CIT Vs. EVEREST ADVERTISING (P) LTD.

JUDGEMENT

(1.) TWO questions of law raised by the revenue in this appeal read thus:

(2.) ONE Mr. Darius Kapadia Chairman and full -time Director of the respondent -assessee company had resigned from the service of the company in the assessment year in question. According to the assessee, exit of Mr. Darius Kapadia from the service of the assessee company would be detrimental to the interest of the business unless he was restrained from carrying on similar business. Accordingly, a sum of Rs. 67,50,000 was paid by the assessee to the said out going Chairman thereby restraining him from competing with the business of the assessee for a period of three years. As per the said agreement Mr. Kapadia was not to enter into any relationship of any industry including the provisions of advertisement services, advisory services, financial services, employment services with any of the appellants clients and sister concerns of its clients etc. According to the revenue, the payment of Rs. 67.50 lacs could not be allowed as revenue expenditure as the expenditure was capital in nature.

(3.) THE ITAT in Para -13 of its order has recorded a finding that the object of making payment was to derive an advantage by eliminating the competition over a period of three years and the said period cannot be considered as sufficiently long period so as to ward off competition from Mr. Kapadia for a long time in future or forever so as to hold that benefit of enduring nature is received from such payment. The Tribunal has recorded a finding that exit of Mr. Kapadia would have immediate impact on the business of the assessee -company and in order to protect the business interest the assessee had paid the said amount to ward off the competition. In our opinion, the decision of the Tribunal is based on finding of facts and therefore, first question cannot be entertained.