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Income Tax Appellate Tribunal - Mumbai

Digi Home Cable Entertainment India ... vs Acit (Osd) 10(1), Mumbai on 6 March, 2017

आयकर अपीलीय अधिकरण "डी " न्यायपीठ मुंबई में।

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH "D", MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 5754/MUM/2013 : (A.Y : 2010-11) M/s Digi Home Cable Entertainment Vs. ACIT (OSD) 10(1) India Pvt. Ltd. R.No.10, 3rd Floor 7/B, Shah Industrial Estate A Wing Mittal Court Off Veera Desai Road Nariman Point Andheri (W) Mumbai - 400 021 Mumbai - 400 053 PAN : AABCH5475J (अपीलार्थी / Appellant) (प्रत्यर्थी / Respondent) अपीलार्थी की ओर से / Appellant by : None प्रत्यर्थी की ओर से / Respondent by : Shrikant Namdeo सुनवाई की तारीख / Date of Hearing : 26/12/2016 घोषणा की तारीख Date of Pronouncement : 06/03/2017 आदे श / O R D E R PER C.N.PRASAD (J.M.) :

This appeal is filed by the Assessee against the order of the Ld. CIT (Appeals)-22, Mumbai dated 17.07.2013 for the assessment year 2010-11 arising out of the assessment order passed u/s 143(3) of the Act.

M/s Digi Home Cable Entertainment India Pvt. Ltd.

2. The only issue in the appeal of the Assessee is that the Ld. CIT (Appeals) erred in disallowing pro-rata claim of Non-Compete fees in the current assessment year.

3. Inspite of several notices issued to the Assessee till now on several occasion none appeared nor any adjournment was sought by the Assessee. The notices issued earlier by registered post with acknowledgement due have been returned unserved with the endorsement that the addressee is left. In these circumstances, we dispose of this appeal on hearing the Ld. DR on merits.

4. The Ld. DR submits that the Assessing Officer while completing the assessment disallowed Non Compete Fee of Rs.1,07,66,667/- holding that such Non Compete Fee paid to one of the promoter director is non business expense of the Assessee company. The Ld. DR further submits that the Assessing Officer also stated that the said Non Compete Fee is paid to protect the interest of the shareholder holding 51% equity of the company and therefore, the expenses claimed towards Non Compete Fee is disallowed treating them as not expended for the purpose of business of the Assessee company. The Ld. DR submits that on appeal by the Assessee, the Ld. CIT (Appeals) sustained the disallowance holding that the payment made towards Non Compete Fee agreement is in the nature of capital. Therefore, Ld. DR strongly places reliance on the orders of the authorities below in disallowing the Non Compete Fee expenditure claimed by the Assessee.

M/s Digi Home Cable Entertainment India Pvt. Ltd.

5. We have perused the orders of the authorities below and the submissions of the Ld. DR. The Assessing Officer completed the assessment disallowing the Non Compete Fee paid to promoter director holding that the Non Compete Fee paid is against the interest of the Assessee Company, the Non Compete Fee paid by the Assessee being the Director was in addition to the remuneration and management fee of Rs.84 lakhs and therefore the additional payment in the form of Non Compete Fee is unwarranted, unnecessary and unreasonable. Therefore, the Assessing Officer disallowed the Non Compete Fee invoking the provisions of section 40A(2)(a) of the Act as unreasonable expenditure. The Assessing Officer further held that the expenditure incurred by way of Non Compete Fee is not for the purpose of business.

6. The Assessee preferred appeal before the Ld. CIT (Appeals) and the Ld. CIT (Appeals) sustained the disallowance holding that the said expense is in the nature of capital expenditure. The findings of the lower authorities have not been rebutted with evidences before us. There is no evidence on record to take to controvert the findings of the lower authorities and to take a contrary view to that of the lower authorities. In the circumstances, the orders of the authorities below are upheld.

7. In the result, appeal of the assessee is dismissed.

M/s Digi Home Cable Entertainment India Pvt. Ltd.

Order pronounced in the open court on the 6th day of March 2017.

       Sd/-                                                                  Sd/-
RAJESH KUMAR                                                         C.N.PRASAD
ले खा सदस्य /                                                        न्याधयक सदस्य /
ACCOUNTANT MEMBER                                                    JUDICIAL MEMBER

मुुंबई / Mumbai; दिनाुं क / Dated 06/03/2017 LR, SPS आदे श की प्रधिधलधप अग्रे धिि / Copy of the Order forwarded to :

1. अपीलार्थी / The Appellant

2. प्रत्यर्थी / The Respondent.

3. आयकर आयुक्त(अपील) / The CIT(A), Mumbai.

4. आयकर आयुक्त / CIT

5. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुुं बई / DR, ITAT, Mumbai

6. गाडड फाईल / Guard file.

सत्यादपत प्रदत //True Copy// आदे शानसार/ BY ORDER, सहायक पुं जीकार (Asstt. Registrar) आयकर अपीलीय अधिकरण, मुुं बई / ITAT, Mum 5 M/s Digi Home Cable Entertainment India Pvt. Ltd.