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12-06-2019, Compass Group (India), Section 32( l)(ii), 32, Tribunal Chennai

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5 days 20 hours ago #9737 by amit
Section - 32( l)(ii), 32, 2(24)(x), 37, 139(1)
Order Date - 12-06-2019
Favouring - Assessee
Court - Tribunal Chennai
Appellant - DCIT
Respondent - Compass Group (India) Support Services P. Ltd.
Justice - GEORGE MATHAN JM & S. JAYARAMAN AM
Citation - 619Taxpundit153
Appeal No. - I.T.A. Nos. 3312 to 3314/CHNY/2018
Asstt. Year - 2012-13 to 2014-15

Order

PER : S. JAYARAMAN

The Revenue filed the above appeals against the orders of the Commissioner of Income Tax(Appeals)-4, Chennai in ITA Nos.370,369 & 371/2016-17 dated 27.09.2018 for the assessment years 2012-13, 2013-14 & 2014-15 respectively, while the assessee filed cross objection against the order related to assessment year 2013-14.

2. Campus Group (India) Support Services Pvt. Ltd., formerly known as Epicurean Enterprises Pvt. Ltd., is engaged in the business of providing catering, facility management and other services to camps, onshore and offshore oil fields, schools and universities, office establishments and hospitals. During the financial year 2009-10, the assessee had been acquired by Compass Group (Singapore) Pte Limited vide a share purchase agreement dated 31.03.2009. Pursuant to it, the assessee had executed a non-compete agreement dated 23.04.2009 with Mr. Darayes P Dalal, Mr. N.S. Udaykumar and Compass Group (Singapore) Pte Limited formerly Stamfless Food Management Pte Limited, Singapore providing that Mr. Darayes P Dalal and Mr. N.S. Udaykumar (‘Covenanters’) should not engage in any competing business. Pursuant to the non-compete agreement, the Covenanters were entitled to receive non-compete fee. Accordingly the assessee paid a non-compete fee and claimed them as revenue expenditure debiting the P&L account as an exceptional item. However, while computing the taxable income, the assessee voluntarily disallowed it but claimed depreciation at the rate of 25% U/s.32 of the Act, considering the payment towards non-compete fee as intangible asset. While making the assessments for the assessment years 2012-13, 2013-14 & 2014-15, the Ld.AO refused to allow the non-compete fee. He refused to allow the assessee’s alternate claim that if the impugned claim is not allowed, the entire payment may be considered U/s.37 of the Act, as revenue expenditure. Further, the Ld.AO noticed that the assessee failed to credit the employees’ contribution to PF & ESI in time for the assessment years 2013-14 & 2014-15. Therefore, he disallowed them.

3. Aggrieved against these orders, the assessee filed appeals before the Ld.CIT(A). The Ld CIT(A) passed consolidated orders. On the disallowance of depreciation on the non-compete fee, the Ld.CIT(A) found that this Tribunal, following the decision of the Hon’ble Jurisdictional Madras High Court in Pentasoft Technologies Ltd. vs. DCIT (2014) 41 taxmann.com, 120 in the assessee’s own case in ITA Nos.2064 & 2924/Mds/2016 for the assessment years 2010-11 & 2011-12 directed the Ld.AO to grant depreciation on non-compete fee paid by the assessee. Therefore, following the order of the ITAT, the Ld.CIT(A) directed the Ld.AO to grant depreciation on the non compete fee paid by the assessee. In respect of disallowance of belated PF & ESI contribution made U/s.36(1)(va) for the assessment years 2013-14 & 2014-15, the Ld.CIT(A) found that the assessee had deposited employees’ contribution to PF & ESI after the due dates specified in the respective Act. However, the assessee deposited them before the due date of filing the return of income under the Income Tax Act, 1961. Therefore, following the decision of the Hon’ble Jurisdictional Madras High Court in the case of CIT vs. M/s. Industrial Security & Intelligence India Pvt. Ltd , (Appeal No.585 and 586 of 2015 dated July 24,2015) and the decision of the Hon’ble Delhi High Court in the case of CIT vs. AIMIL Limited [2010] 321 ITR 508 (Delhi), directed the Ld.AO to verify once again whether the impugned amounts were remitted to government exchequer within the due date for filing of return of income U/s.139(1) of the Act. Subject to this verification, he allowed the appeals of the assessee.

4. Aggrieved against these orders, the Revenue filed these appeals with the following common grounds:-

1. The order of the Ld. CIT(A) is contrary to law, facts and circumstances of the case.

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