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6. On a query by the assessing officer, it was submitted by the assessee that the amount paid by Sharp Business India Ltd. to L & T was merely to facilitate the business of Sharp Systems India Ltd. and in no way going to touch the fixed capital as such. The assessee placing reliance on the decision of Hon'ble Supreme Court in the case of Empire Jute Co. Ltd. Vs. CIT 124 ITR 1 submitted that if the advantage consisted merely facilitating assessee's trading operations or enabling the management to conduct the business more efficiently/profitably, while leaving the fixed capital un-touched, the expenditure would be on revenue account, even though the expenditure might endure for an indefinite future. It was also submitted that under section 28(va)(a) of the Income Tax Act, 1961 any sum received or receivable in cash or kind under an agreement for not carrying out any activity in relation to business shall be treated as revenue receipt in the hands of the receiver and will be subject to tax accordingly. As a natural corollary the payment of the aforesaid sum of Rs.3 crores was to be treated as revenue expenditure in the hands of the payer. The assessing officer, however, held that the assessee company had made payment of the non-compete fee of Rs.3 crores to L & T who had been engaged over a period of years in the business of selling, marketing and distribution of office automation and other I. T. A. No. 4564 (Del) of 2004 products of different global leaders like Canon, HP and others and had developed a sales net- work all over India. By making the payment of Rs.3 crores, the assessee company had ensured itself that there will be no competitor in the field of office automation products since it was only L & T or any of its associated companies, who could have set up or undertaken or assisted in setting up an undertaking for carrying on of any business in India of selling, marketing and trading of office automation products. Secondly, by making the payment of non-compete amount of Rs.3 crores, the assessee will not be facing any competition from L & T or its associated company for a period of 7 years. Since, the expenditure had brought into existence an advantage of enduring nature and, therefore, the amount of Rs.3 crores was to be treated capital in nature. He, therefore, disallowed the claim of the assessee as revenue expenditure.

11. We have heard both the parties and gone through the material available on record. In the case before us there is no dispute that before formation of joint venture by L & T and Sharp Corporation, Japan, L & T was engaged in the business of developing, manufacturing, marketing, distributing and selling among other things, various electronic equipments and products in India and had a well-established country-wide sales net-work. L & T Ltd by entering I. T. A. No. 4564 (Del) of 2004 into agreement with the assessee had undertaken not to set up any undertaking or assist in setting up, undertaking any business in India of selling/marketing and trading of electronic office products for a period of 7 years in lieu of which payment of Rs.3 crores had been received. The business of joint venture is of importing, marketing and selling in India certain electric and electronic office products. Though, the business of joint venture i.e. Sharp Business Systems (India) Ltd. appears similar to that of L & T but payment of Rs. 3,00,00,000/- has been made in lieu of the latter, not setting up undertaking/assisting in setting up, undertaking any business in India of selling, marketing and trading of electronic office products for a period of 7 years. There is no dispute about the fact that L & T Ltd was having well-established country-wide net work in developing, manufacturing, marketing, distributing and selling various electronic equipments and products in India. The joint venture would have faced tough competition if L & T had set up any undertaking or assisted in setting up, undertaking any business in India of selling/marketing and trading of electronic office products. To ward off that competition, the assessee company had paid Rs.3 crores to L & T Ltd. Therefore, by payment of non-compete fee to L & T Ltd the competition for a period of 7 years has been eliminated. The period of 7 years is quite long during which any new company can establish its reputation and a reasonable market share would have been acquired. Therefore, the payment made by the assessee to L & T Ltd. is not to increase the profitability, but to establish itself in the market and acquire market share. By keeping away L & T Ltd. from the same business, the assessee had visualized to acquire a good market share. The contention of the assessee that after a period of 7 years L & T Ltd. would have entered in the same trade and, therefore, the expenditure should be treated as revenue in nature, we are not in agreement with this arguments of the assessee. The payment has been made to ward off the competition for a period of 7 years during which any company could have set up its products and reputation in the market. Therefore, the expenditure cannot be treated to have been incurred in revenue field.