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No compete, no capital SC draws the tax line on non compete fees
MUMBAI: When competition steps aside, the taxman must too at least in this case. In a significant ruling that redraws the tax treatment of business restraints, the Supreme Court of India has held that payments made towards non-compete agreements qualify as revenue expenditure and are deductible under Section 37(1) of the Income-tax Act, 1961.
The verdict came in Sharp Business System vs Commissioner of Income Tax, a lead matter decided alongside a clutch of appeals raising identical questions of law. The case stemmed from a payment of Rs 3 crore made by Sharp Business System to Larsen & Toubro Limited, under which L&T agreed not to enter or assist any competing electronic office products business in India for seven years.
At the heart of the dispute was whether such a non-compete fee creates a capital asset or merely smoothens the path for business operations. Tax authorities had argued that the payment yielded an “enduring benefit” and therefore belonged in the capital field, warranting depreciation at best. Sharp, however, maintained that the payment neither created a new asset nor expanded its profit-making apparatus, but only protected its business from potential competition.
The Supreme Court sided with the taxpayer. It ruled that a non-compete fee is fundamentally a commercial tool to facilitate business efficiency, not a means to acquire ownership rights or monopoly power. Merely keeping a rival out, the Court observed, does not amount to creating a capital asset especially when there is no certainty that the expected commercial benefit will even materialise.
Crucially, the Court reiterated that the test of “enduring benefit” is not decisive by itself. If an expense helps a business operate more profitably without altering its fixed capital structure, it remains revenue in nature regardless of how long the advantage may last.
By overturning the earlier Delhi High Court ruling, the apex court clarified that non-compete payments do not automatically fall within the scope of depreciable intangible assets either. A negative covenant, the Court noted, is not a right that can be “owned” or “used” in the manner envisaged under Section 32 of the Act.
For corporates, the ruling lands as a welcome relief. It brings long-awaited clarity to the tax treatment of non-compete fees, an area that has fuelled years of litigation particularly in mergers, joint ventures and strategic exits. More importantly, it aligns tax law with commercial reality, where such payments are often defensive moves rather than asset-building investments.
In short, the Supreme Court has made it clear, keeping competition at bay may be smart business but it doesn’t make it capital.
NEW DELHI: Hamdard Laboratories gathered a cross-section of India’s achievers in New Delhi on Friday, handing out the Hakeem Abdul Hameed Excellence Awards to figures who have left their mark across healthcare, education, sport, public service and the arts.
The ceremony, attended by minister of state for defence Sanjay Seth and senior officials from the ministry of Ayush, celebrated individuals whose work blends professional success with a sense of public purpose. It was as much a roll call of achievement as it was a reminder that influence is not measured only in profits or podiums, but in people reached and lives improved.
Among the headline awardees was Alakh Pandey, founder and chief executive of PhysicsWallah, recognised for turning affordable digital learning into a mass movement. On the sporting front, Arjuna Awardee and kabaddi player Sakshi Puniya was honoured for her contribution to the game and for pushing women’s participation onto bigger stages.
The cultural spotlight fell on veteran lyricist and poet Santosh Anand, whose songs have echoed across generations of Hindi cinema. At 97, Anand accepted the honour with characteristic humility, reflecting on a life shaped by perseverance and hope.
Healthcare honours spanned both modern and traditional systems. Manoj N. Nesari was recognised for strengthening Ayurveda’s place in national and global health frameworks. Padma shri Mohammed Abdul Waheed was honoured for his research-backed work in Unani medicine, while padma shri Mohsin Wali received recognition for his long-standing contribution to patient-centred care.
Education and social development also featured prominently. Padma shri Zahir Ishaq Kazi was honoured for decades of work in education, while former Meghalaya superintendent of Police T. C. Chacko was recognised for public service. Goonj founder Anshu Gupta received an award for his dignity-centred rural development initiatives, and the Hunar Shakti Foundation was honoured for empowering women and young girls through skill development.
The Lifetime Achievement Award went to former IAS officer Shailaja Chandra for her long career in public healthcare and governance, particularly in the traditional systems under Ayush.
Speaking at the event, Hamdard chairman Abdul Majeed said the awards were a tribute to those who combine excellence with empathy. “These awardees reflect Hakeem Sahib’s belief that healthcare, education and public service must ultimately serve humanity,” he said.
Minister Seth struck a forward-looking note, saying India’s young population gives the country a unique opportunity to become a global destination for learning, health and wellness by 2047.
The ceremony also featured the trailer launch of Unani Ki Kahaani, an upcoming documentary starring actor Jim Sarbh, set to premiere on Discovery on 11 February.
Instituted in memory of Unani scholar and educationist Hakeem Abdul Hameed, the awards have grown into a national platform that celebrates those building a more inclusive and resilient India. For one evening at least, the spotlight was not just on success, but on service with substance.
