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TMI Blog2021 (8) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... COURT] every species of right spelt-out expressly by the Statute - i.e. of the intellectual property right and other advantages such as know-how, franchise, license etc. and even those considered by the Courts, such as goodwill can be said to be alienable. Such is not the case with an agreement not to compete which is purely personal. As a consequence, it is held that the contentions of the assessee are without merit; this question too is answered against the appellant and in favour of the Revenue.For the above reasons, this Court is of the opinion that the words similar business or commercial rights have to necessarily result in an intangible asset against the entire world which can be asserted as such to qualify for depreciation under Section 32(1)(ii) Merely because another appeal raising similar questions has been admitted by this Court, also does not persuade us to admit the present appeal as well only on this ground. - Decided in favour of revenue. - ITA 132/2021 - - - Dated:- 29-7-2021 - HON'BLE MR. JUSTICE MANMOHAN AND HON'BLE MR. JUSTICE NAVIN CHAWLA Appellant Through : Mr. Ajay Vohra, Sr. Adv. with Mr. Aniket D. Agrawal, Ms. Manisha Sharma, Advocate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores to Wockhardt Hospitals Ltd. for not directly or indirectly carrying on the business of hospital and related services for a period of three years in the cities of Bangalore, Kolkata and geographical limits of Eastern Mumbai. The said non-compete fee is claimed to have been capitalized by the appellant in its books of accounts. 3. On 15.10.2010, the appellant filed the return of income for the Assessment Year 2010-11 inter alia claiming depreciation of ₹1,93,75,000/- on the non-compete fee paid to by it to Wockhardt Hospitals Ltd., as intangible asset under Section 32(1)(ii) of the Act. 4. By the Assessment Order dated 20.03.2013 passed by the Assessing Officer under Section 143(3) of the Act the said claim of the appellant was disallowed, observing as under: Disallowance on non deduction of TDS on the payment of non compete fee During the course of assessment proceedings it has been noticed that the assessee has required Wockhard Group of Hospital . From the perusal of the details submitted by the assessee it was noticed that the assessee had paid non compete fee amounting to ₹ 15.5 crore to the wockhard group as a part of sale consideration. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned CIT (A) observed as under: 5.1 Having gone through the submissions of the appellant, order of the assessment made by the Assessing Officer and the material evidences placed on the record, it emerges from the facts that the appellant had paid non compete fee of ₹ 15.50 crore as part of the sale consideration for acquiring the Wockhardt Group of Hospitals without deducting the tax within the meaning of section 194L of the Act and accordingly the provisions of Section 40(a)(ia) came into play. Further, the said payment was capital in nature as declared by the assessee itself. The Assessing Officer made a disallowance of the entire sum of ₹ 15.50 crore although the appellant had claimed the deduction of a sum of ₹ 1,48,63,000/- towards the depreciation. It is clear from the language of the Statute that the assessee was not obliged in law to deduct any tax since section 194L invoked by the Assessing Officer ceased to operate w.e.f. 1st of June, 2000. It is clear from the order of the assessment made by the Assessing Officer that the amount of non compete fee of ₹ 15.50 crore has been capitalized in the books of accounts. The appellant has claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act as the said section ceased to operate with effect from 01.06.2000. The learned CIT (A) therefore, also did not dispute that the non-compete fee was entitled to depreciation as an intangible asset. The learned senior counsel submits that the learned ITAT, therefore, could not have reopened this issue on which there was no dispute raised by the respondent. Placing reliance on the judgments of the Supreme Court in Hukumchand Mills Ltd. v. Commissioner of Income Tax, Central Bombay, AIR 1967 SC 455: (1967) 63 ITR 232; and MCorp Global Pvt. Ltd. v. Commissioner of Income Tax, (2009) 3 SCC 420: (2009) 309 ITR 434, the learned senior counsel for the appellant submits that that the learned ITAT has no power to enhance the assessment or take back the benefit granted to the assessee by the Assessing Officer. He further places reliance on: (i) Indian Steel Wire Products Ltd. v. CIT: 208 ITR 740 (Cal.); (ii) CIT vs. G.M. Chennabasappa: 35 ITR 261 (AP); (iii) Pokhraj Hirachand vs. CIT: 49 ITR 293 (Bom.); (iv) The Motor Union Insurance Co. Ltd vs. CIT: 13 ITR 272 (Bom.); (v) Chandulal Lallubhai (HUF) vs. CIT: 139 ITR 642, 64950 (Guj.); (vi) R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded before the Assessing Officer and/or the learned ITAT has exceeded its jurisdiction in considering the same. 14. On merit, this Court in Sharp Business Systems (supra) has held, as under: 12. The question here, however, is whether a non-compete right of the kind acquired by the assessee against L T for seven years amounts to a depreciable intangible asset. As discussed earlier, each of the species of rights spelt-out in Section 32(1)(ii), i.e. know-how, patent, copyright, trademark, license or franchise as or any other right of a similar kind which confers a business or commercial or any other business or commercial right of similar nature has to be intangible asset . The nature of these rights mentioned clearly spell-out an element of exclusivity which enures to the assessee as a sequel to the ownership. In other words, but for the ownership of the intellectual property or know-how or license or franchise, it would be unable to either access the advantage or assert the right and the nature of the right mentioned or spelt-out in the provision as against the world at large or in legal parlance in rem . However, in the case of a noncompetition agreement or covenant, t ..... 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