Samkeet Arya Homes LLP Vs ITO (ITAT Ahmedabad)
ITAT Ahmedabad held that payment of non-compete fees to retiring partner is revenue expenditure. Accordingly, considering the same as capital expenditure not justifiable. The appeal is allowed to that extent.
Facts- During assessment proceedings, AO held that the Rs. 38,00,000/- claimed in AY 2017-18 was non-business expenditure and should not have been allowed as a deduction. Therefore, the amount was disallowed and added back to the total income of the assessee firm. CIT(A) dismissed the appeal of the assessee. Being aggrieved, the present appeal is filed.
Further, amount of unsecured loans and interest paid/credited thereon amounting to Rs. 1.77 crore were added as unexplained income of the assessee under section 68 of the Income Tax Act. CIT(A) dismissed the appeal.
Conclusion- In assessee’s own case, ITAT Ahmedabad has held that the assessee paid the non-compete fees to Shri Paras C. Pandit and, therefore, it is in nature of revenue expenditure. Hence, the disallowance of non-compete fees expenditure by the Assessing Officer and the CIT(A) is not justified. Thus, appeal of the assessee is allowed.
Held that since the issue has been decided in favour of the assessee by Ahmedabad Tribunal in assessee’s own case for the succeeding assessment year i.e. assessment year 2018-19, in which the balance amount of non-compete fee was paid to the retiring partner (notably the assessee firm had paid non-compete fee to the retiring partner over two assessment years i.e. 2017-18 and 2018-19) and for assessment year 2018-19, the Ahmedabad Tribunal in assessee’s own case has held that the aforesaid payment is allowable to the assessee firm, as revenue expenditure.
