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Court facts and issues
This is an appeal made by the assessee against the order dated 23.07.2018 of learned Commissioner of Income Tax (Appeals)-8, New Delhi for the assessment year 2014-15.
When the appeal was called for hearing, there was no one present on behalf of the assessee to represent the case.
Keeping in view the nature of the dispute and the fact that the matter is covered by the judgment of the Hon’ble High Court, we proceed to dispose of the appeal ex-parte after hearing the learned Departmental Representative and based on the material available on record. Huh. ,
Court View
The court heard the learned departmental representative and perused the material available on record.
In short, the fact that the assessee is a resident-company. For the assessment year in dispute, the assessee filed his return of income on 29.11.2014 declaring a loss of Rs.23,12,53,397. During the course of assessment proceedings, the Assessing Officer while verifying the return of income filed by the assessee observed that the assessee has claimed deduction of Rs. 1,94,33,166 on account of depreciation without any full charges. Considering that depreciation on non-full duty is not in the nature of an intangible asset as per section 32(1)(ii) and the explanation to the said section, the Assessing Officer asked the assessee to show cause that the depreciation claim Why should not be allowed. Ultimately, the Assessing Officer completed the assessment by rejecting the claim of depreciation by adhering to the ratio prescribed by the Hon’ble High Court of Delhi in the case of Sharp Business System vs. Sharp Business System. CIT (2012) 211 Taxman 576 (Delhi). The assessee opposed the said rejection before the learned Commissioner (Appeals). However, relying on the above judgment of the Hon’ble Delhi High Court, the learned Commissioner (Appeals) upheld the disapproval.
It is clear that by virtue of an agreement entered into 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 has transferred all its rights, copyrights, trademarks etc. in respect of Restaurant Sagar Ratna. It appears from the records, the assessee treated the non-competitive duty paid to the transferor as capital expenditure in the year of acquisition and claimed the assessee of depreciation on such expenditure in the assessment years 2012-13 and 2013-14. was allowed. In order to justify his claim of depreciation, during the proceedings before the departmental officers, the assessee has submitted that since depreciation was allowed in the previous assessment years, it cannot be denied in the impugned assessment year because of the consistency The rule will apply. However, we are unable to agree with the above submission made by the assessee before the departmental authorities. It appears that while allowing depreciation in the assessment years 2012-13 and 2013-14, the departmental authorities did not have the benefit of the ratio prescribed by the Hon’ble High Court in the case of Sharp Business System vs. Sharp Business System. CIT (Supra). In the aforesaid judgment, the Hon’ble High Court, while dealing with the similar dispute relating to admissibility of depreciation on non-compete duty, has held that non-compete duty is an intangible asset, however, it is not tantamount to knowing how, patent, copyright, their trademarks, licenses, franchises or any other business or commercial rights of a similar nature. The contention of the Hon’ble High Court to come to such a conclusion is contrary to the rights mentioned in section 32(1)(ii) which an owner may exercise against the world at large and be traded or transferred, In case of non-compete fee, profit is restricted only against the seller. Therefore, it is a right not in Rem but in person. We are aware of the fact that some other non-judicial High Courts have held that non-compete duty is an intangible asset falling within the purview of section 32(1)(ii) of the Act and has allowed depreciation. However, since, we are bound by the decision of the Hon’ble High Court given in the case of Sharp Business System Vs. Sharp Business System. CIT (Supra), respectfully adhering to the prescribed ratio in the case of Sharp Business System (Supra), we hold that the assessee’s claim of depreciation on non-competitive charges is unacceptable. Accordingly, we uphold the decision of the learned Commissioner (Appeals) setting aside the grounds raised.
conclusion
As a result, the court dismissed the appeal.
sagar-ratna-restaurant-private-ltd-vs-acit-itat-delhi
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