Case Law Details
Facts:-Srivatsan Surveyors Pvt. Ltd. (‘Appellant’) is engaged in the business of licensed surveyors and loss assessors under the Insurance Act, 1938. The Appellant entered into a non-compete covenant with its director, Mr. Srivatsan and paid a sum of Rs.10 million, on which depreciation was claimed, treating it as an intangible asset.
As per the covenant, Mr. Srivatsan agreed not to carry on his individual business of general insurance survey, loss assessment, valuation of assets, etc. for a period of seven years and also to abstain from other activities which might jeopardize the business interests of the Appellant in any manner.
The Assessing Officer disallowed the depreciation on the non-compete fee. On appeal by the Appellant, the Commissioner of Income Tax (Appeals) upheld the order of the Assessing Officer. Aggrieved by the decision, the Appellant preferred an appeal before the Income Tax Appellate Tribunal (‘ITAT’), Chennai Bench.
Contentions of the Revenue :- The Tax Department disallowed the depreciation claim holding the payment to be subterfuge on the following basis:
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