SAGAR RATNA RESTAURANTS PVT. LTD.,NEW DELHI vs. ACIT, CIRCLE- 22(1), NEW DELHI
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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’, NEW DELHI
Before: SHRI SAKTIJIT DEY & DR. BRR KUMARR
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘G’, NEW DELHI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND DR. BRR KUMAR, ACCOUNTANT MEMBERR ITA No. 7354/Del/2018 Assessment Year: 2014-15
Sagar Ratna Restaurants Vs. ACIT, Circle-77(1), Pvt. Ltd. C-7 Third Floor, New Delhi. Malviya Nagar, New Delhi1100 17. PAN :AAPCS5289R (Appellant) (Respondent)
Appellant by None Respondent by Shri Umesh Takyar, Sr. DR
Date of hearing 24.02.2022 Date of pronouncement .03.2022
ORDER PER SAKTIJIT DEY: JUDICIAL MEMBER: This is an appeal by assessee against the order dated 23.07.2018
of learned Commissioner of Income-Tax (Appeals)-8, New Delhi for
assessment year 2014-15.
When the appeal was called for hearing, no one was present on
behalf of the assessee to represent the case.
Considering the nature of dispute and the fact that the issue is
covered by the decision of the Hon'ble jurisdictional High Court, we
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proceed to dispose of the appeal ex parte qua the assessee after
hearing the learned Departmental Representative and based on
material available on record.
We have heard learned Departmental Representative and
perused the material on record.
Briefly, the facts are that assessee is a resident-company. For the
assessment year under dispute, assessee filed its return of income on
29.11.2014 declaring loss of Rs.23,12,53,397. In course of assessment
proceedings, assessing officer, while verifying the return of income
filed by the assessee, noticed that the assessee has claimed deduction
of Rs.1,94,33,166, being depreciation on none complete fee. Being of
the view that depreciation on non complete fee is not in the nature of
an intangible asset as per Section 32(1)(ii) and explanation to the said
section, the assessing officer called upon the assessee to show cause
why the depreciation claimed should not be disallowed. Ultimately,
the assessing officer completed the assessment disallowing the claim
of depreciation by following the ratio laid down by the Hon'ble Delhi
High Court in case of Sharp Business System Vs. CIT (2012) 211
Taxman 576 (Del). Assessee contested the aforesaid disallowance
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before learned Commissioner (Appeals). However, relying upon the
aforementioned decision of the Hon'ble Delhi High Court, learned
Commissioner (Appeals) upheld the disallowance.
It is evident, by virtue of an agreement entered in June 2011,
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. It appears from record, assessee treated the payment made
towards non compete fee to the transferor as capital expenditure in the
year of acquisition and assessee’s claim of depreciation on such
expenditure in assessment years 2012-13 and 2013-14 was allowed.
To justify its claim of depreciation, in course of proceedings before
the departmental authorities, assessee has submitted that since
depreciation was allowed in preceding assessment years, the same
cannot be disallowed in the impugned assessment year as Rule of
Consistency would apply. However, we are unable to agree with the
aforesaid submission made by the assessee before the departmental
authorities. It appears, at the time of allowing depreciation in
assessment years 2012-13 and 2013-14, the departmental authorities
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did not have the benefit of the ratio laid down by the Hon'ble
jurisdictional High Court in case of Sharp Business System Vs. CIT
(supra). In the aforesaid decision, the Hon'ble jurisdictional High
Court, while dealing with identical dispute relating to allowability of
depreciation on non compete fee, has held that non compete fee
though is an intangible asset, however, it is not similar to know how,
patent, copy right, their trademark, licenses, franchises or any other
business or commercial right of similar nature. The reasoning of the
Hon'ble jurisdictional High Court for coming to such conclusion is,
unlike the rights mentioned in Section 32(1)(ii) which an owner can
exercise against the world at large and can be traded or transferred, in
case of non compete fee, the advantage is restricted only against the
seller. Therefore, it is not a right in rem but in personem. We are
conscious of the fact that some other non-jurisdictional High Courts
have held that non compete fee is an intangible asset coming within
the ambit of Section 32(1)(ii) of the Act and have allowed
depreciation. However, since, we are bound by the decision of the
Hon'ble jurisdictional High Court rendered in case of Sharp Business
System Vs. CIT(supra), respectfully, following the ratio laid down in
5 ITA No.7354/Del/2018
case of Sharp Business System (supra), we hold that assessee’s claim
of depreciation on non compete fee is unacceptable. Accordingly, we
uphold the decision of learned Commissioner (Appeals) by dismissing
the grounds raised.
In the result, the appeal is dismissed.
Order pronounced in the open court on 31st March, 2022
Sd/- Sd/- (DR. BRR KUMAR) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 31st March, 2022. Mohan Lal Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Sl. No. Particulars Date 1. Date of dictation (Order drafted through Dragon software): 09.03.2022 2. Date on which the draft of order is placed before the Dictating Member: 3. Date on which the draft of order is placed before the 09.03.2022 other Member: 4. Date on which the approved draft of order comes to 09.03.2022 the Sr. PS/PS: 5. Date of which the fair order is placed before the 31.03.2022 Dictating Member for pronouncement: 6. Date on which the final order received after having been singed/pronounced by the Members: 7. Date on which the final order is uploaded on the website of ITAT: 8. Date on which the file goes to the Bench Clerk 31.03.2022 9. Date on which files goes to the Head Clerk: 10. Date on which file goes to the Assistant Registrar for signature on the order: 11. Date of dispatch of order:
