SAMKEET ARYA HOMES LLP,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-3(3)(5), AHMEDABAD

ITA 249/AHD/2024Status: DisposedITAT Ahmedabad16 July 2024AY 2018-19Bench: Ms. SUCHITRA KAMBLE (Judicial Member), SHRI MAKARAND VASANT MAHADEOKAR (Accountant Member)7 pages
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What did the Tribunal hold?

The Tribunal held that the non-compete fee paid to the retiring partner was a revenue expenditure. It reasoned that the payment was to protect the assessee's profit-earning apparatus and that the revenue did not suffer any loss of tax.

What were the facts?

The assessee paid Rs. 38,00,000/- as non-compete fees to a retiring partner. The Assessing Officer disallowed this as a capital expenditure, and the CIT(A) upheld this decision. The assessee argued it was a revenue expenditure to protect its profit-earning apparatus.

What were the issues?

Whether the non-compete fee paid to a retiring partner is a capital or revenue expenditure. Whether such expenditure is incurred for the purpose of business and impacts the profit-earning apparatus.

Which sections of the Income-tax Act were involved?

Section 37

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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH, AHMEDABAD

Before: Ms. SUCHITRA KAMBLE & SHRI MAKARAND VASANT MAHADEOKAR

For Appellant: Ms. Shrunjal Shah, AR
For Respondent: Shri N.J. Vyas, Sr. DR
Hearing: 16.05.2024Pronounced: 16.07.2024

PER SUCHITRA KAMBLE: This appeal is filed by the assessee against order dated 27.12.2023 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2018-19. 2. The assessee has raised the following grounds of appeal :-

“1) The Ld. CIT(A) has erred in law and on facts by considering the non- compete fees amounting to Rs.38,00,000/- to be a capital expenditure without considering the nature of the expenditure.

2) The Ld. CIT(A) has erred in law and on facts by holding that the non- compete fees gives enduring benefit to the Appellant even when looking at the terms of

The order continues below.

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