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TMI Blog2022 (7) TMI 850X X X X Extracts X X X X X X X X Extracts X X X X ..... AO observed as under:- "with regards to non-compete fee of Rs.2.30 crores paid to Dr.P.V.Venugopal, the ITAt set aside the issue to the file of the Assessing Officer to consider allowance of depreciation on the above amount, if any following the directions of the ITAT, opportunity was given to the assessee, Shri P.S.R.V.V. Surya Rao, CA, AR of the assessee company along with Director (Taxation), Shri Simhachal Mohanty appeared from time to time and furnished the information as called for. The Hon'ble ITAT has held that the expenditure cannot be considered for allowance u/s. 37. However, directed the AD to consider the same for allowance u/s. 32(2), considering the nature of payment and also in light of the fact that the non-compete fee is only for a period of 18 months the same cannot be treated on par with other items, know-how, patents, copyrights, trade marks, licences, franchises. Hence the same is disallowed. With regards to deduction u/s. 80HHC on DEPB, the ITAT restored the issue to the file of the Assessing Officer to work out eligible deduction u/s, 80HHC, following the principles laid down by the Supreme court in the case of Topman Exports. Following the directi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue is squarely covered by the judgment of Co-ordinate Bench of the Tribunal of ITAT, Delhi Bench in case of [2022] 139 taxmann.com 87 (Delhi - Trib.) Sagar Ratna Restaurants (P.) Ltd.v. Assistant Commissioner of Income-tax, in which it has been held as under:- Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance/Rate of (Non-competefee) - Assessment year 2014-15 - Assessee-company paid non-competefees and treated same as capital expenditure - Assessee claimed depreciation on non-competefees - Assessing Officer disallowed said claim on ground that non-competefees was not in nature of intangible asset as per section 32(1)(ii) - Whether advantage arising from non-competefees was restricted only against seller and it would not be similar to intangible assets with business or commercial right which could be transferred or traded and, thus, non-competefee paid by assessee would not be an intangible asset within ambit of section 32(1)(ii) and depreciation claimed on same was to be disallowed - Held, yes [Para 6] [In favour of revenue]. 8. He further submitted that the agreement was made only for 18 months, which is a very short period for treating the capital expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nn.com 399/257 Taxman 473/407 ITR 706, 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 of the judgment, the Court has not discussed the decision of G.D. Naidu, though it has referred to it in paragraph 5 of the judgment. This is pointed out because, the Court has discussed the decision in Blaze & Central (P.) Ltd. (supra), which was distinguished in G.D. Naidu. We find that in paragraph 9 of the judgment, the Court after referring to Empire Jute Co. Ltd. (supra) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 Rs. 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 products for seven years. The facts of the case of the assessee before us are entirely different. This aspect had been noted by the Tribunal in paragraph 11 of the impugned order. The Tribunal also took note of the fact that in the assessee's own case, the High Court of Delhi decided the issue in favour of the assessee. 16. Before us, a chart has been filed showing the issue relating to depreciation on non compete f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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