Case Law Details
Sagar Ratna Restaurants Pvt. Ltd. Vs ACIT (ITAT Delhi)
It is evident, by virtue of an agreement entered in June 2011, assessee acquired a restaurant in the name and style of Sagar Ratna. As per the terms of the agreement, the transferor had transferred all its rights, copyrights, trademarks etc. in respect of the restaurant Sagar Ratna. It appears from record, assessee treated the payment made towards non compete fee to the transferor as capital expenditure in the year of acquisition and assessee’s claim of depreciation on such expenditure in assessment years 2012-13 and 2013-14 was allowed. To justify its claim of depreciation, in course of proceedings before the departmental authorities, assessee has submitted that since depreciation was allowed in preceding assessment years, the same cannot be disallowed in the impugned assessment year as Rule of Consistency would apply. However, we are unable to agree with the aforesaid submission made by the assessee before the departmental authorities. It appears, at the time of allowing depreciation in assessment years 2012-13 and 2013-14, the departmental authorities did not have the benefit of the ratio laid down by the Hon’ble jurisdictional High Court in case of Sharp Business System Vs. CIT (supra). In the aforesaid decision, the Hon’ble jurisdictional High Court, while dealing with identical dispute relating to allowability of depreciation on non compete fee, has held that non compete fee though is an intangible asset, however, it is not similar to know how, patent, copy right, their trademark, licenses, franchises or any other business or commercial right of similar nature. The reasoning of the Hon’ble jurisdictional High Court for coming to such conclusion is, unlike the rights mentioned in Section 32(1)(ii) which an owner can exercise against the world at large and can be traded or transferred, in case of non compete fee, the advantage is restricted only against the seller. Therefore, it is not a right in rem but in personem. We are conscious of the fact that some other non-jurisdictional High Courts have held that non compete fee is an intangible asset coming within the ambit of Section 32(1)(ii) of the Act and have allowed depreciation. However, since, we are bound by the decision of the Hon’ble jurisdictional High Court rendered in case of Sharp Business System Vs. CIT(supra), respectfully, following the ratio laid down in case of Sharp Business System (supra), we hold that assessee’s claim of depreciation on non compete fee is unacceptable. Accordingly, we uphold the decision of learned Commissioner (Appeals) by dismissing the grounds raised.
FULL TEXT OF THE ORDER OF ITAT DELHI
This is an appeal by assessee against the order dated 23.07.2018 of learned Commissioner of Income-Tax (Appeals)-8, New Delhi for assessment year 2014-15.
2. When the appeal was called for hearing, no one was present on behalf of the assessee to represent the case.
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