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“non-compete fee”

Business IncomeSection 28(va)Section 28(va)164 judgments

The decision most relied on for non-compete fee is Lord Radcliffe in Commissioner of Taxes v. Nchanga Consolidated Copper Mines Ltd. (58 ITR 241), cited in 69 judgments on BharatTax.

Leading authorities on non-compete fee

Lord Radcliffe in Commissioner of Taxes v. Nchanga Consolidated Copper Mines Ltd.
58 ITR 241 · 1965 · Reported
69
citing judgments

The test of enduring benefit for classifying expenditure as capital or revenue is not absolute; expenditure incurred for an enduring advantage may nonetheless be on revenue account, as the test can break down depending on the facts.

Champion Engineering Works Ltd. v. CIT (1971) 81 ITR 273 (Bom), CIT v. Bowrisankara Stemp Ferry Co.
165 ITR 63 · 1987 · High Court
66
citing judgments

The case is cited for the principle that when a payment is made for a non-compete agreement which is part of a larger business transfer, the characterisation of the payment depends on whether it is for the enduring benefit of the business or for the loss of potential profits.

Guffic Chem (P.) Ltd. v. CIT
332 ITR 602 · 2011 · Supreme Court
66
citing judgments

Compensation received for a non-compete covenant or for not carrying on a specific business activity is a capital receipt and not liable to tax as business income.

Commissioner of Income Tax v. Coal Shipment Ltd.
82 ITR 902 · 1971 · Supreme Court
59
citing judgments

Payments for non-compete fees or restrictive covenants are revenue expenditure if they are for a limited or uncertain duration and do not confer an enduring advantage to the assessee. The classification as revenue or capital depends on the specific facts and circumstances of each case.

Rohitasava Chand v. CIT
306 ITR 242 · 2008 · High Court
59
citing judgments

Receipt of a non-compete fee, even if it does not alter the assessee's business structure, impairs the carrying on of their activity, constituting a loss of a source of income.

Pentasoft Technologies Ltd. v. DCIT
41 Taxmann.com 120 · 2014 · High Court
58
citing judgments

A non-compete fee paid as part of a business acquisition or transaction constitutes an intangible asset, eligible for depreciation under Section 32(1)(ii) of the Income-tax Act.

Alembic Chemical Works (supra), Commissioner of Income Tax v. Madras Auto Services (supra) and CIT vs. HMT Limited
203 ITR 820 · 1993 · High Court
55
citing judgments

Expenditure incurred for the elimination of business competition, such as non-compete fees, is classified as either revenue or capital expenditure based on whether it creates an enduring benefit for the assessee's business.

Sharp Business System v. CIT III
27 Taxmann.com 50 · 2012 · High Court
53
citing judgments

A non-compete fee, being a capital expenditure, is not allowable as a deduction from income and does not qualify for depreciation under Section 32(1)(ii) of the Income-tax Act, 1961.

Judgments citing non-compete fee

Addl. CIT, Special Range- 4, New Delhi vs. Hindustan Coca-Cola Beverages Pvt. Ltd., New Delhi

In the result, appeal is partly allowed for statistical

ITA 1124/DEL/2018[2004-05]Status: DisposedITAT Delhi07 Jun 2023AY 2004-05

Bench: Shri Saktijit Dey & Shri M. Balaganesh

Section 143(3)Section 271(1)(c)

deciding the appeals, learned Commissioner (Appeals) granted relief to the assessee by deleting certain additions completely. Whereas, he partly sustained the disallowance of non-compete fee claimed as revenue expenses. However, he upheld the disallowance of depreciation on acquisition of bottlers list and disallowance of processing fees ... bottlers list and disallowances of processing fees. However, the Tribunal upheld the decision of learned Commissioner (Appeals) with regard to disallowance of non-compete fees by following its earlier decisions in assessee’s own case. 4. Be that as it may, based on the additions sustained by learned Commissioner (Appeals

DCIT, New Delhi vs. M/S Hindustan Coca Cola Beverages Pvt. Ltd., New Delhi

In the result, appeal is partly allowed for statistical

ITA 4589/DEL/2015[2009-10]Status: DisposedITAT Delhi07 Jun 2023AY 2009-10

Bench: Shri Saktijit Dey & Shri M. Balaganesh

Section 143(3)Section 271(1)(c)

deciding the appeals, learned Commissioner (Appeals) granted relief to the assessee by deleting certain additions completely. Whereas, he partly sustained the disallowance of non-compete fee claimed as revenue expenses. However, he upheld the disallowance of depreciation on acquisition of bottlers list and disallowance of processing fees ... bottlers list and disallowances of processing fees. However, the Tribunal upheld the decision of learned Commissioner (Appeals) with regard to disallowance of non-compete fees by following its earlier decisions in assessee’s own case. 4. Be that as it may, based on the additions sustained by learned Commissioner (Appeals

DCIT, New Delhi vs. M/S Hindustan Coca Cola Beverages Pvt. Ltd., New Delhi

In the result, appeal is partly allowed for statistical

ITA 4588/DEL/2015[2008-09]Status: DisposedITAT Delhi07 Jun 2023AY 2008-09

Bench: Shri Saktijit Dey & Shri M. Balaganesh

Section 143(3)Section 271(1)(c)

deciding the appeals, learned Commissioner (Appeals) granted relief to the assessee by deleting certain additions completely. Whereas, he partly sustained the disallowance of non-compete fee claimed as revenue expenses. However, he upheld the disallowance of depreciation on acquisition of bottlers list and disallowance of processing fees ... bottlers list and disallowances of processing fees. However, the Tribunal upheld the decision of learned Commissioner (Appeals) with regard to disallowance of non-compete fees by following its earlier decisions in assessee’s own case. 4. Be that as it may, based on the additions sustained by learned Commissioner (Appeals

Hindustan Coca-Cola Beverages Pvt. Ltd., Gurgaon vs. Deputy Commissioner of Income-Tax, New Delhi

In the result, appeal is partly allowed for statistical

ITA 3449/DEL/2015[2009-10]Status: DisposedITAT Delhi07 Jun 2023AY 2009-10

Bench: Shri Saktijit Dey & Shri M. Balaganesh

Section 143(3)Section 271(1)(c)

deciding the appeals, learned Commissioner (Appeals) granted relief to the assessee by deleting certain additions completely. Whereas, he partly sustained the disallowance of non-compete fee claimed as revenue expenses. However, he upheld the disallowance of depreciation on acquisition of bottlers list and disallowance of processing fees ... bottlers list and disallowances of processing fees. However, the Tribunal upheld the decision of learned Commissioner (Appeals) with regard to disallowance of non-compete fees by following its earlier decisions in assessee’s own case. 4. Be that as it may, based on the additions sustained by learned Commissioner (Appeals

Hindustan Coca-Cola Beverages Pvt. Ltd., Gurgaon vs. Deputy Commissioner of Income-Tax, New Delhi

In the result, appeal is partly allowed for statistical

ITA 3448/DEL/2015[2008-09]Status: DisposedITAT Delhi07 Jun 2023AY 2008-09

Bench: Shri Saktijit Dey & Shri M. Balaganesh

Section 143(3)Section 271(1)(c)

deciding the appeals, learned Commissioner (Appeals) granted relief to the assessee by deleting certain additions completely. Whereas, he partly sustained the disallowance of non-compete fee claimed as revenue expenses. However, he upheld the disallowance of depreciation on acquisition of bottlers list and disallowance of processing fees ... bottlers list and disallowances of processing fees. However, the Tribunal upheld the decision of learned Commissioner (Appeals) with regard to disallowance of non-compete fees by following its earlier decisions in assessee’s own case. 4. Be that as it may, based on the additions sustained by learned Commissioner (Appeals

Viraj Profiles Ltd., Mumbai vs. Dy CIT-CC-3(2), Mumbai

In the result, appeal filed by the assessee is allowed

ITA 775/MUM/2021[2013-14]Status: DisposedITAT Mumbai12 May 2023AY 2013-14

Bench: Shri Aby T. Varkey, Hon'Ble & Shri S. Rifaur Rahman, Hon'Ble

order accordingly. 48. With regard to Ground No. 10 which is in respect of deleting the disallowance of non-compete fee, on perusal of the record, we observe that assessee has also challenged the disallowance of non-compete fee ₹.18,50,00,000/-. The ground raised by the assessee ... circumstances of the appellant’s case and in law the Ld. CIT(A) erred in holding that the benefit of payment of non-compete fee amounting to Rs. 18,50,00,000/- made by the appellant would accrue over a period of seven years in-spite of treating the same

Board of Control for Cricket in India, Mumbai vs. DCIT Cent. Cir. 6(2), Mumbai

In the result, the appeal by the assessee is allowed

ITA 5493/MUM/2017[2016-17]Status: DisposedITAT Mumbai11 May 2023AY 2016-17

Bench: Shri G.S. Pannu & Shri Sandeep Singh Karhail

For Appellant: S/Shri P.J. Pardiwala a/wFor Respondent: Ms. Surabhi Sharma
Section 195Section 248Section 253

learned CIT(A) vide impugned order held that CSA received compensation by way of annual price fees and non-compete fees from the assessee. Further, the situs of the entire cause of action arises in India as the head office of the assessee is in India; all the agreements were ... disputes, therefore, consideration received is in nature of capital receipt. It was further submitted that even if the payment is considered towards non-compete fees, the place where the non-compete clause would apply is outside India because if any tournament takes place in India the same would be organised

Board of Control for Cricket in India, Mumbai vs. DCIT Cent. Cir. 6(2), Mumbai

In the result, the appeal by the assessee is allowed

ITA 5492/MUM/2017[2016-17]Status: DisposedITAT Mumbai11 May 2023AY 2016-17

Bench: Shri G.S. Pannu & Shri Sandeep Singh Karhail

For Appellant: S/Shri P.J. Pardiwala a/wFor Respondent: Ms. Surabhi Sharma
Section 195Section 248Section 253

learned CIT(A) vide impugned order held that CSA received compensation by way of annual price fees and non-compete fees from the assessee. Further, the situs of the entire cause of action arises in India as the head office of the assessee is in India; all the agreements were ... disputes, therefore, consideration received is in nature of capital receipt. It was further submitted that even if the payment is considered towards non-compete fees, the place where the non-compete clause would apply is outside India because if any tournament takes place in India the same would be organised

DCIT-2(3), Mumbai vs. M/S. Zensar Technologies Ltd., Mumbai

In the result, the appeal is partly allowed

ITA 5653/MUM/2009[2004-05]Status: DisposedITAT Mumbai19 Apr 2023AY 2004-05

Bench: Amit Shukla () & Ms. Padmavathy S. ()

Section 10ASection 80Section 92

enumerated below: 2 ITA 5653/Mum/2009 M/s Zensar Technologies Ltd 1. The Ld.CIT(A) erred in deleting the disallowance of Rs.43.90.000/- by way of non-compete fees and holding that the expenditure incurred for non-compete fees should be allowed as revenue expenditure in full in the relevant assessment year without ... appreciating the fact that the assessee derived continued benefit over the agreement period in respect of the non-compete fees and hence, the relevant expenditure by way of non-compete fees should have been spread over the period of the benefit in view of the decision

DCIT, New Delhi vs. M/S. Hindustan Coca Cola Beverage Pvt. Ltd., New Delhi

In the result ground nos

ITA 3903/DEL/2015[2007-08]Status: DisposedITAT Delhi12 Apr 2023AY 2007-08

Bench: Sh. N.K.Billaiya & Sh. Anubhav Sharma

Section 143(2)Section 143(3)Section 40

being the first year of payment, the assessing officer disallowed the proportionate deduction on the ground that non-compete fee was capital expenditure, resulting in benefit of enduring nature, and therefore, not an allowable as revenue deduction. 5.1.1 Ld. CIT(A) had upheld the order

DCIT, New Delhi vs. M/S. Hindustan Coca Cola Beverage Pvt. Ltd., New Delhi

In the result ground nos

ITA 3902/DEL/2015[2006-07]Status: DisposedITAT Delhi12 Apr 2023AY 2006-07

Bench: Sh. N.K.Billaiya & Sh. Anubhav Sharma

Section 143(2)Section 143(3)Section 40

being the first year of payment, the assessing officer disallowed the proportionate deduction on the ground that non-compete fee was capital expenditure, resulting in benefit of enduring nature, and therefore, not an allowable as revenue deduction. 5.1.1 Ld. CIT(A) had upheld the order

Hindustan Coca-Cola Beverages Pvt. Ltd., Gurgaon vs. Deputy Commissioner of Income-Tax, New Delhi

In the result ground nos

ITA 2701/DEL/2015[2007-08]Status: DisposedITAT Delhi12 Apr 2023AY 2007-08

Bench: Sh. N.K.Billaiya & Sh. Anubhav Sharma

Section 143(2)Section 143(3)Section 40

being the first year of payment, the assessing officer disallowed the proportionate deduction on the ground that non-compete fee was capital expenditure, resulting in benefit of enduring nature, and therefore, not an allowable as revenue deduction. 5.1.1 Ld. CIT(A) had upheld the order

Hindustan Coca-Cola Beverages Pvt. Ltd., Gurgaon vs. Deputy Commissioner of Income-Tax, New Delhi

In the result ground nos

ITA 2700/DEL/2015[2006-07]Status: DisposedITAT Delhi12 Apr 2023AY 2006-07

Bench: Sh. N.K.Billaiya & Sh. Anubhav Sharma

Section 143(2)Section 143(3)Section 40

being the first year of payment, the assessing officer disallowed the proportionate deduction on the ground that non-compete fee was capital expenditure, resulting in benefit of enduring nature, and therefore, not an allowable as revenue deduction. 5.1.1 Ld. CIT(A) had upheld the order

Hindustan Coca-Cola Beverages Pvt. Ltd., Gurgaon vs. DCIT, New Delhi

In the result ground nos

ITA 6606/DEL/2014[2005-06]Status: DisposedITAT Delhi12 Apr 2023AY 2005-06

Bench: Sh. N.K.Billaiya & Sh. Anubhav Sharma

Section 143(2)Section 143(3)Section 40

being the first year of payment, the assessing officer disallowed the proportionate deduction on the ground that non-compete fee was capital expenditure, resulting in benefit of enduring nature, and therefore, not an allowable as revenue deduction. 5.1.1 Ld. CIT(A) had upheld the order

Hindustan Coca-Cola Beverages Pvt. Ltd., Gurgaon vs. DCIT, New Delhi

In the result ground nos

ITA 6605/DEL/2014[2004-05]Status: DisposedITAT Delhi12 Apr 2023AY 2004-05

Bench: Sh. N.K.Billaiya & Sh. Anubhav Sharma

Section 143(2)Section 143(3)Section 40

being the first year of payment, the assessing officer disallowed the proportionate deduction on the ground that non-compete fee was capital expenditure, resulting in benefit of enduring nature, and therefore, not an allowable as revenue deduction. 5.1.1 Ld. CIT(A) had upheld the order

Nalini Mahajan, Delhi vs. ACIT, Circle-61(1), New Delhi

In the result, this appeal of the assessee stands allowed

ITA 3130/DEL/2018[2014-15]Status: DisposedITAT Delhi06 Apr 2023AY 2014-15

Bench: Shri Shamim Yahya & Ms. Astha Chandra[Assessment Year: 2014-15]

Section 28Section 28(1)Section 55(2)

goodwill with any other person, was received in different years in the following manner: 6. As can be noticed from the above, the non-compete fees received for exclusive arrangement and not sharing goodwill was treated as capital receipt in AYs 2013-14 to 2016-17 which was accepted ... onwards), discussed in detail infra. Order of AO/CIT(A) 7. As regards the impugned AY 2014-15, the AO treated the aforesaid non-compete fee as benefit/perquisite under section 28(iv) of the Act, which was rejected and modified by the CIT(A) to be a normal professional receipt

Gramos Chemicals India P. Ltd, Mumbai vs. ACIT 15(1)(2), Mumbai

In the result, appeal filed by the assessee is dismissed

ITA 6283/MUM/2016[2012-13]Status: DisposedITAT Mumbai28 Dec 2022AY 2012-13
Section 28

asset with NIL cost Data of acquisition c. Distribution 75,00,000/- claimed exempt Networks & Rights d. Suppliers Contracts 75,00,000/- 4 Non-Compete Fees 50,00,000/- Offered as business Income u/s.28(va) TOTAL 7,25,00,000/- 3 M/s. Gramos Chemicals India Pvt. Ltd. 3. The nature

Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore vs. M/S. Wipro Ge Medical Systems Limited, Bangalore

In the result, the appeal filed by the assessee stands allowed for statistical purposes

ITA 1020/BANG/2007[2000-01]Status: DisposedITAT Bangalore30 Nov 2022AY 2000-01

Bench: Shri Chandra Poojari & Smt. Beena Pillaiassessment Year : 2000-01 M/S. Wipro Ge The Deputy Medical Systems Ltd., Commissioner Of Plot No. 4, Kadugodi Income Tax, Indl. Area, Central Circle – Sadaramangala, 1(3), Vs. Bangalore – 560 067. Bangalore. Pan: Aaacw1685G Appellant Respondent : Shri K.R. Pradeep & Assessee By Smt. Girija G.P., Advocates : Shri K.R. Narayana, Addl. Revenue By Cit-Dr Date Of Hearing : 21-10-2022 Date Of Pronouncement : 30-11-2022 Order Per Beena Pillaipresent Appeal Arises Out Of Remand By Hon'Ble Karnataka High Court In Ita No. 1058/2008 Vide Order Dated 02/12/2016 In An Appeal Filed By Revenue. 2. The Ld.Ar Submitted That Revenue Filed Appeal Before The Hon’Ble Karnataka High Court Against Order Dated 20/06/2008 Passed By This Tribunal On Following Issues. 1) Reduction In Claim Of Exemption Of Profits U/S. 10A. 2) Reduction In Claim U/S. 80Hhe.

For Respondent: Shri K.R. Pradeep &
Section 10ASection 80HSection 80I

exemption of profits u/s. 10A. 2) Reduction in claim u/s. 80HHE. Page 2 3) Reduction of claim u/s. 80IB 4) Disallowance of non-compete fee paid as a revenue expenditure 3. Hon’ble High Court while dealing with the above issues framed the following questions of law. “(i) Whether ... Ld.AR thus submitted that the only issue that is to be considered in the present remand proceeding, is in respect of disallowance of non-compete fee. Page 4 7. Now coming to the issue that has been remanded to this Tribunal, the brief facts that arises in respect

DCIT, Chennai vs. Ab Mauri India Private Limited, Chennai

ITA 3317/CHNY/2018[2012-13]Status: DisposedITAT Chennai23 Nov 2022AY 2012-13

Bench: Shri Mahavir Singh, Vice- & Dr. Dipak P. Ripoteआयकर आयकर अपील आयकर आयकर अपील अपील संसंसंसं. / It(Tp)A No’S.84 To 86/Chny/2018 अपील िनधा"रण िनधा"रण वष" िनधा"रण िनधा"रण वष" वष" / Assessment Years : 2010-11, 11- 12 & 12-13 वष" M/S.Ab Mauri India Pvt. Ltd., The Deputy Commissioner Plot No.218 & 219, Vs Of Income-Tax, Corporate Bommasandra Jigani Link Circle-1(1), Road, Bengaluru – 560 015. Chennai – 600 034. Pan: Aaeca 9923 H Appellant/ Assessee Respondent /Revenue आयकर अपील आयकर अपील संसंसंसं. / Ita No’S.3315 To 3317/Chny/2018 आयकर आयकर अपील अपील िनधा"रण िनधा"रण वष" िनधा"रण िनधा"रण वष" वष" / Assessment Years : 2010-11, 11- 12 & 12-13 वष" The Deputy Commissioner M/S.Ab Mauri India Pvt. Of Income-Tax, Corporate Vs Ltd., Circle-1(1), Plot No.218 & 219, Chennai – 600 034. Bommasandra Jigani Link Road, Bengaluru – 560 015. Pan: Aaeca 9923 H Appellant/ Revenue Respondent /Assessee

Section 92CSection 92C(3)

erred in providing relief to the assessee by holding that the appellant was entitled to depreciation on non-compete fee as an intangible asset under Section 32(l)(ii) of the Income Tax Act, 1961. 6. The Ld. CIT(A) has erred in not appreciating that non compete fee does ... assessee had claimed deprecation @ 25% for the non- compete fee paid. The AO held that no rights accrued to the company by paying non-compete fee and nature of non-compete fee is such it cannot be put to use or transfer to anybody upon consideration. Therefore, the AO held

DCIT, Chennai vs. Ab Mauri India Private Limited, Chennai

ITA 3316/CHNY/2018[2011-12]Status: DisposedITAT Chennai23 Nov 2022AY 2011-12

Bench: Shri Mahavir Singh, Vice- & Dr. Dipak P. Ripoteआयकर आयकर अपील आयकर आयकर अपील अपील संसंसंसं. / It(Tp)A No’S.84 To 86/Chny/2018 अपील िनधा"रण िनधा"रण वष" िनधा"रण िनधा"रण वष" वष" / Assessment Years : 2010-11, 11- 12 & 12-13 वष" M/S.Ab Mauri India Pvt. Ltd., The Deputy Commissioner Plot No.218 & 219, Vs Of Income-Tax, Corporate Bommasandra Jigani Link Circle-1(1), Road, Bengaluru – 560 015. Chennai – 600 034. Pan: Aaeca 9923 H Appellant/ Assessee Respondent /Revenue आयकर अपील आयकर अपील संसंसंसं. / Ita No’S.3315 To 3317/Chny/2018 आयकर आयकर अपील अपील िनधा"रण िनधा"रण वष" िनधा"रण िनधा"रण वष" वष" / Assessment Years : 2010-11, 11- 12 & 12-13 वष" The Deputy Commissioner M/S.Ab Mauri India Pvt. Of Income-Tax, Corporate Vs Ltd., Circle-1(1), Plot No.218 & 219, Chennai – 600 034. Bommasandra Jigani Link Road, Bengaluru – 560 015. Pan: Aaeca 9923 H Appellant/ Revenue Respondent /Assessee

Section 92CSection 92C(3)

erred in providing relief to the assessee by holding that the appellant was entitled to depreciation on non-compete fee as an intangible asset under Section 32(l)(ii) of the Income Tax Act, 1961. 6. The Ld. CIT(A) has erred in not appreciating that non compete fee does ... assessee had claimed deprecation @ 25% for the non- compete fee paid. The AO held that no rights accrued to the company by paying non-compete fee and nature of non-compete fee is such it cannot be put to use or transfer to anybody upon consideration. Therefore, the AO held