TaxTMI 
TaxTMI 
2016 (4) TMI 583
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.... the assessee paid Rs. 18 crores towards non-compete fees during assessment Year 1999-2000. The amount was paid in connection with the acquisition of glass division from Nicholas Piramal India Limited. The same has been capitalized over various fixed assets in the ratio of their values estimated on a fair basis arrived at by the technical experts. Depending upon the value allocated to the respective block of assets, depreciation at the applicable rate had been claimed alongwith the depreciation on that block of assets. The Assessing Officer disallowed the claim of the assessee the above depreciation, following his order of assessment for the assessment year 1999-2000, holding that the expenditure was in no way connected with the acquisition of various assets. Accordingly, the claim of the depreciation on such allocation was declined. 4. We found that similar issue was decided by the Tribunal in preceding year in favour of the revenue. It was contended by ld. AR that the Tribunal has decided the issue against the assessee by relying on Third Member's decision of the Tribunal, however, thereafter there was decision of Hon'ble Madras High Court in the case of Pentasoft Technologies L....
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....moothly and successfully and therefore even the right obtained by way of non-compete fee would also be covered by the term "or any other business or commercial rights of similar nature" because after obtaining non-compete right, the assessee can develop and run his business without bothering about the competition. The right acquired by payment of non-compete fee is definitely intangible asset. Moreover, this right (asset) will evaporate over a period of time of four years in this case because after that the protection of non-competition will not be available to the assessee. This means, this right is subject to wear and tear by the passage of time, in the sense, that after the lapse of a definite period of four years, this asset will not be available to the assessee and, therefore, this asset must be held to be subject to depreciation. Assessee would be entitled to depreciation in respect of non- compete fee which is in the nature of intangible asset. 20. Madras Bench of the Tribunal in the case of Real Image Tech (P) Ltd. (120 TTJ 983) has been held that payment made under a non-compete agreement was capital expenditure and entitled to depreciation as in intangible asset. The b....
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....planation of the assessee, the AO disallowed the interest payment to the extent of Rs. 3,36,32,300/-. 7. By the impugned order, the CIT(A) confirmed the disallowance, against which the assessee is in further appeal before us. 8. We have considered rival contentions and found that the assessee has claimed interest on borrowed funds u/s.36(1)(iii), which was realized for investment in Ceylon Glass Company Limited, Sri Lanka, which is an associate concern. The investment was made for controlling interest in the associate concern, therefore, in view of the decision of Hon'ble Bombay High Court in the cases of Phil Corporation Ltd., 244 CTR 266, Pstabai Rikhabchand Kothar, 30 taxmann.com 346, Shristi Securities, 321 ITR 498 and decision of Hon'ble Kolkata High Court in the case of Jardine Henderson Ltd., 210 ITR 981, the assessee is entitled for claim of interest on the funds acquired for controlling interest. We also found that investment was made in the share of company with a similar line of business and for commercial expediency, therefore, no disallowance was warranted u/s.36(1)(iii), in view of the decision of Hon'ble Supreme Court in the case of S.A.Builders, 288 ITR 1. Accordi....
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....velling expenses incurred for visiting the same is non-business expense. He further held that travelling for machinery inspection purchase of machinery is definitely a capital expenditure. He also included that in the absence of any exports made to USA , the foreign availing to USA is nothing but a pleasure trip, and as such expenses towards foreign traveling to USA is not a legitimate business expenses. 12. By the impugned order the CIT(A) deleted the disallowance in respect of visit to subsidiary company in Sri Lanka and expenditure incurred on travelling for machinery inspection, however, the CIT(A) confirmed the disallowance in respect of visit to USA where the assessee has not done any export. The CIT(A) has given due justification for the disallowance so made. Accordingly, we do not find any justification for interfering in the order of CIT(A). 13. In the appeal of the revenue, the revenue is aggrieved for write off of payments of non-compete fees made to PEL over a period of 18 years. As we have already directed the AO to allow depreciation on the non-compete fees, the ground taken by the revenue has become infructuous. 14. The next grievance of the revenue relates to con....
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....decision of Hon'ble Supreme Court in the case of Sugauli Sugar Works (P) Ltd., 236 ITR 518 and Mumbai bench of the Tribunal in the case of Aasia Business Ventures, 41 taxmann.com 84. 17. The revenue is also aggrieved for excluding the provisions made for redemption of debentures while calculating book profit u/s.115JB. 18. This ground is against the action of the CIT(A) in excluding an amount of Rs. 2.25 crores being provisions made for redemption of debentures while computing book profit under section 115JB of the Act. It was claimed that the amount transferred to debenture redemption reserve is an ascertained liability deductible under section 115JB(2) of the Act, in computing book profit for the year. The AO holding this amount has been transferred to the reserve as part of the appropriation account, or it is below the line adjustment, and such below line adjustments represent the appropriation of profits and does not effect the book profit of the year. He also did not agree with the contention of the appellant that the debenture redemption reserve is not a reserve as per the definition under part In of the Schedule VI of the companies Act, observing that the assessee is misre....