M/S. INDO NATIONAL LIMITED,CHENNAI vs. ACIT COPRATE CRICLE-2(2), CHENNAI, CHENNAI

आयकर अपीलीय अिधकरण, ‘ए’
यायपीठ, चे ई।
IN THE INCOME TAX APPELLATE TRIBUNAL
‘A’ BENCH: CHENNAI

ी एबी टी. वक
, ाियक सद एवं
एवं
एवं
एवं

ी मनोज कुमार अवाल, लेखा सद के सम

BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRIMANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER

आयकर अपील सं./ITA Nos. 1404 & 1405/Chny/2023
िनधा रण वष /Assessment Years: 2015-16 & 2016-17

M/s. Indo National Limited,
No.77, 3rd Floor, Pottipati Plaza,
Nungambakkam,
Chennai – 600 034. v.
ACIT,
Corporate Circle -2(2),
Chennai.
[PAN: AAACI2291L]

(अपीलाथ/Appellant)

(यथ/Respondent)

अपीलाथ क ओर से/ Appellant by :
Mr. NR. Vijayaraghavan,
Advocate
यथ क ओर से /Respondent by :
Mr. S. Sundar Rajan, JCIT

सुनवाईकतारीख/Date of Hearing
:
01.01.2025
घोषणाकतारीख /Date of Pronouncement
:
19.03.2025

आदेश / O R D E R
PER ABY T. VARKEY, JM:

These appeals preferred by the assessee company against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter in short "the Ld.CIT(A)”), Delhi, dated 30.06.2023 for the Assessment
Years (hereinafter in short "AY”) 2015-16 & 2016-17. 2. At the outset, the is a delay of ‘93’ days
2016-17 and that was cause from filing it on prayed for condonation having taking note of th the delay. Hence, we adjudicate both the app
3. First, we will
No.1404/Chny/2023. therefore, it doesn’t re disallowance of weighte of the Act since expendi
4. Brief facts are tha
Return of Income (in admitting total income for scrutiny, and the assessed total income assessee has claimed a deduction u/s. 35(2AB)
35(2AB) of the Act,
ITA Nos. 1404
(AYs 2
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Ld. Counsel for the assessee subm in filing of these appeals for the A s because assessee was prevente n time. Hence, the Ld. Counsel fo of delay, for which, the Ld.DR ob he reasons for delay, we find it adeq condone the delay of ‘93’ days a peals on merits.
take up appeal for AY
2015
. It is noted that Ground no.1 is gen quire any adjudication. Ground No ed deduction of Rs.19,78,33/- claime iture was not approved by the DSIR at, the assessee a public limited co short “RoI") for AY 2015-16 o of Rs.27,34,34,800/-. Later, the Ro
AO framed the assessment on 3
of Rs.30,59,75,636/-. The AO n an amount of Rs.19,78,332/- by w
) of the Act. According to the AO, if a company is engaged in an 4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd itted that there
AYs 2015-16 &
d by sufficient r the assessee bjects; however quate to excuse and proceed to 5-16
in ITA neral in nature, o.2 is regarding ed u/s 35(2AB)
R in Form 3CL.
ompany filed its on 30.11.2015
oI was selected
0.12.2017 and noted that, the ay of weighted as per section ny business of biotechnology or of man article or thing specified
(200%) of the expendit as deduction. According the Act, the assessee h authority for co-operati the prescribed authority
Scientific and Industrial relation to the approval the Ld. PCIT or other assessee did not furnis
DSIR. Therefore, accor deduction u/s. 35(2AB) normal deduction for th of total claim of Rs.
Rs.9,89,166/- was disa assessee. Aggrieved,
Ld.CIT(A), who was plea of the AO. Aggrieved, t
4.1
We have heard undisputed facts are tha facility for which the D
ITA Nos. 1404
(AYs 2
M/
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nufacture or production of any articl d in 11th Schedule), an amount equ ure incurred on scientific research s g to the AO, for claiming deduction ad to enter into an agreement with on in such research and developm y [prescribed authority is Secretary, l Research (DSIR)] who shall subm l of the expenditure incurred by the authorities. However, according t sh the approval received in Form rding to him, the assessee was not e
) of the Act. The AO accordingly on e actual revenue expenditure of Rs
19,78,332/-, and the weighted allowed and added to the total the assessee preferred an appe ased to dismiss the same and confir the assessee is before us.
both the parties and perused the at, the assessee has an approved in DSIR has issued approval in Form 3

4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd e (not being an al to two times shall be allowed u/s. 35(2AB) of h the prescribed ent facility and Department of mit its report in e said facility to to the AO, the 3CL from the eligible to claim nly allowed the .9,89,166/- out component of income of the eal before the rmed the action e records. The n-house in R&D
3CM vide letter

F.No.TU/IV-R-D/743/20
us. Further, according to for the R&D facility whi to the provisions of sub Act, if the aforesaid fac three conditions set o respect of the expend
According to the AO ho
3CLA had not been cert he had denied weighte the claim to the actual notice that Rule 6 of Rules],which contained
DSIR, as it stood then, certify the quantum of w
3CL was to be consider was shown to us that,
Income Tax (10th Am clause (7A) was amend from AY 2017-18and mandated the DSIR to u/s.35(2AB)of the Act i
ITA Nos. 1404
(AYs 2
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012 dated 18.07.2012, which letter i o the assessee, it is maintaining sep ch has been audited in Form 3CLA.
b-sub clauses (1) to (4) of Section ts are correct, then the assessee ha out therein, for claiming weighted diture incurred at the in-house in owever, since the expenditure as s tified and approved by the DSIR in t ed component of deduction and ins amount of expenditure. The Ld. AR the Income Tax Rules, 1962 [he the procedure for obtaining the nowhere prescribed that the DSIR w weighted deduction or the amount c red as the sum eligible for weighte the above Rule 6 underwent ame mendment) Rules, 2016, wherein s ded with effect from 01.07.2016, he onwards, in terms of which t o quantify the quantum of deduc in Part-B Part of Form 3CL. Accord

4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd s placed before parate accounts
. Having regard
35(2AB) of the ad satisfied the d deduction in n R&D facility.
set out in Form their Form 3CL, stead restricted brought to our erein after the approval from was required to ertified in Form ed deduction. It ndment by the sub-clause sub ence applicable the Legislature ction allowable dingly the basis on which the AO is note applicable in the conte position prevailing prio
3CL issued by DSIR wa deduction u/s 35(2AB) o
4.2
In view of the a requirement to claim w
18, was (a) entering int and (b) recognition of these two conditions are accounts of the R&D f deduction u/s u 35(2AB issue stands squarely rendered by this Tribun in ITA No.3236/Chny has been observed as u
4.3
We note th
Rs.14,20,60,668/- and as approved by the brought in Rule 6(7A)
‘the Rules’) w.e.f. 0
authority had to subm facility and developm
Exemption) within six amendment, the quan development facility authority; and since, t the amendment was ITA Nos. 1404
(AYs 2
M/
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ed to have denied the deduction, is f ext of the relevant year in questio r to amendment of the Rule was as not relevant to ascertain the cla of the Act.
bove, and in our considered view weighted deduction u/s 35(2AB), pri to an agreement between the facility the R&D facility by DSIR in Form e met, the expenditure set out in se facility i.e. Form 3CLA, will qualify
B) of the Act. We further note that covered in assessee'sfavour by nal in the case of M/s.SundaramF y/2017, wherein, at Para No.4.3 at nder:
at the assessee has claimed deduct d the AO allowed deduction of only Rs.13,52,
DSIR. It is noted that prior to the ame of the Income Tax Rules, 1962 (hereinafter
1.07.2016 i.e. from AY 2016-17, the pre mit its report in relation to the approval of i ment facility in Form 3CL to DG (Incom xty days of its granting approval unlike a tum of expenditure incurred for in-house res by assessee was required to be given the year under consideration (i.e. AY 2013- not applicable as noted (supra) in the 4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd found to be not on. Hence, the that, the Form im of weighted therefore, the or to AY 2017- y and the DSIR
3CM, and once eparate audited y for weighted t the impugned y the decision asteners Ltd., t Page No.12, it tion of ,44,00/- endment in short escribed n-house me Tax fter the search &
by the 14) and case of Crompton Greaves L amendment was not required to quantify th to the approval of in-h in the absence of any expenditure and cons
Therefore, the non-a disentitle the assesse relevant year under disallowed Rs.68,16,6
the decision of the Trib we allow grounds of Rs.68,16,668/-.
4.3
Since the assesse letter F.No.TU/IV-R-D/7
time, for the interest of to AO to examine wheth at para 4.2 (supra) documents to substant issue in accordance to therefore allowed for sta
5. Ground No. 3 is confirming the action compete fees holding i alternatively claimed th as revenue expenditure an event, the AO ough treating the payment as ITA Nos. 1404
(AYs 2
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Ltd., the assessee has rightly contende applicable, and the prescribed authority w he expenditure and had to only give report in ouse facility and development facility, and th y requirement of law, the AO erred in curtai sequent weighted deduction claimed by as pproval of the expenditure by the DSIR ee to make the claim of Rs.14,20,60,668/- consideration and hence, the AO couldn
68/-. Therefore, respectfully following the bunal in the case of Crompton Greaves Ltd.
f appeal of the assessee and direct dele ee produced the DSIRapproval in F
743/2012 dated 18.07.2012, before f justice and fair-play, we set aside her the assessee met the two cond and assessee is directed to pro iate the same. And the AO to pas law after hearing the assessee.
atistical purposes.
noted to be against the action of of the AO in disallowing the pay t to be capital in nature. The ass hat, in case if the non-compete fee e, and is treated as capital in natur ht to be directed to allow depreciat s ‘intangible asset’.

4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd ed that was not relation herefore, iling the ssessee.
doesn’t
- in the n’t have ratio of (supra), etion of Form 3CM vide us for the first this issue back itions as stated oduce relevant s order on this This ground is the Ld. CIT(A) yment of non- sessee has also e is not allowed e, then in such tion thereon by 5.1
Brief facts as miscellaneous expenses for the year ended 31. breakup of the details details, the AO note
Rs.2,37,07,960/- paid
‘miscellaneous expense submit the details of th that the assessee has a (1) M/s. JSK Marketing
Consumer Products Pvt two companies were directors/promoters of and Shri. Rajendra Pras dated 14.08.2014 has the promoters/directors competing with the ass to pay such non-comp expense, according to A of the assessee. Accord commercial rights wou
Further, according to th
ITA Nos. 1404
(AYs 2
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noted are that, the assessee s of Rs.3,13,24,374/- in the Profit &
.03.2015. The AO is noted to have s of the expenditure; and upon ed that, the assessee has de by way of non-compete fees un s’ and therefore, the AO required t he same. On perusal of the details agreed to pay non-compete fee to g Pvt Ltd (in short “M/s.JSK”) and Ltd (in short “M/s.RAL”). The AO n respectively controlled by (100%
assessee company viz., Shri. Kun sad Khaitan. According to the AO, been entered into by the assessee s in respect of both M/s. JSK and M essee company; and in lieu of it, a pete fee amounting to Rs.2,37,0
AO needs to be capitalized in the boo ding to him, any payment for acquir ld fall under the definition of int he AO, the assessee had entered int

4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd has debited
& Loss Account e called for the examining the bited sum of nder the head the assessee to , the AO noted two companies d (2) M/s. RAL oted that these
% shareholding) nal K. Jiwaraka
, an agreement e company with M/s. RAL for not ssessee agreed
7,960/-, which oks of accounts ring business or angible assets.
to non-compete agreement to avoid co rights from the Directo competing in the same definition of commercia
Hence, according to th business or commercia that the payment of n nature and hence disallo
5.2
After holding so, t assessee for depreciatio opinion that depreciatio the following conditions
(i) a technical feasibility intangible asset
(ii) ability to use or sell th
(iii) existence of market intangible asset
(iv) availability of adequ the development and to u
(v) ability to measure the 5.3
According to the conditions and also note for a restricted period observed that, the pay
ITA Nos. 1404
(AYs 2
M/
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ompetition in terms of which it acq ors by preventing them from direct line of business. This in AO’s view c l right having economic interest and he AO, the non-compete fee is in l rights of similar nature. The AO non-compete fee was not revenue owed the same.
the AO also disallowed the alternati on on such capital expenditure. The on is allowable only if the intangible
:
study supporting the completion of developm he created intangible asset for output of the intangible asset or internal ate technical, financial, and other resources t use or sell the intangible asset e expenditure on the intangible asset reliably an AO, the assessee did not satisfy ed that the advantage gained by th
(as per Schedule 1 of the agreem ment didn’t necessarily confer any 4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd quired valuable tly or indirectly came under the d money value.
the nature of therefore held but capital in ive claim of the e AO was of the e asset satisfies ment of the use of the to complete d fairly.
y the aforesaid e assessee was ment). He thus exclusive right to carry on primary bu asset cannot be sold in form of knowhow, franc the same cannot be tre
Act and hence the co
Aggrieved, the assesse confirmed the action of “19. Regarding ground the appellant has coun submitted that in the Court (2008) did not ad as revenueexpenditure
RealImage Tech (P) Lt depreciation on non-com further relied upon Hon vs. JCIT (407 ITR 674) case of CIT Vs. Max Ind employee restraininghim
20. However, in the in promoter director's inte was made with its prom
Khaitan.(Such paymen appellant avoided com and hence, it being ac bearing. In thisregard, r
-
Revathi Equipment
(2021)- AO held the was held justified.
related to wholesale
-
ITO Vs. Smartchem granted against the -
GKN Driveline Ind
Payments were hel regarding agreemen
-
NELITO Systems Lt non-compete fee is ITA Nos. 1404
(AYs 2
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usiness activity. According to him, ndependently unlike other intangibl chise rights, license etc. Hence acc eated as an intangible asset as def orresponding claim of depreciatio e preferred an appeal before the the AO by holding as under:
of disallowance of non-compete fee of Rs.2.3
tered the case laws relied uponby the AO. Th case of PentasoftTechnologies, the Hon'ble M djudicate on the question of allowability of non-c or not. Further, the decision of ITAT in th td. and Indo Global Corporate Finance dealt mpete fee and not the nature of expenditure.Th n'ble Madras High Court case ofHatsunAgro Pr
(2017) and Hon'blePunjab and Haryana High C dia Ltd.(2018), where non-compete fee was a p m from doing particular business.
nstant case, the AQ has made clear cut findin erest is invòlved. The agreement of theappellan moter director ShriKunal K.Jiwarka and Mr. Rajen t would fallunder the nature of enduring b petitionwith the directors regarding wholesale commercial right having monetary value and reliance is placed on rationale held in the cases
In the instant case of the appellant, the en e dealership is subjected to non-compete fee.
m Technologies Ltd. 103 taxmann.com 360 (SC
High Court's order.
ia Ltd. vs. CIT 88 taxmann.com 208 (Delh d for an enduring benefit and not non-compe nt for purchase of assets and liabilitiesof a new f td. vs. DCIT 27 taxmann.com 201 (Mum-/TA a capital expenditure not allowable u/s37(1).

4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd this intangible e assets in the cording to him, fined under the n was denied.
Ld.CIT(A), who
37,07,960/, he appellant
Madras High compete fee he cases of the issueof he appellant roducts Ltd.
Court in the aid to a ex- ngthat here nt company ndra Prasad benefit. The e dealership long term of:- n. com 382
ng the case ntire issued
C) –SLP was hi) (2017)- teobligation factory.
AT)(2012) -

o question of allowability of depreciation on no pendent value or advantage of fetchingany p e assets like know-how, etc. andthus depreciat omplete fee was rightlyrejected by relying upon usinessSystems and ITAT decision in the case
2013. Hence, ground no. 2of the appellant is dis aforesaid action of the Ld.CIT(A), on of the Ld. CIT(A), the Ld. AR fo he background facts leading to the tween the assessee and M/s JSK & M hat, the assessee had two promoter
Shri Rajendra Prasad Khaitan who h the assessee company respectively rs held 100% stake in the compan uted the assessee company’s prod ng to him, during the relevant year ver the distribution networks in certa were already operating. Having reg etwork of remaining areas would expertise and access to company mutually agreed to enter into a f which M/s JSK & M/s RAL would certain areas, which was defined a etain the distribution business for r

4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd on-complete price in the ion claim of n Delhi High e of Gujarat missed.”
the assessee is or the assessee impugned non-
M/s RAL. It was r directors, Shri held 9.95% and y. He submitted nies M/s JSK &
ucts in various r, the assessee ain areas where ard to the fact continue under y’s confidential a non-compete d give up their as ‘Discontinued remaining areas known as ‘Continuing T
RAL would abstain fro specified period in the assessee agreed to pay fee of Rs.2,37,07,960/
compete fee didn’t a therefore revenue in n relied upon by the low capital in nature was decision of Hon’ble Mad
Heard both the pa disallowance made on t non-compete fees, we genuineness of the imp
ITA Nos. 1404
(AYs 2
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Territories’. It was also agreed that om carrying out any distribution
‘Discontinued Territories’ and for y lump sum consideration by way o
/-. According to Ld. AR, the pay lter the assessee’s capital struc nature. He further submitted that er authorities to treat the impugne distinguishable and instead, he re dras High Court in the case of M/
T (407 ITR 674) wherein the no as revenue expenditure. Alternative fact that both the lower authoritie re of acquisition of valuable comm definition of ‘asset’ as set out in S the assessee ought to be allowed d the Ld. CIT, DR supported the ord arties, and before we enter in to th he claim of expenditure made towa note that AO/Ld CIT(A) has not pugned payment made to two prom

4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd
M/s JSK & M/s n activities for r doing so, the of non-compete yment of non- cture and was t the decisions ed payment as elied upon the /s.HatsunAgro on-compete fee ely, the Ld. AR es had held the mercial/business
Section 2(11) of depreciation on er of the lower he merits of the rds payment of questioned the moters concerns

M/s JSK & M/s RALand t confined to the impugne of this ground, we not business of manufactur
Kunal K Jiwarajkaand S
9.95% & 9.12% of equ been brought to our assessee were being dis wholly owned and contr
Prasad Khaitan. As no assessee intended to un had thus proposed to distribute their manufa already established dist access to confidential in into a non-compete ag essentially gave up the for a specified period t carrying on the busines areas. The relevant te examined and it is ob consideration to acqui
ITA Nos. 1404
(AYs 2
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therefore, our adjudication of the gr ed actions of AO/Ld CIT(A). Comin e that, the assessee company is e re and distribution of batteries, pro
Shri Rajendra Prasad Khaitan, both uity in the assessee company resp notice that, the batteries manufa stributed by M/s JSK & M/s RAL, bo rolled by Shri Kunal K Jiwarajkaand oted from the material placed o ndertake the distribution activity als venture into specified locations wh ctured batteries. Since M/s JSK &
tribution players, having significant nformation, the assessee, is noted t greement in terms of which, M/s J ir distribution activity rights in the to the assessee, and also agreed ss of distribution of batteries in the erms of the non-compete agreeme bserved that the assessee had pa ire valuable commercial right viz

4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd rounds raised is ng to the merits engaged in the omoted by Shri h of whom held ectively. It has actured by the oth of which are d Shri Rajendra on record, the so by itself and herein it would
M/s RAL were t expertise and to have entered
JSK & M/s RAL specified areas to refrain from e said specified ent have been aid a lumpsum z., distribution right/network in specifie time abstaining them to so as to eliminate comp specified period in the c the AO that, by paymen valuable commercial &
company and therefore this, we gainfully refer the case of Tecumse wherein it was held t nature. The observatio present case are as follo
128. Ld. Counsel the decision in th grounds that in carry on its busin the area, but in t and what the ass one party, name manufacturing re cannot be accep acquire monopoly this regard can
Supreme Court fr
(supra) where it made to ward o constitute capital
"Although w business to the object o eliminating
ITA Nos. 1404
(AYs 2
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ed areas from M/s JSK & M/s RAL a o conduct the same business activi petition and obtain an enduring ben course of business. On these facts, nt of non-compete fee, the assesse business rights resulting in enduring the impugned payment was capita to the decision of Special Bench of h India Pvt Ltd Vs Addl. CIT hat payment of non-compete fee ons of this Tribunal relevant to th ows:- appearing on behalf of the assessee has e case of Assam Bengal Cement Co. Ltd. (s that case the right acquired by the asse ness unfettered by any competition from ou the case of the assessee there were severa sessee had got only the non-compete agr ly, "Whirlpool India" from which it had p elated facilities. This proposition of the a pted as it is not necessary that the asse y rights while warding off the competition.
be made to the following observations rom the decision in the case of Coal Shipm was observed that even in a case where off competition in business to a rival d expenditure :—
we agree that payment made to ward off c o a rival dealer would constitute capital e of making that payment is to derive an a the competition over some length of tim

4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd nd at the same ity in that area nefit across the we agree with ee had acquired g benefit to the l in nature. For this Tribunal in (127 ITD 1) es is capital in he facts of the distinguished supra) on the essee was to utsider within l competitors reement from urchased the assessee also essee should
Reference in s of Hon'ble ment (P.) Ltd.
e payment is dealer would ompetition in expenditure if advantage by me, the same result would the advanta
How long th to constitu circumstanc
129. According t competition in b expenditure and t non-compete fee
…
131. With these crores claimed by dated 10-7-1997
be granted to th decided against t
5.7
Applying the ratio present case, it is note between the assessee
Schedule 1 to the agree
"Restricted Period"
continue as follows
1.19.1, Till the time in the JSK Continue
1.19.2 In the eve wholesale dealer i duress from the Implementation Da
1.19.3 In the ev dealership of the U the date of such dis
……
"Restricted Period"
continue as follows
ITA Nos. 1404
(AYs 2
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d not follow if there is no certainty of the age and the same can be put to an end he period of contemplated advantage shoul ute enduring benefit would depend ces and the facts of each individual case."
o above observations it can be seen that business even to a rival dealer will cons to hold them capital expenditure it is not ne is paid to create monopoly rights.
observations we hold that the expenditure y the assessee in pursuance of non-compet are capital expenditure, the deduction of e assessee as revenue expenditure. The m he assessee and in favour of the revenue.
o decidendi laid down in the decision ed that the tenure of the non-comp and M/s JSK & M/s RAL has be ement, which is extracted below:-
" shall commence from the Implementation D
:
e undertaking Parties continue as authorised wh ed Territory ent Undertaking Pai-ties discontinue to act n the JSK Continued Territory on its own a Company, then till the period of 2 year ate'; vent the Company discontinues the authoris
Undertaking Parties in the JSK Continued Territ scontinuation".
" shall commence from the Implementation D
:

4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd e duration of at any time.
ld be in order upon the t warding off stitute capital ecessary that e of Rs. 2.65
te agreement which cannot main issue is n (supra) to the pete agreement een defined in Date and shall holesale dealer as authorised accord without rs from the sed wholesale ory then up to Date and shall 1.20.1 till the time undertaking partie continued Territory
1.20.1.1 In the eve
Company on his ow time the Undertaki
Continued Territory
1.20.1.2 In the e wholesale dealer i duress from the C managing director o
1.20,1.3 In the e
Company on his ow
Parties discontinue territory on its own of 2 years from the 1.20.2 In the ev dealership of the U
RPK as joint mana removal or disconti
5.8
From the above i specifically defined in t the period of five years case of Assam Benga
(SC) wherein their Lord providing an enduring a that the payment was therefore, the ratio laid
(supra) would be applica
5.9
The decision of H upon by the assessee
ITA Nos. 1404
(AYs 2
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RPK continues as the managing director of the es continue as authorized wholesale dealer
; ent Undertaking RPK resigns as joint managing wn accord without duress from the Company, ng Parties continue as authorised wholesale dea y, vent Undertaking Parties discontinue to act n the RAL Continued Territory on its own a Company, then till such time RPK continues of the Company; event RPK resigns as the joint Managing D wn accord without duress from the Company an to act as authorised wholesale dealer in the n accord without duress from the Company, then e Implementation date; vent the Company discontinued the authoris ndertaking Parties in the RAL Continued Territor aging director of the Company then up to the nuation.
t is noted, the period of non-comp the agreement and that, it may ve as stipulated by the Hon’ble Suprem al Cement Co. Ltd. v. CIT [195
4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd e company and r in the RAL director of the then till such aler in the RAL as authorized accord without s as the joint
Director of the nd Undertaking
RAL Continued n till the period sed wholesale ry OR removes e date of such pete fees is not ery well exceed me Court in the 5] 27 ITR 34
of five years as ctive of the fact onsidered view e Special Bench e.
(supra) relied facts as in this judgment, the non-com were leaving the comp their competitors. In t assessee has specificall paid to Shri Kunal K Jiw has been paid to comp distribution of batterie acquisition of their distr with their agreement t specified areas.
5.10 Moreover, we fi
High Court in the case taxmann.com 120) to non-compete fees to Hon’ble juri ictional M case of CIT Vs Areva dated 25.03.2021 w acquisition of business be capital in nature.
5.11 In view of the ab lower authorities to the ITA Nos. 1404
(AYs 2
M/
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mpete fees was paid to the employee any, so as to ensure that they did the present case however, the L y pointed out that, the non-compet warajkaand Shri Rajendra Prasad Kh panies, M/s JSK & M/s RAL who we es and that the payment made ribution rights/network in specified to abstain for operating their bus nd the decision of the Hon’ble juri e of Pentasoft Technologies Ltd o be relevant whereinon similar fact be capital in nature. We further
Madras High Court in their latest ju a T & D India Ltd [TS-231-HC wherein also the non-compete rights from two running companies ove decisions (supra), we uphold t e extent holding the payment of non

4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd e-directors who dn’t join any of Ld. AR for the te fees was not haitan. Rather it ere engaged in e was towards locations along siness in those dictional Madras
Vs DCIT (41
ts had held the note that the udgment in the C-2021(MAD)]
fees paid for s was upheld to he order of the n-compete fees to be in the nature of allowed as revenue expe
5.12 Having held so ab the assessee seeking a is observed that both th payment of non-comp
‘business or commercia within the definition of the Act and therefore entitled to depreciation reasoning given by the viz., that the rights acq marketable or transfera ascertain whether it res of the Act. Further, we
Court in the cases of P
D India Ltd(supra) ha the non-compete fees commercial rights of en
AO to allow depreciation
This ground is therefore
ITA Nos. 1404
(AYs 2
M/
::17 ::

capital outlay and therefore, the s enditure u/s 37(1) of the Act.
bove, we now come to the alternat llowance of depreciation on the imp he lower authorities have admittedl pete fees amounted to acquisitio l rights’ and accordingly, we find th
‘intangible asset’ as set out in Sect in our considered view, the assess thereon u/s 32 of the Act. Accord lower authorities to deny the claim quired upon payment of non-compe able, was of neither any relevance sulted in creation of ‘intangible asset e find that, the Hon’ble juri iction entasoft Technologies Ltd (supr ave also held that depreciation is to as it results in creation of valuab nduring nature. Following the same n on the non-compete fees u/s 32(1
e partly allowed.

4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd ame cannot be te argument of pugned sum. It ly held that the on of valuable at, these rights tion 2(11)(b) of see was legally ding to us, the of depreciation ete fee was not nor decisive to ts’ u/s 2(11)(b) al Madras High ra)&Areva T &
o be allowed on ble business or e, we direct the 1)(ii) of the Act.

is noted to be against the Ld. C of the AO disallowing the d d on solar power plant. The facts a ssee had claimed to have installed
1MW at Tada having value of Rs.1, was put to use on the same date, erefore the assessee had claimed d d asset being Rs.78,03,958/-. Th tion claim by observing that the as olar power generation with support ties, etc., to prove that the asset w
T(A) upheld the order of the AO.
eal before us.
arties. The Ld. AR has brought to ou ctricity Department placed at Page 5
that the electricity authority hasce was installed and synchronized on 3
r attention to the energy meter age 5 & 6 of the paper book and s erated 4050 units from 8.00 am t supplied to M/s Deccan Hospital, an r attention to the invoice raised on 4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd
CIT(A)’s action depreciation of s noted by the a Solar Power
95,09,645/- on which was less depreciation @
e AO however ssessee has not ting documents was put to use.
Aggrieved, the ur attention the 5 of paper book ertified that the 1.03.2016. The reading as on showed us that, to 3.00 pm on nd in support of 31.03.2016 for supply of 4050 units at therefore, the certifica reading details, invoice power plant was put to had rightly claimed dep find that these details authorities. Hence, in fit back to the AO for t furnished by the asses making the claim for A depreciation on the sol say, the AO shall pass assessee an opportunity statistical purposes.
7. Overall, therefo
No.1404/Chny/2023
8. We now take up
2016-17. Ground No. 1
does not require any sp
9. Ground No. 2 re
Rs.20,80,422/- claimed
ITA Nos. 1404
(AYs 2
M/
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the rate of Rs.6 per unit. According ate given by the electricity depar raised on customer clearly showed o use on 31.03.2016 and therefor reciation thereon of Rs.78,03,958/-
& evidences were not available be tness of the matters, we set aside t the purpose of verifying these d ssee and if the same is found to b
AY 2015-16, then AO to consider ar power plant in accordance to la s a speaking order in this regard y for hearing. This ground is theref re, the appeal of the asses is partly allowed.
the appeal in ITA No.1405/Chny
1 is noted to be general in nature a ecific adjudication.
lates to the disallowance of weighte d u/s 35(2AB) of the Act in r

4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd g to the Ld. AR rtment, energy d that the solar e the assessee
. However, we efore the lower his issue afresh ocuments now be in order for and allow the aw. Needless to after allowing fore allowed for ssee in ITA y/2023 for AY and is therefore ed deduction of elation to the expenditure incurred at from the DSIR. After that the issue involved assessee’s appeal in AY
2015-16, and taking
DSIRapproval in Form
18.07.2012, before us fair-play, we set aside assessee met the two assessee is directed to same for AY 2016-17
accordance to law afte allowed for statistical pu
10. Ground No. 3
Rs.4,91,70,411/- paid submissions, it is observ to the Ground No. 2 o conclusion drawn in A authorities disallowing t but we allow the altern grant depreciation on t therefore partly allowed
ITA Nos. 1404
(AYs 2
M/
::20 ::

t the approved R&D facility for wan r considering the rival submissions, in this ground is similar to the G
Y 2015-16.Following our conclusion note that since the assessee
3CM vide letter F.No.TU/IV-R-D/7
for the first time, for the interest this issue back to AO to examin o conditions as stated at para 4. produce relevant documents to s
. And the AO to pass order on r hearing the assessee. This grou urposes.
relates to disallowance of non-co to JSK & RAL. After conside ved that the issue involved in this g of assessee’s appeal in AY 2015-16
.Y. 2015-16, we uphold the orde the impugned sum holding it to be c nate claim of the assessee and di the same u/s 32(1)(ii) of the Act.
d.

4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd nt of Form 3CL
, it is observed round No. 2 of n drawn in A.Y.
produced the 43/2012 dated of justice and ne whether the 2 (supra) and ubstantiate the n this issue in nd is therefore ompete fees of ering the rival round is similar
6.Following our r of the lower capital in nature rect the AO to This ground is 11. Overall, therefo
No.1405/Chny/2023
12. In the result, both

Order pronounced (मनोज कुमार अवाल
(MANOJ KUMAR AGGA
लेखासदय/ACCOUNTANT
चेई/Chennai,
दनांक/Dated: 19th March,
JPV, Sr.PS
आदेशक ितिलिपअेिषत/Copy

ITA Nos. 1404
(AYs 2
M/
::21 ::

re, the appeal of the asses is partly allowed.
h the appeals of the assessee are pa d on the 19th day of March, 2025, in ल)
ARWAL)
MEMBER (एबी टी.
(ABY T. VA
याियकसदय/JUDI
2025. to:
nai / Madurai / Salem / Coimbatore.

4 & 1405/Chny/2024
2015-16 & 2016-17)
/s. Indo National Ltd ssee in ITA artly allowed.
Chennai.
/-
वक
)
ARKEY)
CIAL MEMBER