15 Sagar Ratna Restaurants Pvt. Ltd vs. ACIT [TS-325-ITAT-2022(DEL)] A.Y.: 2014-15; Date of order: 31st March, 2022 Section: 32
Non-compete fees does not qualify for depreciation under section 32 since an owner thereof has a right in personam and not a right in rem
FACTSFor Assessment Year 2014-15, assessee filed a return of income declaring a loss of Rs. 23,12,53,397. While assessing the total income, the Assessing Officer (AO) noticed that the assessee has claimed Rs. 1,94,33,166 as depreciation on non-compete fees. Since the AO was of the view that non-compete fee is not an intangible asset as per Section 32(1)(ii) and Explanation thereto, he asked the assessee to show cause why the same should not be disallowed. The AO following the ratio of the decision of
Delhi High Court in Sharp Business Systems vs. CIT [(2012) 211 Taxman 567 (Del)] disallowed the claim of depreciation on non-compete fees.
Aggrieved, the assessee preferred an appeal to CIT(A) who confirmed the action of the AO.
Aggrieved, assessee preferred an appeal to the Tribunal.
HELDThe Tribunal noted that by an agreement entered in June 2011 the assessee acquired a restaurant in the name and style of Sagar Ratna. As per the terms of the agreement, the transferor had transferred all its rights, copyrights, trademarks, etc. in respect of the restaurant Sagar Ratna. The payment made by the assessee towards non-compete fee to
