Case Law Details
DCIT Vs Ms. Sapa Extrusion India Pvt. Ltd. (ITAT Bangalore)
Payment of non-compete fee gave the assessee, commercial right to carry on manufacturing activity without competition from one major manufacturer. The assessee was also able to retain old customers consequent to the non-compete agreement. Ppayment of non-compete fee resulted in acquisition of an intangible asset and the assessee was entitled to claim depreciation on such intangible asset. Assessee acquired the intangible asset which falls within the meaning of the expression “or any other business or commercial rights of similar nature” occurring in section 32(1)(ii) of the Income-Tax Act, 1961. The assessee in support of the aforesaid contention placed reliance on the decision of the Hon’ble High Court of Karnataka in the case of Ingersoll Rand International Ltd. 48 taxman.com 349 (Kar) wherein it was held that non-compete fee confers commercial rights which is akin to know-how, patents, copyrights, trademarks licenses, franchises and commercial rights, and therefore was intangible asset on which depreciation has to be allowed as per the provisions of section 32(1)(ii) of the Act. ITAT held that non-compete fee paid is an intangible asset acquired by the assessee on which depreciation has to be allowed u/s. 32(1)(ii) of the act.
FULL TEXT OF THE ITAT JUDGMENT
Per N. V. Vasudevan, Judicial Member
This is an appeal by the revenue against the order dated 17.07.2017 of the CIT(Appeals)-IV, Bengaluru relating to assessment year 2013-14.
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