Itta/19/2014 Of The Commissionedr Of Income Tax (Central) v. M/S. Lyka Hetero Health Care

IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH ATHYDERABAD THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTISENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR ITTA No. 19 OF 2014 DATE: 04.02.2014 Between: The Commissioner of Income Tax (Central),Hyderabad. … Appellant And M/s. Lyka Hetero Health Care,Hyderabad. … Respondent This Court made the following: THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTAANDTHE HON’BLE SRI JUSTICE SANJAY KUMAR ITTA No. 19 of 2014 JUDGMENT:(Per the Hon’ble The Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is sought to be preferred and admitted on the following suggested question of law. “Whether on the facts and in the circumstances of thecase, ITAT was correct in allowing the expenditure on non-compete fee without appreciating the fact that the assesseeobtained enduring benefit in the form of non-competition?” We have heard Mr. Prasad, learned counsel for the appellant,and gone through the impugned judgment and order of the learnedTribunal. It appears that the expenditure incurred on account of paymentof non-compete fee to the rivals is stated to be business one. But, thecontention raised is that the same is capital expenditure, as it has got anenduring benefit. It appears that the learned Tribunal has relied on thedecisions of the Delhi High Court as well as the Madras High Court,which have followed the decision of the Supreme Court. Therefore, ithas been settled that this sort of expenditure is always businessexpenditure and not capital one. Thus, there is no scope for decidingafresh by this Court. The object of payment of this kind of expenditure isto eliminate the rival so that without any competition the assessee cancarry on business and thereby earn greater profit and this phenomenonof earning greater profit, as described by Mr. Prasad, to be an enduring benefit. We are of the view that logically it is not possible since becauseof elimination, the profit will not be ensured automatically for businessactivities. Earning profit on business acitivity is always uncertain anddepends upon demand and supply. If there is no demand, no businessand consequently there is no question of earning profit. Enduring benefit,in our view, would be if the same is derived irrespective of any situationand circumstance. The appeal is therefore dismissed. No costs. ___________________ K.J. SENGUPTA, CJ ___________________ SANJAY KUMAR, J Date: 04.02.2014ES