Gujarat Glass Private
Limited Vs. Asst. Commissioner of Income Tax (ITAT Mumbai, ITA No.
4842/Mum/2004, Date of Pronouncement: 05-04-2013
When we take into consideration DR’s
argument that in accordance with the decision of Delhi ITAT in the case
of Sharp Business System (supra), non compete fee is not eligible for
depreciation, we must accept that the order of the coordinate Bench is
not only very detailed and well speaking, we must say that the
coordinate Bench very logically explained the expression, ‘any other
business or commercial rights of similar nature’. When we read the
relevant portion of the provision, the initial part, i.e. knowhow,
patents, copyrights, trademarks, license, franchises, has been
disjointed by the conjunction ‘or. When we read the relevant clause, it
reads as knowhow, patents, copyrights, trademarks, licenses, franchises
or any other business or commercial rights of similar nature. The use of
the disjunction ‘or’ has a very relevant role, because, the legislature
accepts the difference and distinction of intangibles and rights. It is
because of this reason, various decision have placed the doctrine of
ejusdem generis to explain the genus. The legislature has used ‘or’ in
the provision for explaining the distinction of application of like
nature with that of the unlike nature, which is an accepted principle
i.e. doctrine of ejusdem generis. It is important to point out that even
when we read the Third Member decision in the case of Paper Products
Limited vs Add. CIT referred to in the original order of the ITAT, In
our view, taking note of the word ‘or’, used as a disjunction is
essential to carve out a meaningful genus.
The Senior Counsel argued at length,
whether such non compete right constitute is a right in rem or
otherwise, is a matter to be decided by an appropriate higher judicial
forum. In the instant proceedings, we cannot import the decision of
Hon’ble Supreme Court of India in the case of Smifs (supra), wherein the
Hon’ble Apex Court held that goodwill was an intangible asset and
eligible for depreciation. It is important to observe that the Hon’ble
Apex Court was seized with the issue of goodwill only.
The assessee does not satisfy, the
payment made to acquire non compete right, being an asset, as per the
second part of clause (ii) to section 32(1), and is, therefore, not
eligible for depreciation as per law.
We, therefore, sustain the order of the
CIT(A) on this issue and consequentially sustain the order of the AO,
wherein the AO had disallowed the depreciation, as claimed at Rs.
18,00,00,000/-, which, in our opinion is as per law.