Case Law Details
Pricewaterhouse Coopers Private Ltd. Vs ACIT (ITAT Kolkata)
The Assessing Officer relied on the judgment in the case of Pitney Bowes India Pvt. Ltd. vs. CIT (2012) 204 Taxmann 333(Del) , and ld. CIT(A) has relied on the judgments in the case of Sharp Business System v. DCIT [2011] 15 taxmann.com 144 (Delhi) and Tecumesh India (P.) Ltd. v. Addl. CIT [2010] 127 ITD 1 (Delhi) (SB) .
We find that these cases are distinguishable on facts :-
– Pitney Bowes (Supra): In this case, the taxpayer had acquired going concern on lumpsum consideration. Under the Business Transfer Agreement, there was no bifurcation of the consideration for non -compete and other tangible and intangible assets so acquired. Thus, the taxpayer had bifurcated the total consideration paid for acquisition of business based upon valuation done by the independent auditor. Based upon such valuation, the taxpayer claims the amount of non-compete, being revenue expenditure as quantified by the Independent Valuer as deductible expenditure. The ITAT/High Court denied the claim of such allowance on the ground that the amount in question being non-compete is part of purchase consideration of going concern business, thus, is to be treated as capital expenditure being consideration paid for acquisition of business. It is also relevant that the consideration of non-compete fee is paid to owner of such business and not the employees/directors of the company. Hence, the facts of the above case are clearly distinguishable.
– Sharp Business System (Supra): In this case, L&T had sold its business to taxpayer under the agreement. In addition to the above, the taxpayer also paid separate consideration for non-compete fee to L&T under the same business transfer agreement. On account of the above, the ITAT held that the amount in question is part of acquisition of business and thus non -compete fee ought to be treated as capital expenditure . As stated, in this case also, the compensation of non-compete is part of the business transfer agreement and is paid to shareholder of the company. Hence, the facts of the above case are clearly distinguishable.
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can you explain it a little more
25. Section 28(iv) of the Act is reproduced below for reference:
“28. The following income shall be chargeable to income “Profits and gains of business or profession”, –