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| The Tax Publishers2019 TaxPub(DT) 1274 (Chen-Trib) INCOME TAX ACT, 1961
Section 37(1)
Restriction period mentioned in concerned agreement was a period of eighteen months only, therefore, it could not be said that assessee derived any enduring benefit due to non-compete fee paid by it for obtaining certain commitments from 'V' and restricting him from indulging in any competition with business of the assessee or from weaning way the employees and therefore, same had to be allowed as revenue expenditure.
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Capital or revenue expenditure - Non-complete fee - -
Assessee acquired business of M/s. S through a Business Transfer Agreement (BTA) with one 'V'. who was promoter of the said company. Under the BTA, 'V' was restricted from competing with the business of M/S. for a period of eighteen months. Assessee claimed deduction of said non-compete fee, AO held the same to have been incurred in capital field.Held: Restriction period mentioned in concerned agreement was a period of eighteen months only, therefore, it could not be said that assessee derived any enduring benefit due to non-compete fee paid by it for obtaining certain commitments from 'V' and restricting him from indulging in any competition with business of the assessee or from weaning way the employees and therefore, same had to be allowed as revenue expenditure.
REFERRED : Asianet Communications Ltd. v. CIT [T.C (Appeal) No. 174 of 2005 dt. 26-6-2018) : (2018) 96 Taxmann.com 399 (Mad-HC) : 2018 TaxPub(DT) 4923 (Mad-HC).
FAVOUR : In assessee's favour.
A.Y. :
INCOME TAX ACT, 1961
Section 14A Section 8D(2)(iii)
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