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Tax Publishers
Business acquisition
- non-compete fee paid - whether capital or revenue expenditure
Facts:
Assessee acquired the fuse and fuse fittings business from GE and had to pay
Rs. 3.21 crores towards non-compete fee and for customer lists, orders etc to
GE. They claimed the entire amount as a revenue expenditure under section 37.
AO and CIT(A) held that the payment of non-compete fee etc. cannot be seen as a
standalone expenditure but is an integral part of the business and disallowed
the same citing it a capital expenditure. On higher appeal by the assessee -
Held against the assessee that non-compete fee etc. was capital in nature but
eligible for depreciation as intangible assets.
Ed. Note: Depreciation on intangible assets is also a vexed
issue. The strategy to claim it as revenue spend is novel as eventually the
revenue read it as capital expenditure and assessee got depreciation on the
same.
Case: Eaton Power
Quality (P) Ltd. v. Dy. CIT 2023 TaxPub(DT) 6828 (Chny-Trib)
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