Business acquisition - non-compete fee paid - whether capital or revenue expenditure

Facts:

Assessee acquired the fuse and fuse fittings business from GE and had to pay Rs. 3.21 crores towards non-compete fee and for customer lists, orders etc to GE. They claimed the entire amount as a revenue expenditure under section 37. AO and CIT(A) held that the payment of non-compete fee etc. cannot be seen as a standalone expenditure but is an integral part of the business and disallowed the same citing it a capital expenditure. On higher appeal by the assessee -

Held against the assessee that non-compete fee etc. was capital in nature but eligible for depreciation as intangible assets.

Ed. Note: Depreciation on intangible assets is also a vexed issue. The strategy to claim it as revenue spend is novel as eventually the revenue read it as capital expenditure and assessee got depreciation on the same.

Case: Eaton Power Quality (P) Ltd. v. Dy. CIT 2023 TaxPub(DT) 6828 (Chny-Trib)