Section 2(42C) of the Income Tax Act
The decision most relied on for Section 2(42C) is Asianet Communications v. CIT (96 Taxmann.com 399), cited in 34 of the 57 judgments on BharatTax that turn on this section.
Leading authorities on Section 2(42C)
A non-compete fee paid as part of an agreement to prevent competition or induce employees to stay is to be treated as a revenue expenditure.
Benefit or income foregone, such as a lesser amount of share premium received on share issuance, cannot be considered an expenditure under Section 37 of the Income Tax Act as it does not represent an actual loss or incurred liability.
Addition should not be made when tax authorities fail to conduct inquiries with TDS deductors regarding discrepancies between Form 26AS and books of account, despite having the information and opportunity. Disallowance of expenses is arbitrary and against the rule of law if made without rejecting books of account or identifying specific discrepancies.
Depreciation is allowable on goodwill, even if it's considered an intangible asset representing future profits, following the Supreme Court's decision in CIT v. SMIFS Securities Ltd.
Expenditure incurred for acquiring a non-compete right is capital in nature and eligible for depreciation under section 32(1)(ii) of the Income Tax Act as it constitutes an intangible asset.
Succession to business requires the successor to take over the whole or substantially the whole of the predecessor's business and continue it. A successor to only a part of the business, resulting from disintegration, is not considered a successor to the original business.
