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TMI Blog2022 (7) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... ip Private Limited (hereinafter referred to as 'the Assessee' or 'AMPL') respectfully craves leave to prefer an appeal against the final order dated 04 January 2022 (received on 04 January 2022) passed by the National Faceless Assessment Centre, Delhi (hereinafter referred to as the 'AO') under section 143(3) read with section 144C(13) read with section 144B of the Income-tax Act, 1961 ('the Act') in pursuance of the directions issued by Dispute Resolution Panel-3 (DRP), Mumbai dated 23 December 2021 under section 144C(5) of the Act on the following grounds: General 1. On the facts and in the circumstances of the case and in law, the AO, based on directions of DRP, has erred in assessing total income of the Assessee at Rs 2,14,38,06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and in law, the AO has erred in initiating penalty under Section 271(1)(c) of the Act in respect of disallowances / additions. The above grounds of appeal are mutually exclusive and without prejudice to one another. The Assessee craves leave to add/ alter/ amend/ delete/ withdraw any or all of the grounds at or before the hearing of the appeal so as to enable the Income tax Appellate Tribunal to decide the appeal according to law." 3. Briefly, the facts of the case are as under :- The appellant is a company incorporated under the provisions of the Companies Act, 1956. The return of income for the assessment year 2017-18 was filed on 20.03.2018 disclosing Rs.Nil income. The assessee also reported some international transactions in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant had acquired business of Shri Ajay Pitre in terms of share purchase agreement dated 09.04.2013. The Assessing Officer was of the opinion that the said expenditure cannot be allowed as revenue expenditure for the reason that it is a capital in nature as the expenditure was incurred only towards smoothening the process of acquisition of the ongoing business/unit of Shri Ajay Pitre including the intellectual rights and not of revenue nature in view of the fact that the said case is clearly is on capital account not of revenue nature. The ratio of the Hon'ble Delhi High Court in the case of Sharp Business System vs. CIT, 254 CTR 233 (Del) is squarely applicable. The Assessing Officer also doubted the true nature of the agreement as it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Accordingly, the ld. DRP confirmed the findings of the Assessing Officer. 9. On receipt of the direction from the ld. DRP, the Assessing Officer had passed the final assessment order dated 04.01.2022 passed u/s 143(3) r.w.s. 144C(13) r.w.s. 144B of the Act after making the addition on account of disallowance of non-compete fee of Rs.8,26,31,590/-. 10. Being aggrieved by the above final assessment order, the assessee is in appeal before us in the present appeal. 11. The ld. AR submitted that non-compete fee paid to Shri Ajay Pitre in terms of the consultancy agreement is revenue expenditure as the consideration was paid to Shri Ajay Pitre was not to compete in similar line of business for a period of 3 years. Reliance in this regard was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it should be treated as part and parcel of purchase of shares of the appellant company and the same cannot be allowed as revenue expenditure. 13. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the allowability of non-compete fee paid in the year 2013-14 in terms of the consultancy agreement entered by the appellant company on 29.10.2013 with Shri Ajay Pitre. In terms of the said agreement, the appellant company had agreed to pay consultancy fee of Rs.21.55 crores in 3 equal instalments. The said consideration was stated to have been paid to Shri Ajay Pitre towards not to compete with the business of the appellant company. The Assessing Officer had doubted the sum and substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of the said agreement, the liability had clearly crystallized during the financial year 2013-14 relevant to the assessment year 2014-15 and had not incurred during the assessment year 2017-18. Thus, the assessee company had also failed to satisfy the conditions precedent to claim as revenue expenditure, as the expenditure was incurred during the previous year relevant to the assessment year under consideration, therefore, the claim made by the assessee cannot be allowed as deduction for the reasons stated above. Accordingly, the grounds of appeal raised by the assessee stands dismissed.
15. In the result, the appeal filed by the assessee stands dismissed.
Order pronounced on this 21st day of June, 2022. X X X X Extracts X X X X X X X X Extracts X X X X
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