Case Law Details
DCIT Vs. EAC Industrial Ingredients India P. Ltd (ITAT Delhi)
Assessee is wholly owned subsidiary of EAS Industrial Ingredients PTE Ltd incorporated on 03.10.2005. It purchased the trading unit of Nitrex Chemicals for a total consideration of 244.06 million as a going concern on slump sale basis vide business transfer agreement dated 14.10.2005. According to the BTA the assessee has paid a non compete fee of 35.83 million for a period of five years included in above consideration. The assessee claimed Rs. 4478750 as depreciation on the above sum considering it as “intangible asset”. The ld Assessing Officer denied the claim holding that the business is of specialize nature and there are no chances that other parties can enter into the business due to its complexity. Therefore, according to him the assessee has not acquired any intangible asset. The ld CIT(A) while adverting ground No. 4 has held that by the amendment to the income tax act by the Finance Act 1998 w.e.f. AY 1999-2000, the intangible asset are eligible for depreciation. According to him, any right which is obtained for carrying on the business will fall in the definition of intangible asset. Hence, he deleted the addition. However, this issue squarely is covered against the assessee in view of the decision of the Hon’ble Delhi High Court in case of Sharp Business Systems Vs CIT, ITA No. 492/2012 dated 05.11.2012 wherein, in para No. 11 to 13 Honorable High Court has decided this issue against the assessee that non compete fee is not an eligible intangible asset as the words “similar business or commercial rights” have to necessary result in an intangible asset against the entire word which can be asserted as such to qualify for depreciation u/s 32(1)(ii) of the Act which non compete fees lacks. Further, the reliance placed by the assessee on the decision of the Honorable Karnataka High Court in CIT Vs. Ingersoll Rang International Ltd, (supra) is perused but in view of the decision of Honorable Jurisdictional High Court, the decision of the Honorable Delhi High Court binds us. Further, reliance on the decision of Honorable Supreme Court in case of Cit Vs. Smif Securities Ltd 13 SCC 488 dated 22.08.2012 the issue was not with respect to non compete fees but “goodwill” and “Stock Exchange Membership Card”. In the present case though goodwill of 57.30 million was paid but that is not the issue in dispute. In view of the decision of the Honorable Jurisdictional High Court we reverse the finding of the ld CIT(A) in granting deprecation to the assessee on non compete fees and restored the order of ld Assessing Officer. In the result, the solitary ground of the appeal of the revenue is allowed.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
1.This is an appeal filed by the Revenue against the order of the ld CIT(A), XIII, New Delhi dated 01.02.2011 for the Assessment Year.. 2006-07.
2. The revenue has raised the following grounds of appeal:-
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