DIGI HOME CABLE ENTERTAINMENT INDIA P.LTD, MUMBAI V. ACIT (OSD) 10(1), MUMBAI

ITA 5754/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8094 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 26-12-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 23-09-2013
• Court: TRIBUNAL
• Department Lawyers: KANT NAMDEO
• Keywords: Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D , MUMBAI BEFORE SHRI C . N . PRASAD , JUDICIAL MEMBER AND SHRI RAJESH KUMAR , ACCOUNTANT MEMBER ITA NO. 5754 /MUM/201 3 : (A.Y : 20 10 - 1 1 ) M/S DIGI HOME CABLE ENTERTAINMENT INDIA PVT. LTD. 7/B, SHAH INDUSTRIAL ESTATE OFF VEERA DESAI ROAD ANDHERI (W) MUMBAI 400 0 53 PAN : AABCH5475J ( / APPELLANT) VS. ACIT (OSD) 10(1) R.NO.10, 3 RD FLOOR A WING MITTAL COURT NARIMAN POINT MUMBAI - 400 021 ( / RESPONDENT) / A PPELLANT BY : NONE / RE SPONDENT BY : SHRI KANT NAMDEO / DATE OF HEARING : 26 / 1 2 /201 6 DATE OF PRONOUNCEMENT : 06/ 03 / 2017 / O R D E R PER C.N.PRASAD (J.M.) : THIS APPEAL IS FILED BY THE A SSESSEE AGAINST THE ORDER OF THE LD. CIT (APPEALS) - 22 , MUMBAI DATED 1 7 . 0 7 .201 3 FOR THE ASSESSMENT YEAR 20 10 - 1 1 ARISING OUT OF THE AS SESSMENT ORDER PASSED U/S 143(3) OF THE ACT . 2 M/S DIGI HOME CABLE ENTERTAINMENT INDIA PVT. LTD. ITA NO. 5 7 54 /MUM/ 20 13, A.Y.2010 - 11 2. THE ONLY ISSUE IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT (APPEALS) ERRED IN DISALLOWING PRO - RATA CLAIM OF N ON - C OMPETE FEES I N THE CURRENT ASSESSMENT YEAR. 3. INSPITE OF SEVERAL NOTICES ISSUED TO THE ASSESSEE TILL NOW ON SEVERAL OCCASION NONE APPEARED NOR ANY ADJOURNMENT WAS SOUGHT BY THE ASSESSEE . THE NOTICES ISSUED EARLIER BY REGISTERED POST WITH ACKNOWLEDGEMENT DUE HAVE BEEN RETURNED UNSERVED WITH THE ENDORSEMENT THAT THE ADDRESS EE IS LEFT. IN THESE CIRCUMSTANCES, WE DISPOSE OF THIS APPEAL ON HEARING THE LD. DR ON MERITS. 4 . THE LD. DR SUBMITS THAT THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT DISALLOWED NON C OMPETE F EE OF RS.1,07,66,667 / - HOLDING THAT SUCH NON COMPETE F EE PAID TO ONE OF THE PROMOTER DIRECTOR I S NON BUSINESS EXPENSE OF THE ASSESSEE COMPANY. THE LD. DR FURTHER SUBMITS THAT THE ASSESSING OFFICER ALSO STATED THAT THE SAID N ON C OMPETE F EE IS PAID TO PROTECT THE INTEREST OF THE SHAREHOLDER HOLDING 51% EQUITY OF THE COMPANY AND T HEREFORE, THE EXP ENSES CLAIMED TOWARDS NON COMPE TE F EE IS DISALLOWED TREATING THEM AS NOT EXPENDED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE COMPANY. THE LD. DR SUBMITS TH AT ON APPEAL BY THE ASSESSEE, THE LD. CIT (APPEALS) SUSTAINED THE DISALLOWANCE HOLDING THAT THE PAYMENT MADE TOWARDS N ON C OMPETE F EE AGREEMENT IS IN THE NATURE OF CAPITAL. THEREFORE, LD. DR STRONGLY PLACES RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW I N DISALLOWING THE N ON COMPETE FEE EXPENDITURE CLAIM ED BY THE ASSESSEE. 3 M/S DIGI HOME CABLE ENTERTAINMENT INDIA PVT. LTD. ITA NO. 5 7 54 /MUM/ 20 13, A.Y.2010 - 11 5 . WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE SUBMISSIONS OF THE LD. DR. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT DISALLOWING THE NON COMPETE FEE PAID TO PROMO TE R D IRECTOR HOLDING THAT THE NON COMPET E FEE PAID IS AGAINST THE INTEREST OF THE ASSESSEE COMPANY, THE NON COMPETE FEE PAID BY THE ASSESSEE BEING THE DIRECTOR WAS IN ADDITION TO THE REMUNERATION AND MANAGEMENT FEE OF RS.84 LAKHS AND THEREFORE THE ADDITION AL PAYMENT IN THE FORM OF NON COMPETE FEE IS UNWARRANTED , UNNECESSARY AND UNREASONABLE . THEREFORE, THE ASSESSING OFFICER DISALLOWED THE NON COMPETE FEE INVOKING THE PROVISIONS OF SECTION 40A(2)(A) OF THE ACT AS UNREASONABLE EXPENDITURE. THE ASSESSING OFF ICER FURTHER HELD THAT THE EXPENDITURE INCURRED BY WAY OF NON COMPETE FEE IS NOT FOR THE PURPOSE OF BUSINESS. 6 . THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT (APPEALS) AND THE LD. CIT (APPEALS) SUSTAINED THE DISALLOWANCE HOLDING THAT THE SAID EXPENSE IS IN THE NATURE OF CAPITAL EXPENDITURE. THE FINDINGS OF THE LOWER AUTHORITIES HAVE NOT BEEN RE BUTTED WITH EVIDENCES BEFORE US. THERE IS NO EVIDENCE ON RECORD TO TAKE TO CONTROVERT THE FINDINGS OF THE LOWER AUTHORITIES AND TO TAKE A CONTRARY VIEW TO THAT OF THE LOWER AUTHORITIES. IN THE CIRCUMSTANCES, THE ORDERS OF THE AUTHORITIES BELOW ARE UPHELD. 7 . IN THE RESULT, APPEAL OF TH E ASSESSEE IS DISMISSED . 4 M/S DIGI HOME CABLE ENTERTAINMENT INDIA PVT. LTD. ITA NO. 5 7 54 /MUM/ 20 13, A.Y.2010 - 11 ORDER PRONOUNCED IN THE OPEN COURT ON THE 6 TH DAY OF MARCH 2017 . SD/ - SD/ - RAJESH KUMAR C.N.PRASAD / / ACCOUNTANT MEMBER JUDICIAL MEMBER / MUMBAI; / DATED 06 / 0 3 / 2017 LR, SPS / COPY OF THE ORDER FORWARDED TO : / BY ORDER , ( ASSTT. REGISTRAR) , / ITAT, MUM 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. // TRUE COPY / / 5 M/S DIGI HOME CABLE ENTERTAINMENT INDIA PVT. LTD. ITA NO. 5 7 54 /MUM/ 20 13, A.Y.2010 - 11