M/s. Arkema Peroxides India Private Ltd., CHENNAI V. Addl.CIT, CHENNAI

ITA 2039/CHNY/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81239 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-10-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 09-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Business income; Depreciation; Business expenditure; Revenue expenditure; Capital expenditure
• Section: 80HHC; 80G; 32

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI . , . ! ! ! ! , ' ' ' ' # # # # BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER ./ I.T.A.NOS.2039, 2040 AND 2041/MDS/2012 ' ! $! / ASSESSMENT YEARS :2004-05, 2005-06 AND 2007-08 M/S. ARKEMA PEROXIDES INDIA PVT. LTD., 1 ST FLOOR, BALMER LAURIE HOUSE, 628, ANNA SALAI, TEYNAMPET, CHENNAI 18. [PAN: AAACE1713F] VS. THE ADDITIONAL COMMISSIONER OF INCOME TAX, COMPANY RANGE I, CHENNAI. ( %& %& %& %& /APPELLANT ) ( '(%& '(%& '(%& '(%& / RESPONDENT ) %& ) * / APPELLANT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE '(%& ) * / RESPONDENT BY : SHRI S. DAS GUPTA, JCIT ) + / DATE OF HEARING : 28.10.2014 ,$ ) + /DATE OF PRONOUNCEMENT : 30.10.2014 - - - - / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THESE THREE APPEALS FILED BY THE SAME ASSESSEE ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF THE COMMISSIONER OF INCOME T AX (APPEALS) III, CHENNAI, DATED 14.08.2012 AND 09.08.2012 RELEVANT T O THE ASSESSMENT YEARS 2004-05, 2005-06 AND 2007-08. 2. THE COMMON GROUND INVOLVED IN ALL THE APPEALS I S AS UNDER: 2. THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISA LLOWANCE OF THE CLAIM FOR DEPRECIATION ON NON-COMPETE FEES ON THE B ASIS THAT THE SAID RIGHT DOES NOT CONSTITUTE THE INTANGIBLE ASSETS. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .2039 2039 2039 2039- -- -2041 2041 2041 2041/M/ /M/ /M/ /M/1 11 12 22 2 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S IN THE BUSINESS OF MANUFACTURE AND SALE OF POLYMERIZATION INITIATORS A ND CROSS LINKING AGENTS. THE ASSESSEE HAS CLAIMED DEPRECIATION ON NON-COMPET ING FEES FOR THE ASSESSMENT YEAR 20004-05. THE ASSESSEE HAS CLAIMED THE VERY SAME DEPRECIATION FOR THE ASSESSMENT YEAR 2003-04 ALSO. IN THE ASSESSMENT YEAR 2003-04, THE ASSESSING OFFICER HAS DISALLOWED THE C LAIM ON NON-COMPETING FEES AND BASED ON THE ASSESSMENT ORDER IN 2003-04, FOR THE ASSESSMENT YEARS UNDER CONSIDERATION I.E. 2004-05, 2005-06 AND 2007-08 ALSO DISALLOWED THE CLAIM ON NON-COMPETING FEES. THE ASS ESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(APPEALS) IN RES PECT OF THE ORDER PASSED FOR THE ASSESSMENT YEAR 2003-04. THE LD. CIT(APPEAL S) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE ITAT AND THE ITAT HAS DISMISSED THE APPEAL FILE D BY THE ASSESSEE IN I.T.A. NO. 2212/MDS/2006 VIDE ORDER DATED 13.01.201 2 FOR THE ASSESSMENT YEAR 2003-04. THE LD. CIT(APPEALS), BY FOLLOWING TR IBUNALS DECISION FOR THE ASSESSMENT YEAR 2003-04 DISMISSED THE APPEALS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2004-05, 2005-06 AND 2007-08. 4. AGGRIEVED, THE ASSESSEE FILED APPEALS BEFORE TH E TRIBUNAL FOR THE ASSESSMENT YEARS 2004-05, 2005-06 AND 2007-08. AT T HE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE CARRIED THE MATTER IN APPEAL RELEVANT TO THE ASSESSMENT YEAR 20 03-04 BEFORE THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .2039 2039 2039 2039- -- -2041 2041 2041 2041/M/ /M/ /M/ /M/1 11 12 22 2 3 HONBLE JURISDICTIONAL HIGH COURT AND THE HONBLE J URISDICTIONAL HIGH COURT ADMITTED THE APPEAL. 5. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTE D THE ORDER PASSED BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 2003-04. 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE COMMON ISSUE OF ALLOWANCE OF DEPRECIATION ON NON-COMPLETE FEES INVOLVED IN THESE APPEALS WAS CONSIDERED BY THE ITAT IN I.T.A. NO. 2212/MDS/2006 DATED 13.01.2012 FOR THE ASSESSMENT YEAR 2003-04 AND DECIDED THE ISSUED AGAINST THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS U NDER: 11. WE FIND THAT IN THE INSTANT CASE IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD INCURRED EXPENDITURE OF RS. 3,62,85,000/- ON ACCOU NT OF NON-COMPETE FEE. THE ASSESSEES CLAIM FOR DEPRECIATION ON THE ABOVE EXPE NDITURE WAS DISALLOWED BY THE ASSESSING OFFICER AND SUCH DISALLOWANCE WAS CON FIRMED BY THE LD. CIT(A). THE REASONING GIVEN BY THE LD. CIT(A) IS STATED ABO VE IN THIS ORDER. WE FIND THAT THE ISSUE IN THE INSTANT APPEAL IS SQUARELY CO VERED BY THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF M/S SHAR P BUSINESS SYSTEMS [INDIA] LTD [SUPRA] WHEREIN IT HAS BEEN HELD AS UNDER: 11. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE MATERIAL AVAILABLE ON RECORD. IN THE CASE BEFORE US THERE IS NO DISPUTE THAT BEFORE FORMATION OF JOINT VENTURE BY L&T LTD. AND S HARP CORPORATION, JAPAN, L&T LTD. WAS ENGAGED IN THE BUSINESS OF DEVE LOPING, MANUFACTURING, MARKETING, DISTRIBUTING AND SELLING AMONG OTHER THINGS, VARIOUS ELECTRONIC EQUIPMENTS AND PRODUCTS IN INDIA AND HAD A WELL ESTABLISHED COUNTRY-WIDE SALES NETWORK. L&T LTD. BY ENTERING INTO AGREEMENT WITH THE ASSESSEE HAD UNDERTAKEN NOT TO S ET UP ANY UNDERTAKING OR ASSIST IN SETTING UP, UNDERTAKING AN Y BUSINESS IN INDIA OF SELLING/MARKETING AND TRADING OF ELECTRONIC OFFI CE PRODUCTS FOR A PERIOD OF 7 YEARS IN LIEU OF WHICH PAYMENT OF RS. 3 CRORES HAD BEEN RECEIVED. THE BUSINESS OF JOINT VENTURE IS OF IMPOR TING, MARKETING AND SELLING IN INDIA CERTAIN ELECTRIC AND ELECTRONIC OF FICE PRODUCTS. THOUGH, THE BUSINESS OF JOINT VENTURE I.E. SHARP BUSINESS S YSTEMS (INDIA) LTD. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .2039 2039 2039 2039- -- -2041 2041 2041 2041/M/ /M/ /M/ /M/1 11 12 22 2 4 APPEARS SIMILAR TO THAT OF L&T LTD. BUT PAYMENT OF RS. 3,00,00,000 HAS BEEN MADE IN LIEU OF THE LATTER, NOT SETTING UP UND ERTAKING/ASSISTING IN SETTING UP, UNDERTAKING ANY BUSINESS IN INDIA OF SE LLING, MARKETING AND TRADING OF ELECTRONIC OFFICE PRODUCTS FOR A PERIOD OF 7 YEARS. THERE IS NO DISPUTE ABOUT THE FACT THAT L&T LTD. WAS HAVING WELL ESTABLISHED COUNTRY-WIDE NETWORK IN DEVELOPING, MANUFACTURING, MARKETING, DISTRIBUTING AND SELLING VARIOUS ELECTRONIC EQUIPME NTS AND PRODUCTS IN INDIA. THE JOINT VENTURE WOULD HAVE FACED TOUGH COM PETITION IF L&T LTD. HAD SET UP ANY UNDERTAKING OR ASSISTED IN SETT ING UP, UNDERTAKING ANY BUSINESS IN INDIA OF SELLING/MARKETING AND TRAD ING OF ELECTRONIC OFFICE PRODUCTS. TO WARD OFF THAT COMPETITION, THE ASSESSEE COMPANY HAD PAID RS. 3 CRORES TO L&T LTD. THEREFORE, BY PAY MENT OF NON- COMPETE FEE TO L&T LTD. THE COMPETITION FOR A PERIO D OF 7 YEARS HAS BEEN ELIMINATED. THE PERIOD OF 7 YEARS IS QUITE LON G DURING WHICH ANY NEW COMPANY CAN ESTABLISH ITS REPUTATION AND A REAS ONABLE MARKET SHARE WOULD HAVE BEEN ACQUIRED. THEREFORE, THE PAYM ENT MADE BY THE ASSESSEE TO L&T LTD. IS NOT TO INCREASE THE PROFITA BILITY, BUT TO ESTABLISH ITSELF IN THE MARKET AND ACQUIRE MARKET SHARE. BY K EEPING AWAY L&T LTD. FROM THE SAME BUSINESS, THE ASSESSEE HAD VISUA LIZED TO ACQUIRE A GOOD MARKET SHARE. THE CONTENTION OF THE ASSESSEE T HAT AFTER A PERIOD OF 7 YEARS L&T LTD. WOULD HAVE ENTERED IN THE SAME TRADE AND, THEREFORE, THE EXPENDITURE SHOULD BE TREATED AS REV ENUE IN NATURE, WE ARE NOT IN AGREEMENT WITH THIS ARGUMENTS OF THE ASS ESSEE. THE PAYMENT HAS BEEN MADE TO WARD OFF THE COMPETITION FOR A PER IOD OF 7 YEARS DURING WHICH ANY COMPANY COULD HAVE SET UP ITS PROD UCTS AND REPUTATION IN THE MARKET. THEREFORE, THE EXPENDITUR E CANNOT BE TREATED TO HAVE BEEN INCURRED IN REVENUE FIELD. 12. THE NEXT CONTENTION OF THE LEARNED AUTHORISED R EPRESENTATIVE OF THE ASSESSEE THAT THE PAYMENT OF NON-COMPETE FEE HAS NO T CREATED ANY ASSET OR ADVANTAGE IN THE CAPITAL FIELD AND, THEREFORE, I T SHOULD BE REVENUE IN NATURE. THE DECISION OF HONBLE SUPREME COURT IN TH E CASE OF MADRAS AUTO SERVICES (P) LTD. (SUPRA) CANNOT BE APPLIED TO THE FACTS OF THE CASE BEFORE US. IN THAT CASE THE ASSESSEE HAD TAKEN THE PREMISES FOR 39 YEARS ON LEASE AND INVESTED IN THE CONSTRUCTION OF BUILDI NG. THE BUILDING DID NOT BELONG TO THE ASSESSEE AND THE ASSESSEE WAS PAY ING NOMINAL RENT FOR A PERIOD OF 39 YEARS. UNDER THESE CIRCUMSTANCES , HONBLE SUPREME COURT HELD THAT NO ASSET OF ENDURING NATURE WAS CRE ATED AND, THEREFORE, THE EXPENDITURE WAS TO BE TREATED AS REVENUE IN NAT URE. THE RATIO OF THIS DECISION IS OF NO AVAIL IN THE CASES OF NON-CO MPETE PAYMENTS AS IN THAT CASE THE INCURRING OF EXPENSES DID NOT CREATE ANY ASSET AS AGAINST THAT IT HAS BEEN CLEARLY HELD BY THE HONBLE SUPREM E COURT IN THE CASE OF ASSAM BENGAL CEMENT CO. LTD. VS. CIT (1955) 27 I TR 34 (SC) THAT THE PROTECTION FEE PAID BY THE ASSESSEE HAD ACQUIRE D AN ADVANTAGE OF AN ENDURING NATURE WHICH ENSURED FOR THE BENEFIT OF THE WHOLE OF THE BUSINESS. THE DECISION OF HONBLE GUJARAT HIGH COUR T RELIED UPON BY I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .2039 2039 2039 2039- -- -2041 2041 2041 2041/M/ /M/ /M/ /M/1 11 12 22 2 5 ASSESSEE IS NOT APPLICABLE TO THE FACTS OF THE CASE AS IN THAT CASE THE ASSESSEE PAID AMOUNT FOR LAYING OF CABLES BY THE EL ECTRICITY BOARD TO ENSURE THE REGULAR SUPPLY OF ELECTRICITY. IN THE CA SE BEFORE US, EXPENDITURE HAS NOT BEEN LAID FOR CREATION OF ANY A SSET WHICH DID NOT BELONG TO THE ASSESSEE, BUT HAS BEEN PAID TO WARD O FF THE COMPETITION. THE AFORESAID DECISION OF HONBLE SUPREME COURT IN THE CASE OF ASSAM BENGAL CEMENT COMPANY VS. CIT (SUPRA) HAS BEEN REFE RRED IN ALMOST ALL THE CASES TOUCHING THIS ISSUE AND TILL THE DATE THE SAID DECISION HAS NOT BEEN OVERRULED. 13. HONBLE SUPREME COURT IN THE CASE OF CIT VS. CO AL SHIPMENTS LTD. (SUPRA) HAS HELD THAT EVEN IN A CASE WHERE PAYMENT IS MADE TO WARD OFF COMPETITION IN BUSINESS TO A RIVAL DEALER WOULD CON STITUTE CAPITAL EXPENDITURE AND TO HOLD THEM CAPITAL EXPENDITURE IT IS NOT NECESSARY THAT NON-COMPETE FEE IS PAID TO CREATE MONOPOLY RIG HTS. HONBLE SUPREME COURT IN THE CASE OF PUNJAB STATE INDUSTRIA L DEVELOPMENT CORPORATION LTD. VS. CIT (1997) 140 CTR (SC) 594 : (1997) 225 ITR 792 (SC) HAS HELD THAT THE FEE PAID TO THE REGISTRA R FOR EXPANSION OF THE CAPITAL BASE OF THE COMPANY WAS DIRECTLY RELATE D TO CAPITAL EXPENDITURE INCURRED BY THE COMPANY AND ALTHOUGH IN CIDENTALLY THAT WOULD CERTAINLY HELP IN THE BUSINESS OF THE COMPANY AND MAY ALSO HELP IN PROFIT MAKING, IT STILL RETAINS THE CHARACTER OF CAPITAL EXPENDITURE SINCE THE EXPENDITURE WAS DIRECTLY RELATED TO THE E XPANSION OF CAPITAL BASE OF THE COMPANY AND THUS IT WAS NOT AN EXPENSE IN THE NATURE OF REVENUE. HONBLE DELHI HIGH COURT IN THE CASE OF CI T VS. J.K. SYNTHETICS LTD. (2009) 222 CTR (DEL) 339 : (2009) 1 7 DTR (DEL) 134 : (2009) 309 ITR 371 (DEL) HAD HELD THAT THE BASIC TE ST TO DETERMINE THE NATURE OF AN EXPENDITURE REMAINS SAME EVEN IN THE C ONTEXT OF MODERN SITUATION AND THESE TESTS ARE THE TEST OF (I) INITI AL OUTLAY OF THE BUSINESS, (II) THE AIM AND OBJECTS OF THE EXPENDITURE, (III) ENDURING BENEFIT TEST, AND (IV) THE TEST OF FIXED AND CIRCULATING CAPITAL. IN THE CASE OF ASSESSEE THE PAYMENT OF RS. 3 CRORES TO L&T LTD. HAS BEEN MA DE AT THE START OF BUSINESS OF JOINT VENTURE. THEREFORE, ASSESSEES CA SE WILL FALL UNDER THE FIRST TEST LAID DOWN IN CIT VS. J.K. SYNTHETICS LTD . (SUPRA) WHICH DESCRIBES THAT IF EXPENDITURE IS MADE FOR INITIAL O UTLAY OR FOR THE EXTENSION OF BUSINESS OR A SUBSTANTIAL REPLACEMENT OF EQUIPMENT THEN IT WILL FALL UNDER THE CAPITAL EXPENDITURE. 14. TRIBUNAL DELHI SPECIAL BENCH IN THE CASE OF TEC UMSEH INDIA. (P) LTD. VS. ADDL. CIT (SUPRA) HAS EXAMINED THE PROPOSI TION CANVASSED BY THE ASSESSEE THAT THE PURPOSE OF MAKING NON-COMPETE FEE IS TO MAINTAIN THE PROFITABILITY OF THE BUSINESS BY INSULATING THE SAME FROM THE RISK OF COMPETITION. THIS CONTENTION OF ASSESSEE HAS BEEN R EJECTED AFTER DETAILED DISCUSSION KEEPING IN VIEW THE JUDICIAL PR ONOUNCEMENTS. IT HAS BEEN HELD THAT WHEN EXPENDITURE IS MADE FOR INITIAL OUTLAY OR FOR EXPANSION OF BUSINESS OR FOR A SUBSTANTIAL REPLACEM ENT OF EQUIPMENT, I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .2039 2039 2039 2039- -- -2041 2041 2041 2041/M/ /M/ /M/ /M/1 11 12 22 2 6 THEN IT WOULD FALL UNDER CAPITAL EXPENDITURE. THE P AYMENT OF NON- COMPETE FEE FOR ACQUISITION OF BUSINESS HAS BEEN HE LD AS CAPITAL EXPENDITURE AS THE SAME WAS INCURRED FOR INITIAL OU TLAY OF THE BUSINESS. IN THE INSTANT CASE THE EXPENDITURE WAS INCURRED TO WARD OFF THE COMPETITION FOR A PERIOD OF 7 YEARS AT THE START OF THE BUSINESS AND HENCE WILL FORM PART OF INITIAL OUTLAY OF THE BUSIN ESS. ACCORDINGLY THE ASSESSEES CASE IS SQUARELY COVERED BY THE DECISION OF SPECIAL BENCH IN THE CASE OF TECUMSEH INDIA (P) LTD. VS. CIT (SUPRA) . THEREFORE, THE EXPENDITURE BY WAY OF NON-COMPETE FEE HAS TO BE TRE ATED CAPITAL IN NATURE. 15. WE ARE CONSCIOUS OF THE PROVISIONS OF S. 28(VA) INSERTED IN THE STATUTE BY THE FINANCE ACT, 2002 W.E.F. 1ST APRIL, 2003 ACCORDING TO WHICH ANY SUM, WHETHER RECEIVED OR RECEIVABLE, IN C ASH OR KIND, UNDER AN AGREEMENT FOR NOT CARRYING OUT ANY ACTIVITY IN R ELATION TO ANY BUSINESS WILL BE CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. IN THE APPEAL BEFORE US TH E ASSESSMENT YEAR INVOLVED IS 2001-02. IT IS NOT THE CASE OF THE ASSE SSEE THAT L&T LTD. HAD TREATED THE PAYMENTS RECEIVED BY IT AS BUSINESS INC OME AND HENCE AS A COROLLARY TO THE AMENDED PROVISIONS OF S. 28(VA) TH E PAYMENT MADE WILL BE TREATED AS REVENUE EXPENDITURE. HENCE, IT IS NOT POSSIBLE TO TREAT THE PAYMENT OF NON-COMPETE FEE AS REVENUE EXPENDITURE I N THE HAND OF THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATIO N. 16. IN VIEW OF THE ABOVE IT IS HELD THAT THE NON-CO MPETE FEE PAID BY THE ASSESSEE TO WARD OFF COMPETITION FROM L&T LTD. IS C APITAL IN NATURE AND AS SUCH, IT CANNOT BE ALLOWED AS REVENUE EXPEND ITURE. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LEARNED CIT(A) CONFIRMING THE ADDITION MADE BY THE AO. 17. ALTERNATIVELY, IT HAS BEEN ARGUED THAT IN CASE THE EXPENDITURE IS TREATED AS CAPITAL IN NATURE, IN VIEW OF THE DECISI ON OF TRIBUNAL IN THE CASE OF ITO VS. MEDICORP. TECHNOLOGIES INDIA LTD. ( SUPRA) DEPRECIATION SHOULD BE ALLOWED AS NON-COMPETE FEE I S AN INTANGIBLE ASSET. UNDER S. 32 (1)(II) DEPRECIATION IN RESPECT OF KNOW-HOW, PATENT, COPYRIGHT, TRADE-MARK, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE BEING INTANGIBL E ASSETS ACQUIRED ON OR AFTER 1ST DAY OF APRIL, 1998, OWNED WHOLLY AN D PARTLY BY THE ASSESSEE AND USED FOR THE PURPOSE OF BUSINESS OR PR OFESSION, SHALL BE ALLOWED AT THE SPECIFIED RATES. FROM PLAIN READING OF LANGUAGE OF S. 32(1)(II) IT IS CLEAR THAT (I) THE ASSET SHOULD BE AN INTANGIBLE ASSET; (II) SHOULD BE WHOLLY OR PARTLY OWNED BY THE ASSESSEE; A ND (III) USED FOR THE PURPOSES OF BUSINESS OR PROFESSION. ALL THREE CONDI TIONS ARE CUMULATIVE AND NON-FULFILMENT OF ANY OF THE CONDITIONS WOULD D ISENTITLE THE ASSESSEE FOR DEPRECIATION ALLOWANCE. ADMITTEDLY, TH E NON-COMPETE FEE IS NOT IN THE NATURE OF KNOW-HOW, PATENTS, COPYRIGH T, TRADEMARKS, I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .2039 2039 2039 2039- -- -2041 2041 2041 2041/M/ /M/ /M/ /M/1 11 12 22 2 7 LICENSES OR FRANCHISES. NOW, IT IS TO BE SEEN WHETH ER NON-COMPETE FEE WOULD FALL UNDER RESIDUARY PART OF THE DEFINITION ' ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE'. THE INTANGIBL E ASSET FALLING IN EXPRESSION 'ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' SHOULD BELONG TO SAME GENUS TO WHICH KNOW-HOW, PATE NTS, COPYRIGHTS, TRADEMARKS, LICENSES/FRANCHISES BELONG. THEREFORE, THE EXPRESSION 'ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATU RE' WOULD MEAN THAT THE BUSINESS OR COMMERCIAL RIGHT SHOULD BE IN THE NATURE OF KNOW- HOW, PATENTS, COPYRIGHTS, TRADE-MARKS, LICENSES OR FRANCHISES. BY NO STRETCH OF IMAGINATION, THE NON-COMPETE FEE CAN BE TREATED TO HAVE BELONGED THE SAME GENUS TO WHICH KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENCES/FRANCHISES BELONG. 18. AN ASSET WHETHER TANGIBLE OR INTANGIBLE MUST BE ONE FOR WHICH A MARKET VALUE CAN BE ASCERTAINED. THERE IS NO DISPUT E THAT KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENSES/FRANCHISE S ETC. ARE INTELLECTUAL PROPERTY RIGHTS, WHICH CAN BE TRANSFER RED/ASSIGNED/ LEASED OUT TO ANY OTHER PARTIES FOR A PRICE. NON-COMPETE A GREEMENT BETWEEN TWO PARTIES IS LIKE PERSONAL SERVICES CONTRACT WHIC H IS UNASSIGNABLE. PERSONAL SERVICES CONTRACT CANNOT SURVIVE ON THE DE MISE OF EITHER OF THE PARTIES. SIMILARLY THE NON-COMPETE AGREEMENT BETWEE N TWO PARTIES WILL COME TO AN END ON THE DEMISE OF EITHER OF THE PARTI ES. WHILE INTANGIBLE ASSETS LIKE KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMAR KS, LICENSES/ FRANCHISES ETC. CAN BE SOLD/ASSIGNED TO ANY OTHER P ERSON FOR A VALUE BUT NON-COMPETE RIGHT ACQUIRED ON PAYMENT CANNOT BE TRA NSFERRED FOR A PRICE. NO THIRD PARTY CAN BE ROPED IN, IN THE AGREE MENT FOR NON- COMPETE BY WAY OF SALE/ASSIGNMENT AS IT IS NON-SALE ABLE/UNASSIGNABLE. SIMILARLY, THE RIGHT TO TRADE FREELY OR TO COMPETE IN THE MARKET IS NOT AN ASSET. HENCE, A RIGHT ARISING OUT OF AN AGREEMENT O F NON-COMPETE OR NOT TO TRADE FREELY WILL NOT CONSTITUTE A COMMERCIA L RIGHT FALLING IN THE CATEGORY OF INTANGIBLE ASSETS. 19. NON-COMPETE FEE OF RS 3,00,00,000 HAS BEEN PAID TO WARD OFF THE COMPETITION FROM L&T LTD. HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN COCA COLA BEVERAGES (P) LTD. (201 1) 238 CTR (DEL) 1 : (2011) 50 DTR (DEL) 122 WHILE DEALING WIT H ISSUE OF DEPRECIATION ON GOODWILL IN PARA 22 HELD AS UNDER : '22.TO EFFECTIVELY UNDERSTAND WHAT WOULD CONST ITUTE AN INTANGIBLE ASSET, CERTAIN ASPECTS, LIKE THE NATURE OF GOODWILL INVOLVED, HOW THE GOODWILL HAS BEEN GENERATED, HOW IT HAS BEE N VALUED, AGREEMENT UNDER WHICH IT HAS BEEN ACQUIRED, WHAT IN TANGIBLE ASSET IT REPRESENTS, NAMELY, TRADEMARK, RIGHT, PATENT ETC. A ND FURTHER WHETHER IT WOULD COME WITHIN THE CLAUSE, NAMELY, ANY OTHER BU SINESS OR COMMERCIAL RIGHTS WHICH ARE OF SIMILAR NATURE ARE TO BE BORNE IN MIND.' I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .2039 2039 2039 2039- -- -2041 2041 2041 2041/M/ /M/ /M/ /M/1 11 12 22 2 8 HONBLE DELHI HIGH COURT IN PARA 24 EXPLAINED THE M EANING OF 'BUSINESS OR COMMERCIAL RIGHT OF SIMILAR NATURE' IN THE FOLLOWING WORDS : '24. IT IS WORTH NOTING THAT THE MEANING OF BUSINE SS OR COMMERCIAL RIGHTS OF SIMILAR NATURE HAS TO BE UNDERSTOOD IN T HE BACKDROP OF S. 32(1)(II) OF THE ACT. COMMERCIAL RIGHTS ARE SUCH RI GHTS WHICH ARE OBTAINED FOR EFFECTIVELY CARRYING ON THE BUSINESS A ND COMMERCE, AND COMMERCE, AS IS UNDERSTOOD, IS A WIDER TERM WHICH E NCOMPASSES IN ITS FOLD MANY A FACET. STUDIED IN THIS BACKGROUND, ANY RIGHT WHICH IS OBTAINED FOR CARRYING ON THE BUSINESS WITH EFFECTIV ENESS IS LIKELY TO FALL OR COME WITHIN THE SWEEP OF MEANING OF INTANGIBLE A SSET. THE DICTIONARY CLAUSE CLEARLY STIPULATES THAT BUSINESS OR COMMERCIAL RIGHTS SHOULD BE OF SIMILAR NATURE AS KNOW-HOW, PATENTS, C OPYRIGHTS, TRADEMARKS, LICENCES, FRANCHISES, ETC. AND ALL THES E ASSETS WHICH ARE NOT MANUFACTURED OR PRODUCED OVER-NIGHT, BUT ARE BROUGH T INTO EXISTENCE BY EXPERIENCE AND REPUTATION. THEY GAIN SIGNIFICANC E IN THE COMMERCIAL WORLD AS THEY REPRESENT A SIMILAR BENEFI T OR ADVANTAGE OR REPUTATION BUILT OVER A CERTAIN SPAN OF TIME AND TH E CUSTOMERS ASSOCIATE WITH SUCH ASSETS.'. 20. THUS FROM THE DECISION OF HONBLE DELHI HIGH CO URT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES (P) LTD. (SUPRA) IT I S CLEAR THAT 'BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' A RE NOT MANUFACTURED OR PRODUCED OVER-NIGHT, BUT ARE BROUGH T INTO EXISTENCE BY EXPERIENCE AND REPUTATION. THE NON-COMPETE FEE I S OUTCOME OF AN AGREEMENT ENTERED INTO BETWEEN TWO PARTIES. IT DOES NOT REPRESENT ANY INTANGIBLE ASSET, SUCH AS, KNOW-HOW, PATENTS, COPYR IGHTS, TRADEMARKS, LICENSES, FRANCHISES ETC. THEREFORE, IN VIEW OF DEC ISION OF HONBLE DELHI HIGH COURT IN THE CASE OF HINDUSTAN COCA COLA BEVER AGES (P) LTD. (SUPRA) NON-COMPETE AGREEMENT WOULD NOT CREATE AN A SSET OF INTANGIBLE NATURE ELIGIBLE FOR DEPRECIATION UNDER S. 32(1)(II) OF THE ACT. THE DECISION OF THE TRIBUNAL, CHENNAI BENCH IN THE CASE OF ITO VS. MEDICORP TECHNOLOGIES (INDIA) LTD. (SUPRA) WAS REND ERED PRIOR TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES (P) LTD. (SUPRA). HENCE IT RENDERS N O HELP TO THE ASSESSEE. THEREFORE, WE ARE NOT IN AGREEMENT WITH T HE ARGUMENTS OF THE ASSESSEE THAT NON-COMPETE FEE IS AN INTANGIBLE ASSE T TO WHICH PROVISIONS OF S. 32(1)(II) OF THE ACT ARE APPLICABL E. THEREFORE, IN OUR CONSIDERED OPINION, THE DEPRECIATION CANNOT BE ALLO WED ON AMOUNT OF NON-COMPETE FEE. WE ACCORDINGLY DISMISS THIS CONTEN TION OF THE ASSESSEE. 21. THE NEXT CONTENTION OF THE ASSESSEE IS THAT THE EXPENDITURE INCURRED BY WAY OF NON-COMPETE FEE SHOULD BE ALLOWED DURING THE PERIOD OF I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .2039 2039 2039 2039- -- -2041 2041 2041 2041/M/ /M/ /M/ /M/1 11 12 22 2 9 SEVEN YEARS. THE RELIANCE HAS BEEN PLACED ON THE DE CISION OF THE TRIBUNAL, CHENNAI BENCH IN THE CASE OF ORCHID CHEMI CALS & PHARMACEUTICALS LTD. VS. ASSTT. CIT (2011) 137 TTJ (CHENNAI) 373 : (2010) 48 DTR (CHENNAI) 441 WHEREIN IT HAS BEEN HEL D THAT PAYMENT OF NON-COMPETE FEE SHOULD BE SPREAD OVER IN THE LIGHT OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTR IAL INVESTMENT CORPORATION LTD. VS. CIT (1997) 139 CTR (SC) 555 : (1997) 225 ITR 802 (SC). WE HAVE CONSIDERED THE SUBMISSIONS MADE B Y THE ASSESSEE. WE FOLLOWING THE DECISION OF SPECIAL BENCH, DELHI I N THE CASE OF TECUMSEH INDIA (P) LTD. (SUPRA) HAVE HELD THAT PAYM ENT OF NON- COMPETE FEE IS CAPITAL EXPENDITURE. IN MADRAS INDUS TRIAL INVESTMENT CORPORATION LTD. (SUPRA) THE ASSESSEE ISSUED DEBENT URES IN DECEMBER, 1966 AT A DISCOUNT. THE TOTAL DISCOUNT ON ISSUE OF RS. 1.5 CRORES AMOUNTED TO RS. 3 LAKHS. FOR ASST. YR. 1968-69 THE ASSESSEE WROTE OFF RS. 12,500 OUT OF THE TOTAL DISCOUNT OF RS. 3 LAKHS BEING THE PROPORTIONATE AMOUNT OF DISCOUNT FOR THE PERIOD OF SIX MONTHS ENDING WITH 30TH JUNE, 1967, TAKING INTO ACCOUNT THE PERIO D OF 12 YEARS WHICH WAS THE PERIOD OF REDEMPTION AND DIVIDING THE DISCO UNT OF RS. 3 LAKHS OVER THE PERIOD OF 12 YEARS. THE AO DISALLOWED THE CLAIM BUT THE AAC ALLOWED DEDUCTION OF RS. 12,500. ON FURTHER APPEAL THE TRIBUNAL HELD THAT THE ENTIRE EXPENDITURE OF RS. 3 LAKHS WAS ALLO WABLE AS EXPENDITURE INCURRED FOR THE PURPOSE OF THE BUSINESS. ON REFERE NCE THE HIGH COURT NOTED THAT OUT OF THE TOTAL DISCOUNT OF RS. 3 LAKHS AN AMOUNT OF RS. 12,500 HAD BEEN ALLOWED WHICH THE DEPARTMENT HAD NO T CHALLENGED. HENCE THE HIGH COURT WAS CONCERNED ONLY WITH THE BA LANCE AMOUNT OF RS. 2,87,500 WHICH THE HIGH COURT HELD, COULD NOT B E CONSIDERED AS EXPENDITURE. ON FURTHER APPEAL TO THE HONBLE SUPRE ME COURT IT WAS HELD THAT LIABILITY TO PAY THE DISCOUNTED AMOUNT OV ER AND ABOVE THE AMOUNT RECEIVED FOR THE DEBENTURES WAS A LIABILITY INCURRED BY THE COMPANY FOR THE PURPOSE OF ITS BUSINESS IN ORDER TO GENERATE FUNDS FOR ITS BUSINESS ACTIVITIES. IT WAS, THEREFORE, EXPENDI TURE. THE ASSESSEE HAD IN ITS RETURN CORRECTLY CLAIMED A DEDUCTION ONLY IN RESPECT OF PROPORTIONATE PART OF THE DISCOUNT OF RS. 12,500 OV ER THE RELEVANT ACCOUNTING PERIOD IN QUESTION. THIS WAS ALSO IN CON FORMITY WITH THE ACCOUNTING PRACTICE OF SHOWING THE DISCOUNT IN THE 'DISCOUNT ON DEBENTURE ACCOUNT' WHICH WAS WRITTEN OFF OVER THE P ERIOD OF DEBENTURES. THE ASSESSEE WAS ENTITLED TO DEDUCT A S UM OF RS. 12,500 OUT OF DISCOUNT OF RS. 3 LAKHS IN THE RELEVANT ASSE SSMENT YEAR. HONBLE SUPREME COURT ALSO HELD THAT ORDINARILY, REVENUE EX PENDITURE WHICH IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS MUST BE ALLOWED IN ITS ENTIRETY IN THE YEAR IT IS INCURRED. IT CANNOT BE SPREAD OVER A NUMBER OF YEARS EVEN IF THE ASSESSEE HAS WRI TTEN IT OFF IN HIS BOOKS, OVER A PERIOD OF YEARS. HOWEVER, THE FACTS M AY JUSTIFY AN ASSESSEE WHO HAS INCURRED EXPENDITURE IN A PARTICUL AR YEAR TO SPREAD AND CLAIM IT OVER A PERIOD OF ENSUING YEARS. IN FAC T, ALLOWING THE ENTIRE EXPENDITURE IN ONE YEAR MIGHT GIVE A VERY DISTORTED PICTURE OF THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .2039 2039 2039 2039- -- -2041 2041 2041 2041/M/ /M/ /M/ /M/1 11 12 22 2 10 PROFITS OF A PARTICULAR YEAR. ISSUING DEBENTURES IS AN INSTANCE WHERE, ALTHOUGH THE ASSESSEE HAS INCURRED THE LIABILITY TO PAY THE DISCOUNT IN THE YEAR OF ISSUE OF DEBENTURES, THE PAYMENT IS TO SECURE A BENEFIT OVER A NUMBER OF YEARS. THERE IS A CONTINUING BENEFIT TO THE BUSINESS OF THE COMPANY OVER THE ENTIRE PERIOD. THE LIABILITY SHOUL D, THEREFORE, BE SPREAD OVER THE PERIOD OF DEBENTURES. FROM THE DECI SION OF HONBLE SUPREME COURT IT IS CLEAR THAT EXPENDITURE WHICH IS REVENUE IN NATURE AND IS INCURRED TO SECURE A BENEFIT OVER A NUMBER O F YEARS CAN BE SPREAD OVER THE PERIOD OF BENEFIT DERIVED BY AN ASS ESSEE. HOWEVER, WHERE THE EXPENDITURE INCURRED IS IN THE NATURE OF CAPITAL EXPENDITURE, THE SPREAD OVER CANNOT BE ALLOWED. SINCE WE HAVE HE LD THAT THE EXPENDITURE INCURRED BY WAY OF NON-COMPETE FEE IS C APITAL IN NATURE, IT CANNOT BE ALLOWED TO BE SPREAD OVER FOR THE PERIOD OF SEVEN YEARS. THEREFORE, THE CLAIM OF THE ASSESSEE FOR SPREAD OVE R OF THE EXPENDITURE CANNOT BE ENTERTAINED. ACCORDINGLY, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALSO DISMISSED. 12. WE RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL, DO NOT FIND ANY MERITS ON THIS ISSUE IN THE APPEAL OF THE ASSESSEE. HENCE THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 7. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF TH E COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSM ENT YEAR 2003-04, THE COMMON GROUND RAISED IN THE ASSESSMENT YEARS 2004-0 5, 2005-06 AND 2007-08 IS DISMISSED. 8. WITH REGARD TO ASSESSMENT YEAR 2004-05, THE ASS ESSEE HAS RAISED ONE MORE GROUND IN RESPECT OF RENTAL RECEIPTS OF .1,64,161/- TREATING IT AS INCOME. WHILE COMPUTING THE BUSINESS PROFIT, THE AS SESSING OFFICER HAS EXCLUDED .4,08,377/- [BEING 90 PER CENT OF MISCELLANEOUS REC EIPTS AND RENTAL RECEIPTS OF .4,53,752/-] FOR COMPUTING DEDUCTION UNDER SECTION 80HHC OF THE ACT. IT WAS SUBMITTED BEFORE THE ASSES SING OFFICER THAT IT IS NOT CORRECT TO TREAT THE RENTAL RECEIPT OF .1,64,161/- AS INCOME AND EXCLUDING 90 I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .2039 2039 2039 2039- -- -2041 2041 2041 2041/M/ /M/ /M/ /M/1 11 12 22 2 11 PER CENT OF THE SAME FROM THE BUSINESS INCOME FOR T HE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80HHC OF THE ACT. 9. ON APPEAL, THE LD. CIT(APPEALS) CONFIRMED THE O RDER OF THE ASSESSING OFFICER BY OBSERVING THAT AS PER CLAUSE (BAA) OF EX PLANATION, 90 PER CENT OF ANY SUM REFERRED IN CLAUSES (IIIA) TO (IIIB) OF SEC TION 28 OR ANY RECEIPT BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT CHARGES OR ANY OTHER RECEIPTS OF SIMILAR NATURE INCLUDED IN SUCH PROFIT SHOULD BE RE DUCED FROM PROFIT AND GINS OF BUSINESS OR PROFESSION. THE LD. CIT(APPEALS) HE LD THAT SINCE THE PROVISIONS ARE CLEAR, THE ASSESSING OFFICER HAS RI GHTLY EXCLUDED 90 PER CENT OF RENT FROM PROFITS OF THE BUSINESS. 10. ON APPEAL BEFORE THE TRIBUNAL, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE WHILE COMPUTING DEDUCTION UNDER SECTION 80HHC OF THE ACT, THE ASSESSING OFFICER HAS TAKEN 90 PER CENT OF GROSS AND HE HAS TO TAKE NET FOR THAT HE RELIED ON THE DECISION OF ACG ASSOC IATED CAPSULES PVT. LTD. V. CIT [2012] 343 ITR 89 (SC). 11. THE LD. DR STRONGLY SUPPORTED THE ORDER PASSED BY THE AUTHORITIES BELOW. 12. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIAL S ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WHILE COM PUTING THE BUSINESS PROFIT, THE ASSESSING OFFICER HAS EXCLUDED .4,08,377/- [BEING 90 PER CENT OF I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .2039 2039 2039 2039- -- -2041 2041 2041 2041/M/ /M/ /M/ /M/1 11 12 22 2 12 MISCELLANEOUS RECEIPTS AND RENTAL RECEIPTS OF .4,53,752/-] FOR COMPUTING DEDUCTION UNDER SECTION 80HHC OF THE ACT. IT WAS SU BMITTED BEFORE THE ASSESSING OFFICER THAT IT IS NOT CORRECT TO TREAT T HE RENTAL RECEIPT OF .1,64,161/- AS INCOME AND EXCLUDING 90 PER CENT OF THE SAME FROM THE BUSINESS INCOME FOR THE PURPOSE OF COMPUTING DEDUCT ION UNDER SECTION 80HHC OF THE ACT. THE LD. CIT(APPEALS) OBSERVED THA T AS PER CLAUSE (BAA) OF EXPLANATION, 90 PER CENT OF ANY SUM REFERRED IN CLA USES (IIIA) TO (IIIB) OF SECTION 28 OR ANY RECEIPT BY WAY OF BROKERAGE, COMM ISSION, INTEREST, RENT CHARGES OR ANY OTHER RECEIPTS OF SIMILAR NATURE INC LUDED IN SUCH PROFIT SHOULD BE REDUCED FROM PROFIT AND GINS OF BUSINESS OR PRO FESSION AND CONFIRMED THE ORDER PASSED BY THE ASSESSING OFFICER. AT THE T IME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. L TD. V. CIT (SUPRA), WHEREIN IT WAS HELD AS UNDER: HELD ACCORDINGLY, THAT NINETY PER CENT OF NOT THE GROSS RENT OR GROSS INTEREST BUT ONLY THE NET INTEREST OR NET RENT, WHI CH HAD BEEN INCLUDED IN THE PROFITS OF BUSINESS OF THE ASSESSEE AS COMPUTED UND ER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, WAS TO BE DEDUCTE D UNDER CLAUSE (1) OF EXPLANATION (BAA) TO SECTION 80HHC FOR DETERMINING THE PROFITS OF THE BUSINESS. 13. KEEPING IN VIEW OF THE ABOVE DECISION OF THE H ONBLE SUPREME COURT, WE DIRECT THE ASSESSING OFFICER TO CONSIDER THE FAC TS AND RECOMPUTE THE DEDUCTION UNDER SECTION 80HHC OF THE ACT AFTER GIVI NG REASONABLE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .2039 2039 2039 2039- -- -2041 2041 2041 2041/M/ /M/ /M/ /M/1 11 12 22 2 13 OPPORTUNITY OF HEARING TO THE ASSESSEE. ACCORDINGLY , THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 14. IN THE ASSESSMENT YEAR 2005-06, THE ASSESSEE H AS RAISED ONE MORE GROUND RELATING TO EXPENDITURE TOWARDS TSUNAMI RELI EF OF .4,51,740/-. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVE D THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF .4,51,740/- TOWARDS DONATION CLAIMING THAT THESE DONATIONS MADE WEE CONTRIBUTION TOWARDS AFFECTED PE OPLES BY TSUNAMI. BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS RELI ED ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. MAD RAS REFINERIES LTD. 266 ITR 170. THE ASSESSING OFFICER, BY CONSIDERING THE ABOVE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, OBSERVED THAT TH E CASE LAW RELIED ON BY THE ASSESSEE HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. IN THAT CASE, THE OBLIGATION WAS CAST UPON THE ASSESSEE TO IMPROVE THE LIVING CONDITIONS IN THE LOCALITY IN WHICH HE ASSESSEES U NDERTAKING WAS SITUATED, WHICH IS NOT THE CASE OF THE ASSESSEE. IN THIS CASE , THE ASSESSEE HAS MADE VOLUNTARY DONATIONS FOR TSUNAMI RELIEF TO ORGANIZAT IONS WHICH WERE NOT RECOGNIZED/APPROVED UNDER SECTION 80G OF THE ACT. T HEREFORE, THE ASSESSING OFFICER HAS DISALLOWED THE SAME AND ADDED BACK TO T HE TOTAL INCOME OF THE ASSESSEE. 15. ON APPEAL, THE LD. CIT(APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER BY OBSERVING THAT THE EXPENSES INCURRED BY THE ASSESSEE WAS NOT FOR THE PURPOSE OF BUSINESS. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .2039 2039 2039 2039- -- -2041 2041 2041 2041/M/ /M/ /M/ /M/1 11 12 22 2 14 16. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIAL S ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND TH AT THE CASE LAW RELIED ON BY THE ASSESSEE HAS NO APPLICATION AND VOLUNTARY DO NATIONS WERE MADE FOR TSUNAMI RELIEF TO ORGANIZATIONS WHICH WERE NOT RECO GNIZED/APPROVED UNDER SECTION 80G OF THE ACT. IT IS ALSO DIFFICULT TO ACC EPT THE SUBMISSIONS OF THE ASSESSEE THAT IT IS BUSINESS EXPENDITURE AND ALSO A N ALLOWABLE EXPENDITURE. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(APPE ALS) AND ACCORDINGLY THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I .T.A. NO. 2039/MDS/2012 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND I.T.A . NOS. 2040 AND 2041/MDS/2012 ARE DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 30 TH OF OCTOBER, 2014 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER CHENNAI, DATED, THE 30.10.2014 VM/- - ) ''+./ 0/$+ /COPY TO: 1. %& / APPELLANT, 2. '(%& / RESPONDENT, 3. 1 ( ) /CIT(A), 4. 1 /CIT, 5. /2 ''+' /DR & 6. 3! 4 /GF.