In Brief
This batch of civil appeals involved the classification of non-compete fees paid by companies to prevent competitors from engaging in similar business. The core issue was whether such payments constitute capital or revenue expenditure deductible under the Income Tax Act, 1961. The Supreme Court held that non-compete fees are revenue expenditure under Section 37(1) when they merely facilitate business conduct without creating capital assets or expanding the profit-earning apparatus. Duration of benefit is not determinative; what matters is whether the expenditure results in acquisition of a capital asset. The Court set aside the Delhi High Court's contrary judgment and remitted other cases to the ITAT for reconsideration. It also upheld the allowability of interest on borrowed funds advanced to subsidiary companies for commercial expediency under Section 36(1)(iii).
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