Depreciation on non-compete fees available u/s.32
Facts and Issues of the case
The assessee submitted that assessee company is engaged in the business of manufacturing and trading of pharmaceutical, nutritional, diagnostic and vascular products. During assessment proceedings the Assessing Officer questioned assessee’s claim of depreciation on Non-compete Fee and disallowed assessee’s claim of deprecation of Rs.128.38 crores on Non- compete Fee.
The assessee carried the issue in appeal before the CIT(A). Before the CIT(A) the assessee made primary claim of depreciation on Non- compete Fee. The assessee also raised an alternate ground without prejudice to the primary contention that Non-compete Fee be treated as deferred revenue expenditure and the same should be allowed to be amortized over a period of eight years.
The CIT(A) accepted assessee’s alternate prayer and directed the Assessing Officer to treat Non-compete Fee as deferred revenue expenditure for a period of eight years. The Department assailed the findings of CIT (A) including the findings on non-compete fee in appeal before the Tribunal. The Tribunal missed the ground raised by the Revenue assailing the relief allowed by CIT (A) on the issue of non-compete fee.
Observations by the Court
The Court has heard the submissions made by rival sides. The solitary issue before us for adjudication is with respect to assessee’s claim of depreciation amounting to Rs.128,38,65,000/- on Non-compete Fee u/s. 32 of the Act. Since, the issue has been dealt with by the Assessing Officer and the CIT(A), non-fresh evidence is required to be adduced for the adjudication of the issue raised by way of additional grounds. Hence, the additional grounds of appeal are admitted and decided as under.
The assessee had paid Non-compete Fee to the tune of Rs.513,54,60,000/-. The assessee claimed depreciation u/s. 32 on Non- compete Fee being an intangible asset. The Assessing Officer disallowed assessee’s claim.
In the present case payment of non-compete fee in accordance with terms of agreement between the assessee and Piramal Healthcare Ltd. is not disputed by the Revenue. We hold that the assessee is eligible for depreciation u/s. 32 of the Act on Non-compete Fees paid being an intangible asset.
Non-compete fees being an intangible asset are eligible for depreciation u/s 32.Abbott-Healthcare-Private-Limited-Vs-ACIT-ITAT-Mumbai