Assistant Commissioner OF Income Tax Circle-2(3), Hyderabad V. Kapil Chits (Kosta) Private Limited, Vijayawada

ITA 726/Hyd/2020

• Counselvise Citation: [2022] 129 COUNSELVISE.COM (IT) 9827 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-B
• Assessment Year: 2017-2018
• Appeal Filed On: 26-11-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y V S T SAI
• Keywords: Revenue expenditure; Capital expenditure
• Section: 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD ‘B’ BENCH, HYDERABAD. BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI L. P. SAHU, ACCOUNTANT MEMBER (Through Virtual Hearing) Sl.No. ITA No. & Asst. Year Appellant Respondent 1. 619/Hyd/2020 2015-16 Dy. Commissioner of Income Tax, Central Circle 2(3), Hyderabad. M/s. Kapil Chits (Kakatiya) Pvt. Ltd., Warangal. PAN AADCK4851D 2. 620/Hyd/2020 2016-17 -do- -do- 3. 621/Hyd/2020 2018-19 -do- -do- 4. 622/Hyd/2020 2012-13 -do- M/s. Kapil Chits (Hyderabad) Pvt. Ltd., Hyderabad. PAN AADCK5137C 5. 623/Hyd/2020 2013-14 -do- -do- 6. 624/Hyd/2020 2014-15 -do- -do- 7. 625/Hyd/2020 2015-16 -do- -do- 8. 626/Hyd/2020 2016-17 -do- -do- 9. 627/Hyd/2020 2018-19 -do- -do- 10. 629/Hyd/2020 2012-13 -do- M/s. Kapil Chits (Kosta) Pvt. Ltd., Vijayawada. PAN AADCK4820G 11. 630/Hyd/2020 2013-14 -do- -do- 12. 631/Hyd/2020 2014-15 -do- -do- 13. 632/Hyd/2020 2015-16 -do- -do- 14. 633/Hyd/2020 2016-17 -do- -do- 15. 634/Hyd/2020 2018-19 -do- -do- 2 ITA Nos.619 to 627/Hyd/2020, 629 to 634/Hyd/2020 and 725 to 727/Hyd/2020 16. 725/Hyd/2020 2017-18 ACIT, Central Circle 2(3), Hyderabad. M/s. Kapil Chits (Hyderabad) Pvt. Ltd., Hyderabad. 17. 726/Hyd/2020 2017-18 -do- M/s. Kapil Chits (Kosta) Pvt. Ltd., Vijayawada. 18. 727/Hyd/2020 2017-18 -do- M/s. Kapil Chits (Kakatiya) Pvt. Ltd., Warangal. Appellant By : Shri YVST Sai CIT-DR. Respondents By : Smt. S.Sandhya (A.R) Date of Hearing : 30.09.2021. Date of Pronouncement : 05.10.2021. O R D E R Per Bench : The instant batch of Revenue’s eighteen appeals pertains to three group entities M/s. Kapil Chits (Kakatiya) Pvt. Ltd., Kapil Chits (Hyderabad) Pvt. Ltd. and Kapil Chits (Kosta) Pvt. Ltd. All the instant appeals are against the Commissioner of Income Tax (Appeals)-12, Hyderabad’s separate orders as under :- Appeal No. and A.Y. Assessee Name Order under challenge date and case No. Proceedings under section 3 ITA Nos.619 to 627/Hyd/2020, 629 to 634/Hyd/2020 and 725 to 727/Hyd/2020 619/Hyd/2020 2015-16 M/s. Kapil Chits (Kakatiya) Pvt. Ltd., Warangal. 31.08.2020 No.10304/ 2019-20 143(3) r.w.s. 153A of the Act. 620/Hyd/2020 2016-17 -do- 31.08.2020 10305/ 2019-20 -do- 621/Hyd/2020 2018-19 -do- 31.08.2020 No.10311/ 2019-20 -do- 622/Hyd/2020 2012-13 M/s. Kapil Chits (Hyderabad) Pvt. Ltd., Hyderabad. 31.08.2020 No.10222/ 2019-20 -do- 623/Hyd/2020 2013-14 -do- 31.08.2020 No.10249/ 2019-20 -do- 624/Hyd/2020 2014-15 -do- 31.08.2020 No.10256/ 2019-20 -do- 625/Hyd/2020 2015-16 -do- 31.08.2020 No.10264/ 2019-20 -do- 626/Hyd/2020 2016-17 -do- 31.08.2020 No.10266/ 2019-20 -do- 627/Hyd/2020 2018-19 -do- 31.08.2020 No.10271/ 2019-20 -do- 629/Hyd/2020 2012-13 M/s. Kapil Chits (Kosta) Pvt. Ltd., Vijayawada. 31.08.2020 No.10233/ 2019-20 -do- 630/Hyd/2020 2013-14 -do- 31.08.2020 No.10302/ 2019-20 -do- 631/Hyd/2020 2014-15 -do- 31.08.2020 No.10303/ 2019-20 -do- 4 ITA Nos.619 to 627/Hyd/2020, 629 to 634/Hyd/2020 and 725 to 727/Hyd/2020 632/Hyd/2020 2015-16 -do- 31.08.2020 No.10345/ 2019-20 -do- 633/Hyd/2020 2016-17 -do- 31.08.2020 No.10348/ 2019-20 -do- 634/Hyd/2020 2018-19 -do- 31.08.2020 No.10357/ 2019-20 -do- 725/Hyd/2020 2017-18 M/s. Kapil Chits (Hyderabad) Pvt. Ltd., Vijayawada. 24.09.2020 No.10267/ 2019-20 -do- 726/Hyd/2020 2017-18 M/s. Kapil Chits (Kosta) Pvt. Ltd., Vijayawada. 24.09.2020 No.10354/ 2019-20 -do- 727/Hyd/2020 2017-18 M/s. Kapil Chits (Kakatiya) Pvt. Ltd., Warangal. 24.09.2020 No.10307/ 2019-20 -do- Heard both the parties. Case files perused. 2. It transpires at the outset that the Revenue has raised the following substantive grounds in the lead appeal ITA No.619/Hyd/2020 for Assessment Year 2015-16 involving the first assessee herein i.e. M/s. Kapil Chits (Kakatiya) Pvt. Ltd. as under : “ 2. The ld. CIT(A) erred in deleting the addition made on account of disallowance of noncompete fees amounting to Rs.10,68,34,400/ - being 5 ITA Nos.619 to 627/Hyd/2020, 629 to 634/Hyd/2020 and 725 to 727/Hyd/2020 the expenditure of capital nature for A. Y .2015-16 disregarding the fact that the agreement for this payment clearly states that the payment is being made towards "Non competition in business" and also use of "Trade Mark" and "Brand Name" of the holding company. 3. The ld. CIT(A) erred in disregarding the fact that the assessee has incurred the expenditure with a view to bring into existence an asset or an advantage for the enduring benefit of a trade. 4. The ld. CIT(A) failed to appreciate that the use of the "Trade Mark" and "Brand Name" of "Kapil Chits" have wide acceptance in the market and commands goodwill among the clientele and has given an advantage of enduring benefit to assessee's business and therefore become a capital expenditure. 5. The ld. CIT(A) failed to appreciate that the initial agreement for 5 years was further extended for 5 years which makes the period involved in this case quite a long period and thus the benefits accruing to the assessee are enduring in nature. 6. The ld. CIT(A) failed to appreciate that the assessee, by virtue of the agreement gained the business of the holding company i.e. income generating area, use of "trade mark" & "brand name" and also not having its holding company as its 6 ITA Nos.619 to 627/Hyd/2020, 629 to 634/Hyd/2020 and 725 to 727/Hyd/2020 competitor over a period of 10 years and thus the benefits accruing to the assessee are enduring in nature.” 3. Learned CIT-DR vehemently contended during the course of hearing that the CIT(A) has erred in law and on facts in wrongly deleting the disallowance of non-compete fees of Rs.10,68,34,400 thereby treating it as in the nature of revenue than capital expenditure in nature as per the Assessing Officer’s corresponding assessment framed on 30.12.2019. He took us to the CIT(A)’s detailed discussion on the instant issue reading as under :. “ 4.1 The appellant has raised 11 grounds. Ground Nos.2 & 3 are related to the proceedings u/s.153A of IT Act; Ground Nos.4 to 8 are related to disallowance of non-compete fees of Rs.10.25,03,800/-; Ground Nos.9 & 10 are related to disallowance u/s.14A of Rs.3,01,000/-. The other grounds are general or consequential in nature, which do not require separate adjudication. The specific grounds are being dealt with in the ensuing paras of this order. 7 ITA Nos.619 to 627/Hyd/2020, 629 to 634/Hyd/2020 and 725 to 727/Hyd/2020 8 ITA Nos.619 to 627/Hyd/2020, 629 to 634/Hyd/2020 and 725 to 727/Hyd/2020 9 ITA Nos.619 to 627/Hyd/2020, 629 to 634/Hyd/2020 and 725 to 727/Hyd/2020 10 ITA Nos.619 to 627/Hyd/2020, 629 to 634/Hyd/2020 and 725 to 727/Hyd/2020 11 ITA Nos.619 to 627/Hyd/2020, 629 to 634/Hyd/2020 and 725 to 727/Hyd/2020 12 ITA Nos.619 to 627/Hyd/2020, 629 to 634/Hyd/2020 and 725 to 727/Hyd/2020 13 ITA Nos.619 to 627/Hyd/2020, 629 to 634/Hyd/2020 and 725 to 727/Hyd/2020 14 ITA Nos.619 to 627/Hyd/2020, 629 to 634/Hyd/2020 and 725 to 727/Hyd/2020 15 ITA Nos.619 to 627/Hyd/2020, 629 to 634/Hyd/2020 and 725 to 727/Hyd/2020 16 ITA Nos.619 to 627/Hyd/2020, 629 to 634/Hyd/2020 and 725 to 727/Hyd/2020 17 ITA Nos.619 to 627/Hyd/2020, 629 to 634/Hyd/2020 and 725 to 727/Hyd/2020 4. Learned CIT-DR quote (2012) 27 taxmann.com 50 (Del) Sharp Business System Vs. CIT and DCIT Vs. Excelex Bio Polymers (P) Ltd. ITA No.1110/Del/2013 dt.1.3.2018 that such claim(s) of expenditure is capital in nature only. And that the learned co-ordinate bench also has erred in law and on facts in going by the alleged short tenure of the corresponding agreement and therefore, the Assessing Officer’s action under challenge deserves to be restored. We find that the learned co-ordinate bench’s foregoing order (supra) has also given a detailed reasoning whilst holding the assessee's identical nature of claim as a revenue expenditure in identical set of facts and circumstances. We 18 ITA Nos.619 to 627/Hyd/2020, 629 to 634/Hyd/2020 and 725 to 727/Hyd/2020 therefore see no merit in the Revenue’s instant sole substantive grievance in absence of any distinction of facts or law in all these assessment years, as the case may be. Learned co-ordinate bench appears to have gone by both purposes as well as nature of the assessee's payments in issue that the same lacked any enduring benefit while declining the Revenue’s corresponding arguments. We therefore adopt judicial consistency to affirm the CIT(A)’s above extracted findings under challenge holding the assessee’s non-compete fee payment as well as trade mark and brand name expenditure incurred under the revenue head only. The Revenue fails in its sole substantive ground as well as in the “lead” appeal ITA No.619/Hyd/2020 therefore. 5. Same order follows in Revenue’s all remaining seventeen appeals in ITA Nos.620 to 627/Hyd/2020, 629 to 634/Hyd/2020 and 725 to 727/Hyd/2020 as well since it has already transpired during the course 19 ITA Nos.619 to 627/Hyd/2020, 629 to 634/Hyd/2020 and 725 to 727/Hyd/2020 of hearing that it raises identical substantive grounds therein. No other grounds were pressed/argued before us. 6. These Revenue’s eighteen appeals are dismissed in above terms. A copy of this common order be placed in the respective case files. Order pronounced in the open court on 5th October, 2021. Sd/- Sd/- (L.P. SAHU) (S.S. GODARA) Accountant Member Judicial Member Hyderabad, Dt. 05.10.2021. * Reddy gp Copy to : 1. i) M/s. Kapil Chits (Kakatiya) Pvt. Ltd., H.No.2-5- 760,Subedari, Opp. District Collectors of Hanamkonda, Warangal-506001 ii) M/s. Kapil Chits (Hyderabad) Pvt. Ltd., H.No.51,52,53, Main Road, 9 th Phase, KHPB Colony, Kukatpally, Hyderabd- 500 072 iii) M/s. Kapil Chits (Kosta) Pvt. Ltd., H.No.4-6-4A, 1 st Floor, Mogal Rajapuram, Vijayawada-520 010 2. DCIT, Central Circle 2(3), Hyderabad. ACIT, Central Circle 2(3), Hyderabad. 3. Pr. C I T (Central), Hyderabad. 4. CIT(Appeals)-12, Hyderabad. 5. DR, ITAT, Hyderabad. 6. Guard File. By Order Sr. Pvt. Secretary, ITAT, Hyderabad.