Facts of case:
There is Indian company which is in business providing the high-quality services in education, training and other related activities and method of training for impart of education for pre-schools for children. It proposes to enter contract with Educational trust ( Say X) to provide the aforesaid services for a period of thirty years on an exclusively basis. However, the Indian Co. is required to pay 5 crores as fixed fees to X since the X will avail educational services from Indian Co. only for 30 years. Also The Indian Co. is free to provide similar educational services to other Educational trust but it that other Educational trust should not be within 3 kilometer of X educationl service.
This fees is not in nature of non compete in nature as Indain Co is free to provide similar servies to other educational service provider subject to condition of 3 kilometer criteria as above.
Query
Whether the Fixed fee of 5 cores will be allowed as dedcution as revenue expenses under Income tax? Or will depreciation will be allowed under intangible asset? please provide your views in support of case law.
Regards
Siddharth
CAclubindia
