This is appeal by Department against order of learned CIT(A), relating to asst. yr. 1994-95. following grounds have been taken by Department in its appeal. Briefly stated, facts are that assessee company was originally incorporated as Synergy Credit Corporation Ltd., was in business of finance w.e.f. 1st April, 1993, relevant to asst. yr. 1994-95. It purchased business of computer software along with certain assets and liabilities belonging to Login Systems Innovations (P) Ltd. (LSI) for sum of Rs. 6 lakhs. four directors of LSI were Shri Krishna Badrinath, Shri Ian Peter Morris, Shri D.V. Subramaniam and Shri M.M. Diwan. first three had their education in business management while fourth one did post graduation in computer mathematics. Shri Peter Morris also did graduation in electronics engineering. In jobs they did after their education, all of them gained experience in implementation, designing, development of software which prompted them to set up in October, 1990, their own software business styled as LSI. But, unable to make satisfactory progress in business, they allowed their company to be taken over by this assessee company. During short period of its existence, LSI did some preliminary work in developing some technical knowledge basis of software in banking sector. It earned some income by way of consultancy and development of customized software to banks. turnover during year 1993 was Rs. 28 lakhs. Before formal takeover of LSI by appellant-company w.e.f. 1st April, 1994, four directors of LSI entered into separate agreements with assessee on 15th Oct., 1993. following were important terms of agreement: "1. This agreement shall come into force on 15th Oct., 1993, for period of 5 years with respect of first party. consideration payable to first party for restrictive covenant shall be Rs. 21 lakhs (Rupees twenty one lakhs only), which shall be payable by second party in cash as per time schedule to be mutually agreed upon and in any case not beyond 12 months from date of this agreement. first party shall not carry on business of computer software development and marketing and other related business for above-mentioned period in consideration of having received cash to extent mentioned above. restrictive covenant hereby agreed between parties shall be in force not only in territory of India but also in other countries of world." This agreement was termed as restrictive covenant. assessee claimed sum of Rs. 84 lakhs paid to four directors, s deduction from its income for asst. yr. 1994-95. AO treated it as capital expenditure and added it to income returned by assessee. dispute in this appeal centres around issue as to whether amount paid by assessee was capital or revenue expenditure. following reasons were given by AO for treating payment of Rs. 84 lakhs as capital expenditure: (a) "The assessee company by taking over business of M/s Login Systems and by ensuring uninterrupted service of four professionals with whom restrictive covenant agreements were signed, has added significant value to its business." This is evident from fact that software division contributed 22 per cent of total income during 1993-94 which shot upto 43 per cent in following year. This was attributable, according to AO to induction of four professionals. (b) computer software product in treasury operation named as "FISTS", developed by these four professionals is leading product in market. This is software for securities dealing activities of bank. assessee company after inducting these four professionals launched product called "Synergy" which is very specialized analytical tool for financial institution. Subsequently, this group has developed very complex integrated treasury software called ITMS which covers whole area of treasury including foreign exchange in integrated manner in addition to securities modules. This professional group in assessee company is now in final stage of developing specific software for mutual funds called "Fund Manager". (c) restrictive covenant fees paid has to be analysed in conjunction w i t h taking over of business of company in which these four professionals were promoters. restrictive covenant fees was paid for purpose of availing exclusive rights of services of these professionals for period of 5 years from 15th Aug., 1993. (d) payment was made to avail exclusive rights to service of assessee company for period of 5 years and to ward off competition and to ensure continuous association and services of these four professionals for business interest of company. Therefore, this payment is distinctly in nature of capital expenditure. assessee cited following case law in support of its contention that expenditure of Rs. 84 lakhs incurred was revenue in nature: (i) CIT vs. Late G.D. Naidu by LRs (1986) 51 CTR (Mad) 256: (1987) 165 ITR 63 (Mad); (ii) Champion Engineering Works Ltd. vs. CIT (1971) 81 ITR 273 (Bom); (iii) CIT vs. Coal Shipments (P) Ltd. 1972 CTR (SC) 151: (1971) 82 ITR 902 (SC); (iv) CIT vs. Travencore Sugars & Chemicals Ltd. 1973 CTR (SC) 49: (1973) 88 ITR 1 (SC); (v) Assam Bengal Cement Co. Ltd. vs. CIT (1955) 27 ITR 34 (SC); (vi) Lakshmiji Sugar Mills Co. (P) Ltd. vs. CIT (1971) 82 ITR 376 (SC); (vii) CIT vs. Panipat Woollen & General Mills Co. Ltd. 1976 CTR (SC) 317: (1976) 103 ITR 66 (SC); (viii) Empire Jute Co. Ltd. vs. CIT (1980) 17 CTR (SC) 113: (1980) 124 ITR 1 (SC). AO discussed at considerable length as to why decision of Madras High Court in case of Late G.D. Naidu (supra) decision of Bombay High Court in case of Champion Engg. Works Ltd. (supra) and decision of Supreme Court in case of Coal Shipments (P) Ltd. (supra), do not apply to facts of present case. Without making any further discussion, he held that other cases cited by learned counsel for assessee also do not apply to present case. AO, however, held that ratio of following decisions support his finding that payment in question was capital expenditure: (i) Blaze & Central (P) Ltd. vs. CIT (1979) 120 ITR 33 (Mad); (ii) CIT vs. Hindustan Pilkington Glass Works (1981) 24 CTR (Cal) 327: (1981) 139 ITR 581 (Cal). common thread of reasoning found by AO in all these decisions is that payment made to ward off competition is in nature of capital expenditure. assessee preferred appeal before learned CIT(A) and contention before AO were reiterated before learned CIT(A) by learned counsel for assessee. Reliance was placed on various case law also. After considering order of AO and contentions raised before learned CIT(A), learned CIT(A) found that assessee deserves to succeed in this appeal on issue involved. learned CIT(A) has analyzed various decisions relied upon by learned counsel for assessee as well as AO and also analyzed benefits derived by assessee company on account of payment of Rs. 84 lakhs made to 4 persons. Thereafter, learned CIT(A) drew conclusion that payment of Rs. 84 lakhs is not capital in nature but revenue in nature. case law relied upon by AO were found distinguishable on facts and various other case law placed by learned counsel for assessee were found in favour of assessee. Against findings of learned CIT(A), Department is now in appeal before Tribunal. learned Departmental Representative, firstly, kly placed reliance on order of AO. Attention of Bench was drawn at para 2 of p. 2 of assessment order. It was further submitted that assessee started its business activity now and for starting new business, any expenditure incurred on acquiring assets or knowledge has to be treated as expenditure as capital in nature. Therefore, it was submitted that AO was correct in treating expenditure incurred by assessee as capital in nature. Reliance was placed on decision relied upon by AO in Blaze & Central (P) Ltd. s case (supra) and Hindustan Pilkington Glass Works s case (supra). Regarding case law relied upon by learned counsel for assessee which were considered by learned CIT(A) was stated to be distinguishable on facts of present case. It were also added that whole of amount, i.e., Rs. 90 lakhs [Rs. 6 lakhs (+) Rs. 84 lakhs] were spent by assessee for buying company, therefore, same was capital in nature. It was also submitted that it was device on part of company payments were made to 4 individuals just to give colourable device so that amount of Rs. 90 lakhs which was in capital in nature to be treated by assessee as revenue in nature. learned counsel for assessee who appeared on behalf of assessee, firstly, kly placed reliance on order of learned CIT(A). It was further submitted that contention of learned Departmental Representative that it was device in showing payment in four names neither this was case of AO nor it was discussed at any stage either before AO or before learned CIT(A). Therefore, stand of learned Departmental Representative that it was device, should not be accepted. In support of this contention, it was submitted that nothing has been brought on record that it was device, therefore, making just argument that it was device cannot be and should not be taken into consideration. It was submitted that assets and liabilities of company was taken over by assessee for sum of Rs. 6 lakhs. It was further submitted that there were only two computers and there were no stocks at all. Accordingly, value of total assets was arrived at Rs. 6 lakhs and they were taken for Rs. 6 lakhs. Therefore, assessee itself has shown amount of Rs. 6 lakhs as capital in nature. Attention in this regard was invited to copy of balance sheet at p. 31 of paper book. It was further submitted that 4 persons to whom payment of Rs. 21 lakhs each was made are independent in their own capacity and all 4 persons are highly qualified and can be said to be institution in itself. It was further submitted that sum of Rs. 21 lakhs each was paid to 4 individuals to prevent to start their own business in same line in which assessee company has started business. four persons are so highly qualified that they can develop and start their own business thereself. After making payments to 4 persons and then taking them into business of assessee company, assessee company started business within six months and have shown progressive work. It was further submitted that payment was not in lieu of any fixed assets, therefore, same has to be treated as revenue in nature and learned CIT(A) was right in holding that payment made by assessee was revenue in nature. Further reliance was placed on various case law considered by learned CIT(A) and on decision reported in 232 ITR 944 (sic). It was further added that in this case SLP filed by Department has been dismissed by Supreme Court. We have heard rival submissions and considered them carefully. We have also considered orders of authorities below and various case laws considered by both lower authorities. After considering submissions, case law and orders of authorities below, we find that learned CIT(A) was correct in holding that payment of Rs. 84 lakhs was in revenue account. We, however, noted that learned CIT(A) has examined issue from both angles that whether nature of payment is capital in nature or in revenue in nature. learned CIT(A) has recorded observations in his order somewhere that this is case of capital versus revenue and thereafter he examined issue and found that payment made by assessee was of revenue in nature. In para 7, learned CIT(A) has observed that it is really difficult to analyze plethora of cases cited on both sides and apply ratio of those decisions to facts of present case, especially where issue pertains to perennial controversy of capital expenditure versus revenue expenditure. It is all more difficult to apply earlier decisions of Courts to present case because here business involved is in substance whereas earlier decisions were mostly in relation to manufacturing business. criterion applied in cases of traditional business cannot be applied in respect of software business. facts and circumstances of case pertaining to assessee s business cannot be applied in respect of software business. facts and circumstances of case pertaining to assessee s business in software have to be borne in mind in deciding issue in this appeal. Thereafter, learned CIT(A) has observed observations made in case of Travencore Sugar & Chemicals Ltd. (supra) which was relied upon by AO at para 2.28 at p. 15 of assessment order. "In considering nature of expenditure incurred in discharge of obligation under contract or statute or decree or some similar binding convenant, one must avoid being caught in maze of judicial decisions rendered on different facts and which always present distinguishing features for comparison with facts and circumstances of case in hand. Nor would it be conducive for clarity or for reaching logical result if we were to concentrate on facts of decided cases with view to match colour of that case with that of case which requires determination. surer way of arriving at just conclusion would be to first ascertain by reference to document under which obligation for incurring expenditure is created and thereafter to apply principle embalmed in decisions of those facts. Judicial statements of facts of particular case can never assist Courts in construction of agreement or statute which was not considered in those judgments or to ascertain what intention of legislature was. What we must look at is contract or statute or decree in relation to its terms, obligation imposed and purpose for which transaction was entered into." Thereafter, learned CIT(A) has observed in para 8 that having realized that there was lot of confusion and lots of misapprehensions about scope of impact of agreements entered into by assessee company with four persons and actual role played by them in development of assessee s software business, Shri Sanjay Kumar, managing director of assessee company personally appeared in course of hearing of this appeal and clarified many points both orally and in writing. Shri M.M. Diwan, former director of taken-over company, also appeared and gave further clarifications. following facts emerged from these discussions and clarifications. facts from arguments and submissions of Shri Sanjay Kumar, managing director and Shri M.M. Diwan, former director of taken-over company were discussed by learned CIT(A) in forgoing paras at pp. 7 and 8 which can be seen hereunder: "The appellant-company, originally incorporated as Synergy Credit Corporation Ltd., was in business of finance. With effect from 1st April, 1993, relevant to asst. yr. 1994-95, it purchased business of computer software l o n g with certain assets and liabilities belonging to Login Systems Innovations Pvt. Ltd. (LSI) for sum of Rs. 6 lakhs. four directors of LSI were Shri Krishna Badrinath, Shri Ian Peter Morris, Shri D.V. Subramanian and Shri M.M. Diwan. first three had their education in business management while fourth one did post graduation in computer mathematics. Shri Peter Morris also did graduation in electronics engineering. In jobs they did after their education, all of them gained experience in implementation, designing, development of software which prompted them to set up, in October, 1990, their own software business styled as Login Systems Innovations (P) Ltd. But unable to make satisfactory progress in business they allowed their company to be taken over by this appellant-company. During short period of its existence, LSI did some preliminary work in developing some technical knowledge basis of software in banking sector. It earned some income by way of consultancy and development of customized software to bank. turnover during year 1993 was Rs. 28 lakhs. In order to bring into correct perspective nature of expenditure incurred as per restrictive covenant agreements and actual benefit derived therefrom, following note was submitted by Shri Sanjay Kumar, managing director of assessee company: restrictive covenant agreement is only negative agreement that restrains recipient from carrying on specific business for specified time. This is because company was proposing to make significant investment in that line of business viz. developing software products for treasury (called ITMS), mutual funds (called Fund Manager) and financial analytics (called Synergy). Contrary to what is stated in assessment order, four recipients were not compelled to work only for company in period of 5 years. They were at liberty to quit and work elsewhere. In fact, Ian Morris, one of four resigned before 5 years period elapsed. consideration paid was not towards ensuring their services for period of time. Further, each of them was paid handsome compensation during their employment. Contrary to what is stated in assessment order, business of software did not develop only because of four people. In fact, four people had conducted similar software business for 6 years prior to acquisition by Synergy Long-in System Ltd. and had achieved turnover of only Rs. 28 lakhs in 1993. While in period 1994-1998, Synergy Log-in Systems Ltd., turnover has grown to Rs. 7.8 crores. Contrary to what is stated in assessment order, software business has grown not only because of expertise of 4 recipients in banking software, in fact 2 of 3 products, viz., Fund Manager and Synergy are in areas which t h e four had no prior expertise. In product Synergy it was principal promoter s expertise in finance that enabled product to be developed. product development effort involved not just 4 recipients but also upto 50 other financial and technical team members. total of over 175 man years have been spent till date of which only 25 man years are attributable to recipients. Contrary to what is stated in assessment order, existing products FISTS and FESTRA were not sophisticated generalized solutions but were more i n nature of products. code was transferred from client to client with numerous changes. It was only after acquisition that large team of professionals were assembled and newer products were developed. To summarise, on no grounds was any benefit of enduring nature obtained by entering into restrictive agreement, recipients were not compelled to work only for company and growth in business thereafter was due to number of factors other than mere presence of recipients." After examining contents of letter and other submissions of learned counsel for assessee, learned CIT(A) drew inference that mastermind of company was Shri Sanjay Kumar, and who paid amount to these 4 persons so that assessee company could achieve by taking over LSI and enlisting services of 4 professionals to assessee company after pre-empting availability of their services to any rivals in field. learned CIT(A) further drew inference from written note filed on behalf of assessee that restrictive covenants were only negative agreements in sense that 4 experts were prevented from working for others in field of software for period of 5 years. Such negative agreements did not bring into existence any assets for assessee, not to speak of any asset of enduring advantage that justifies treatment of expenditure in question as capital expenditure. 4 recipients were under no obligation to work for assessee company as per terms of restrictive covenant agreements and hence, question of any advantage of enduring benefit accruing to assessee as result of those agreements, did not arise. purpose of restrictive agreements was to prevent others, including recipients, from gaining any advantage from their expertise in field of software. inferences neither have been controverted by learned Departmental Representative nor any other material was brought on record from which these observations of learned CIT(A) could be established otherwise. Any advantage derived by assessee from services of these four persons was unrelated to restrictive covenant agreements. Their recruitment into company was like any other recruitment effort of company and they were at liberty not to work for company and work elsewhere in other lines of vocation. Apart from these four, assessee recruited scores of other software professionals and there was no difference between recruitment of four from others. Thus when once covenant agreements and subsequent recruitment of these four persons are considered to be unconnected events, any advantage derived by assessee out of their services cannot be linked up with restrictive covenant agreements. Hence, amounts paid by assessee as result of agreements cannot be treated as capital expenditure on ground that company derived any enduring advantage out of such services. Written note was filed before learned CIT(A) wherein it was mentioned as under: "There is no link between acquisition of business of M/s Log-in System and employment of four technical professionals and payment of non-compete fee. appellant-company need not have taken over four professionals while acquiring assets and liabilities of M/s Log-in Systems. However, since four persons were already renowned in field of computer software, appellant-company felt that it would be useful to employ four professionals in their company and with view to ensure that four professionals do not leave company and also do not compete with business of company sum of Rs. 21,00,000 lakhs for each professional was paid as non-compete fee." After considering these submissions of assessee whereby it was clarified that software business of assessee did not develop only because of 4 persons as prior to joining assessee company they could not make much headway in this line of business which obviously prompted them to sell their company LSI to assessee and join it on separate remuneration packages, large number of other software specialists were also recruited by assessee to develop completely new products like Fund Manager and Synergy in which they had no prior expertise. We further noted that it was clarified before learned CIT(A) that in log-in systems they could not develop any concrete product but only did some preliminary work in developing technical knowledge basis for banking sector. That company earned some income from providing consultancy services and customized software to clients. principal promoter of assessee company Mr. Sanjay Kumar s expertise in field of finance as contributory factor to development of these products was as crucial as contribution of these 4 persons and other software specialists recruited by assessee company. Therefore, in view of all these facts and circumstances, it is clear that organizational financial, managerial and intellectual resources were provided by assessee company that largely contributed to development of software products which sustained assessee company in spite of dismal performance of finance wing. success of software division of company, therefore, cannot be attributed to 4 persons only, much less to negative character of restrictive covenant agreements. Therefore, it is clearly established that Rs. 84 lakhs paid by assessee were not in nature of capital expenditure but were in nature of revenue expenditure. We further noted that learned CIT(A) has examined this issue in light of various decisions pronounced by apex Court as well as various High Courts and then distinction was drawn that expenditure of Rs. 84 lakhs incurred by assessee was of revenue in nature. learned CIT(A) while holding so, has taken into consideration various case law relied on by AO as well as learned counsel for assessee. These decisions discussed by learned CIT(A) are from paras 18 to 23 and thereafter finding of learned CIT(A). To avoid brevity, we would like to incorporate all those paras in our order hereunder: "18. I am not impressed with arguments advanced by AO as to applicability of case law cited by him in support of his finding that expenditure of Rs. 84 lakhs in this case was capital in nature. In cases of Blaze & Central (P) Ltd. vs. CIT (1979) 120 ITR 33 (Mad) and CIT vs. Hindustan Pilkington Glass Works (1981) 24 CTR (Cal) 327: (1981) 139 ITR 581 (Cal), amounts were paid by respective assessee to ward off competition by preventing other parties in same line of business from carrying on their businesses. In case of Travancore Sugars & Chemicals Ltd. 1973 CTR (SC) 49: (1973) 88 ITR 1 (SC), Supreme Court held that any expenditure incurred to acquire profit making apparatus of business assets should be allowed as revenue expenditure. In fact this decision, relied upon by AO is in favour of assessee. In case of CIT vs. Jalan Trading Co. (P) Ltd. (1985) 47 CTR (SC) 182: (1985) 155 ITR 536 (SC), expenditure in question was made for initial outlay for acquisition of capital asset and hence was held to be capital expenditure by Supreme Court. Such is not case here. cases of Champion Engineering Works Ltd. vs. CIT (1971) 81 ITR 273 (Bom) and CIT vs. Late G.D. Naidu by LRs (1986) 51 CTR (Mad) 256: (1987) 165 ITR 63 (Mad), relied upon by assessee, are analogous to assessee s case. In those cases payments were made to individuals to prevent them from carrying on any profession or business that might offer competition to respective business of assessee. Courts held such expenses to be revenue in nature as they did not bring into existence any assets of enduring advantage to payers of amounts. assessee s counsel also cited decisions of Tribunal in cases of Modipon Ltd. vs. IAC (1995) 52 TTJ (Del) 477 and Pathare Dhru & Co. vs. Asstt. CIT (1995) 54 ITD 746 (Bom) in support of his contention that amounts paid to retired employee or retiring partners for restraining them from entering into competitive business were held to be revenue expenditure. In this connection, principle relating to test of enduring benefit laid down by Supreme Court in case of Empire Jute Co. Ltd. vs. CIT (1980) 17 CTR (SC) 113: (1980) 124 ITR 1 (SC) may be referred to. In that case, assessee purchased loom hours from 4 mills for purpose of its manufacturing and claimed it as revenue expenditure which was upheld by Supreme Court. Though facts in this case are not identical to facts in case of present appellant, following principle laid down by Supreme Court is of universal application: There may be cases where expenditure, even if incurred for obtaining advantage of enduring benefit, may, nonetheless, be on revenue account and t h e test of enduring benefit may break down. It is not every advantage of enduring nature acquired by assessee that brings case within principle laid down in this test. What is material to consider is nature of advantage in commercial sense and it is only where advantage is in capital field that expenditure would be disallowable on application of this test. If advantage consists merely in facilitating assessee s trading operations or enabling management in conduct of assessee s business to be carried on more efficiently or more profitable while leaving fixed capital untouched, expenditure would be on revenue account, even though advantage may endure for indefinite future. test of enduring benefit is, therefore, not certain or conclusive test and it cannot be applied blindly and mechanically without regard to particular facts and circumstances of given case. distinctive facts of appellant s case should be borne in mind. sum of Rs. 6 lakhs paid by assessee for acquiring business of Synergy Log-in Innovations Systems was not claimed as revenue expenditure. What was claimed as revenue expenditure was amounts paid to four experts preventing them from working for anybody else as per terms of restrictive covenant agreements entered into with them. agreements did not oblige them to work in appellant-company. They were agreements negative in character. They did not bring into existence any asset of enduring benefit to assessee in capital field. It was expenditure laid out wholly and exclusively for purpose of earning profit in assessee s business and hence can be characterised only as revenue expenditure. total income determined by AO is, therefore, reduced by Rs. 84,00,000." As stated above, learned CIT(A) has discussed decisions relied upon by AO as well as by learned counsel for assessee and then only came to conclusion that expenditures incurred by assessee are revenue in nature. Sometimes it is seen that there are decisions favouring both, i.e., assessee and Department on issue. However, where two possible views are available, then view favouring assessee should be adopted as held by Hon ble Supreme Court in case of CIT vs. Vegetable Products Ltd. 1973 CTR (SC) 177: (1973) 88 ITR 192 (SC). However, in instant case, we have seen facts and found that these are nearer to cases, which are in favour of assessee. Therefore, in view of these facts and circumstances and in view of detailed reasoning given by learned CIT(A), we confirm his order. In result, appeal is dismissed. *** JOINT COMMISSIONER OF INCOME TAX v. SYNERGY CREDIT CORPN. LTD.