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6.1. The assessee's alternative ground of allowing depreciation, if the expenditure is found to be of capital nature was also rejected and the relevant discussion/findings as contained in para Nos. 5 to 5.3 of the order of the CIT(A) are in the following terms :

"5. The appellant has taken another alternative plea that if the impugned payment of non-compete fee is considered capital in nature then depreciation @ 25 per cent should be allowed under Section 32 of the Act since the payment of non-compete fees could at worst be said to have resulted in acquisition of business/commercial right to the appellant and this right being intangible asset, qualifies for depreciation under Section 32 of the Act.

5.2 The AO, on the other hand, in his written submission observed that Section 32(1)(ii) specifies certain intangible assets like know-how, patents, copyrights, trademarks, licenses, franchise and also mentions any other business or commercial right of similar nature. The appellant has never claimed that the payment of non-compete fees was to acquire an asset. All the assets pertaining to chemical business of VBC Industries were acquired as per business purchase agreement dt. 23rd March, 2000 and -as per the definition given in para 1.1. of this agreement, it can be seen that the acquired business undertaking means all of seller right, title and interest in respect of chemical business including all movable and immovable property, licenses, NOCs, etc., tangible and intangible rights and benefits. Thus, all the assets of the chemical business whether tangible or intangibla were part of acquisition of business purchase agreement, for which consideration of Rs. 29 crores has been paid. The payment of Rs. 6 crores for non-compete fees was only to avoid competition from seller for a period of five years and this was not linked with any of the intangible assets like know-how, patents, -etc. Without prejudice, it was submitted that if at all any intangible assets can be said to have been acquired by non-competition, the same is not a right such as know-how, patents, copyrights, trademarks, license, franchise or any other right of similar nature. The appellant might have acquired some commercial right but the same are not similar to the nature of the know-how, patents, etc. Therefore, depreciation cannot be allowed.

"While acquiring the chemical business from VBC Industries Ltd. (VBC), the company has paid a consideration of Rs. 600 lacs to VBC and its promoters agreeing not to compete against the company in the same or similar business either directly or indirectly for a period of five years of the said purchase of the business. The said consideration of Rs. 600 lacs is being amortized over a period of five years under consideration. Accordingly, during the previous year the company has written off Rs. 1.20 crores, out of total non-compete fee of Rs. 6 crores paid. It is however submitted that the entire, non-compete fee of Rs. 6 crores is a revenue expenditure and, therefore, fully allowable as a deduction during the previous year. Accordingly, in the tax computation the said consideration is claimed in full as business expense.
In view Of the above, it was submitted that the observations made by the learned AO that it was not doing any business prior to the acquisition of VBC and the non-compete payment was associated with acquiring of new business are not correct.
(xiv) The learned Counsel for the assessee, further submitted that without prejudice to the above, it is submitted that when the payment is made in respect of non-compete fees, whether the assessee was in the business prior to such payments or not would not alter the nature of transaction. The payments made for non-compete should still be treated as being in the nature of revenue expenditure.