TaxTMI 
TaxTMI 
2016 (1) TMI 1094
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.... prays that the order of CIT(A) on the above grounds be set aside and that of Assessing Officer be restored." 3. Rival contentions have been heard and record perused. From the record, we found that original assessment was completed u/s 143(3) of I.T. Act on 31.03.2005. Notice u/s.148 was issued on 30.03.2007. Assessee has objected to the reopening of the assessment on the ground that all the relevant details were submitted during the original assessment. The issue was examined and the assessment was completed by A.O. under scrutiny assessment.. No fresh material is brought on record and reassessment proceedings is only due to change of opinion. After completion of assessment u/s 143(3) of the Act on 31-3-2005, the A.O. issued letter dated 08.11.2007 wherein it was stated that the non-compete fee paid by the assessee is capital in nature which gives enduring benefit hence cannot be allowed. Since the same was claimed as revenue expenditure by the assessee there is escapement of income accordingly he reopened the assessment by issue of notice u/s.148. 4. From the record, we found that the assessee entered into non- compete agreement dated 30.06.2001 with M/s. Rallis India Ltd., the ....
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....lied his mind, and allowed the expenditure of non compete fee as revenue expenditure in the original assessment proceedings. In such circumstances reopening the assessment u/s.147 without any fresh material amounts to change of opinion on the same set of facts and such assessment cannot be held valid in accordance with Hon‟ble Supreme Court decision in the case of CIT vs. Kelvinator of India Ltd. (2010) 34 DTR (SC) 49, wherein it was held that mere change of opinion cannot be perse reason to reopen the assessment and the AO has no power to review the assessment. 7. On the merits also CIT(A) allowed assessee's claim after observing as under: - The facts of case are, the appellant is a pharmaceutical company. Vide agreement dated 12.02.2001 with M/s. Rallis India Ltd. had acquired the pharma business of M/s. Rallis India Ltd. for an amount of Rs. 49 crores which includes non compete fee of Rs. 10 crores. The relevant portion of non compete agreement dated 30.06.2001, between appellant and M/s. Rallis India Ltd. read as - "Non-Compete: (i) SELLER agrees and covenants with and undertakes to the PURCHASER that neither SELLER nor any of its Affiliates shall, for a period of 4 (f....
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.... of bulk drugs. It has been pointed out by the appellant that this non compete fees is only in respect of promotion, marketing and distribution of bulk pharmaceuticals and other medicinal preparation for four years and that too, only in India. There was no restriction on manufacturing and selling it outside India. It has been stated by the appellant that a substantial business of the appellant is outside India. It has further been stated that this agreement was only for four years, seller would be free after four years and therefore, this did not have enough durability to make it an asset of enduring nature. It has also been pointed out that the products referred to in this agreement was generic in nature and there were many players offering similar products at comparable prices. Therefore, non compete agreement with Rallis India Ltd. only helped in augmenting the profit during the year and no other enduring benefit. It is also an important fact that brand name „Rallis‟ was not transferred and the seller was free to use the same brand name when it would decide to resume its activities after four years. I agree with the appellant that competition has not been eliminated ....
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....hat mere change of opinion is not sufficient for reopening the assessment and reopening was held to be invalid. Further reliance was placed on the decision of Hon'ble Bombay High Court in the case of CIT vs. M/s Jet Speed Audio Pvt. Ltd. in IT Appeal No. 285 of 2013 dated 28th January, 2015 wherein it was held that reassessment on the basis of change of opinion are held to be not valid. Further reliance was placed on the decision of Hon'ble Delhi High Court in the case of BLB Ltd. Vs. ACIT, (2012) 343 ITR 129 (Delhi) wherein it was observed that the payment of non-compete fee in the original assessment treated as a revenue expenditure by the A.O., the reassessment proceedings could not be initiated on the ground that the A.O. was legally wrong and had misapplied and wrongly understood the law/legal position. 12. Reliance was also placed on the decision of Hon'ble Bombay High Court in the case of Mrs. Parveen P. Bharucha vs. Vs. DCIT/Union of India in Writ Petition No. 10447 of 2011 dated 27th June, 2012 wherein the Hon'ble Court observed that a fresh application of mind on the same set of facts amounts to a change of opinion and does not warrant reopening and for this proposition,....
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....n cannot be held valid in accordance with the decision of Hon'ble Supreme Court in the case of Kelvinator reported in 34 DTR 49 wherein it was held that mere change of opinion per se can not be a reason to reopen the assessment and A.O. has no power to review the assessment. 15. The Hon'ble Delhi High Court in the case of BLS Ltd. (supra) exactly on similar set of facts quashed the reassessment proceedings. In this case also, the A.O. has allowed the assessee's claim for non-compete fee as revenue expenditure in the original assessment u/s 143(3) of the Act on 30-1-2006. The A.O. thereafter issued notice u/s 148 of the Act for reassessment on the ground that non-compete fee which was allowed as revenue expenditure to the assessee was required to be capitalised and added back to the income of the assessee. 16. Applying the proposition of law laid down in the decisionbs referred above, vis-a-vis the findings recorded by the ld. CIT(A) with regard to the change of opinion, we do not find any infirmity in the order of the ld. CIT(A) quashing the reassessment proceedings on the ground of change of opinion. 17. With regard to claim of revenue expenditure in respect of non compete fee ....
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....f similar nature" has to be interpreted in such a way that it would have same similarities as other assets mentioned in cl. (b) of Expin. 3. The other assets mentioned are know-how, patents, copyrights, trade marks, licences, franchises, etc. In all these cases no physical asset comes into possession of the assessee. What comes in is only a right to carry on the business smoothly 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 su....