2022 (2) TMI 977 - AT - Income Tax

Addition of capital expenditure in the form of intangibles - HELD THAT - We noticed that the coordinate bench of the Tribunal in the case of Flipkart India Private Ltd. for AY 2015-16 2018 (5) TMI 337 - ITAT BANGALORE on the identical issue under consideration here held that the action of the Revenue cannot be sustained, as the Revenue has disregarded the book results and has presumed that the assessee had incurred expenditure in creating intangibles assets/brand or goodwill is without any basis. Tribunal held that the loss declared by the assessee in the return of income should be accepted by the AO and action of disallowing the expenses is without any basis. - Appeal of revenue dismissed.

Summary

Issues:
- Disallowance of capital expenditure in the form of intangibles
- Disallowance of depreciation claimed on assets sold as part of slump sale
- Disallowance under section 40(a)(i)

Issue 1: Disallowance of capital expenditure in the form of intangibles:
- The appellant, a wholesale dealer, was found selling goods at prices lower than the purchase price, leading the Assessing Officer (AO) to conclude that the appellant engaged in predatory pricing to create marketing intangibles and brand value. The AO calculated the valuation of the intangible asset based on presumed sale prices, disallowing an amount as capital expenditure. The Commissioner of Income Tax (Appeals) (CIT(A)) deleted this addition, citing precedents favoring the appellant and emphasizing the lack of basis for the AO's assumptions. The Tribunal upheld the CIT(A)'s decision, rejecting the Revenue's arguments and dismissing their Miscellaneous Petition (MP) as lacking merit.

Issue 2: Disallowance of depreciation claimed on assets sold as part of slump sale:
- The AO disallowed depreciation claimed on assets sold as part of a slump sale, resulting in a specific amount being added to the appellant's income. The CIT(A) upheld this disallowance, and since the appellant did not challenge this aspect, the Tribunal did not address it separately in the appeal. Therefore, the disallowance of depreciation stood uncontested in the final judgment.

Issue 3: Disallowance under section 40(a)(i):
- The AO made a disallowance under section 40(a)(i) for a specific amount, which was part of the overall additions to the appellant's income. The CIT(A) also upheld this disallowance, and as the appellant did not contest it further, the Tribunal did not delve into this issue separately. Consequently, the disallowance under section 40(a)(i) remained unchanged in the final decision.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition related to capital expenditure in the form of intangibles. The judgment highlighted the lack of merit in the Revenue's arguments, emphasizing the precedents favoring the appellant and rejecting the Revenue's attempts to challenge the previous decisions. The Tribunal's detailed analysis and reliance on established legal principles led to the dismissal of the Revenue's appeal, affirming the CIT(A)'s ruling on the specific issue at hand.