Document Fragment View
Fragment Information
Showing contexts for: Sharp Business System in M/S Inditrade Capital Ltd (Previously ... vs The Ito, Corporate Ward1(1),, Kochi on 14 May, 2025Matching Fragments
3. The appellant raised the following grounds of appeal:-
"1. Disallowance of depreciation on non-compete fee amounting to INR 93,75,000 1.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in disallowing an amount of INR 93,75,000 on account of depreciation claimed on non-compete fees paid under 32(1)(ii) of the Act, without considering the detailed submissions and judicial precedents quoted by the Appellant.
1.2 On the facts and circumstances of the case, the CIT(A) has erred in purely relying only on the decision of Delhi High Court in case of Sharp Business System v CIT (2012) 254 CTR 233 and Fortis Hospitals Ltd (ITA 132/2021), by treating non- compete fee as Capital in nature and not eligible for depreciation, without considering the fact that the High Court of Madras, recently in 2021, in the case of CIT v. Areva T & D India Ltd. (129 taxmann.com 55), after considering on the decision of the Delhi High Court in case of Sharp Business System (supra), has held that, expenditure incurred for acquiring non-compete right is capital in nature and entitled to depreciation under section 32(1)(ii) of the Act.
"It would be relevant to note that in the case of Sharp Business System (supra) the joint-venture company was incorporated in the assessment year 2001-02 and in the first year of business, with a view to warding on competition, it entered into agreement by paying a non-compete fee of Rs. 73 crores to L and T Ltd. of setting up or undertaking or assisting in the setting up or undertaking any business in India, of selling and trade of electronic office products for seven years and this amount was treated as deferred revenue expenditure in the assessee's books of account and written-off over corresponding period of seven years.
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 M/s.Inditrade Capital Limited.
in Sharp Business System (supra) is not applicable to the facts of the case apart from the reservation expressed by us above."
13. In the light of the above legal position, we are of the considered opinion that the claim of allowance of depreciation on the payment of non-compete fee results in an acquisition of intangible asset, which qualifies for allowance of depreciation u/s.32(1)(ii) of the Act. Accordingly, this grounds of appeal stands allowed.