Section 40 of Income tax Act, 1961— Disallowance of depreciation on noncompete fee— The Revenue has proposed the following substantial questions of law for the consideration—

Whether ITAT has erred in upholding the order of the CIT(A) deleting the addition of Rs. 1,68,48,562/- made on account of disallowance of depreciation on noncompete fees ?

Whether ITAT erred in upholding the order of the CIT(A) deleting the addition made on account of disallowance u/s.40(a)(ia) of the Act for non deduction of tax on commission payable to foreign agents of Rs. 1,38,19,875/- ?”

Held that— the rights acquired by the assessee under the said agreement not only give enduring benefit, protected the assessee’s business against competence, that too from a person who had closely worked with the assessee in the same business. The expression “or any other business or commercial rights of similar nature” used in Explanation 3 to subsection 32(1)(ii) is wide enough to include the present situation.”

 The Tribunal therefore correctly held that there was no liability on the assessee to deduct tax at source. Merely because a portion of the sale to the overseas purchasers took place in India, would not change situation vis a vis the commission agents.[THE PRINCIPAL COMMISSIONER OF INCOME TAX 2 VERSUS FERROMATIC MILACRON INDIA PVT LTD.] [2019] 15 ITCD Online (59) [GUJARAT HIGH COURT]