the Court distinguished the decision of the Delhi High Court in the case of Sharp Business System. We would hasten to add that the facts in the case of Sharp Business System were couched differently in the sense that a sum of ₹ 73 Crores was paid to M/s.L T Ltd., as consideration for the latter in setting-up or undertaking or assisting in the setting-up or undertaking any business in India, of selling, marketing and trade of electronic office pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and the benefit, which is received has to be in some other form other than in the shape of money. 21. An identical issue was considered by the Hon'ble Division Bench of this Court in the case of CIT Vs. Stads Ltd. [reported in (2015) 373 ITR 313] wherein it was held that the provisions of Section 28(iv) of the Act make it clear that the amount reflected in the balance sheet of the assessee under the head 'reserves and surplus' could not be treated as a benefit or perquisite arising from business or exercise of profession, that the difference amount post amalgamation was the amalgamation reserve and it could not be said that it was out of normal transaction of the business and that the present transaction, being capital in nature, which arose on account of amalgamation of four companies, could not be treated as falling under Section 28(iv) of the Income Tax Act. 22. Thus, the Tribunal rightly granted relief to the assessee. We also find that the CIT(A) appreciated the facts in a proper perspective and granted relief to the assessee and in doing so, followed the decision of the High Court of Gujarat in the case of CIT Vs. Spunpipe Construction Co. [repor ..... 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