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2024 (12) TMI 320 - HC - Income TaxDisallowance of depreciation for the trademark 'FABINDIA' u/s 32 - AO found that since the ALP of the asset FABINDIA had been determined at Nil, there was no question of claiming any depreciation in respect of the said asset - HELD THAT - Clearly, the acquisition of the trademark during the financial year 2006-07 could not possibly be treated as an international transaction within the meaning of Section 92B of the Act, which was entered into during the previous year relevant to the AY 2011-12. The transaction to purchase an asset is a singular transaction, if the same is an international transaction under Section 92B of the Act, the same may require to be benchmarked for determining the ALP under Section 92C of the Act. This determination is required to be made in the AY relevant to the previous year in which the said transaction was entered into. In view of the above, the order remanding the controversy to the TPO/AO to decide afresh as directed by the learned ITAT cannot be construed as a reference to the TPO in regard to the issue of determining the ALP of the transaction relating to purchase of the trademark FABINDIA. In terms of the order passed by the ITAT, the AO was required to examine the admissibility and the quantum of depreciation allowable in respect of the asset in question, namely, the trademark FABINDIA. Revenue has misconstrued the direction of the ITAT to mean that it required to make a reference to the TPO for the purpose of assessment for AY 2010-11. Since no international transaction was entered into in this year, the reference made by the AO is fundamentally flawed. The petitioner s challenge to the impugned order dated 28.01.2021 passed by the TPO under Section 92(CA) of the Act, is without jurisdiction. The same is accordingly set aside.
Issues:
1. Impugning an order passed by the Transfer Pricing Officer relating to assessment year 2011-12. 2. Claim of depreciation for the trademark 'FABINDIA' under Section 32 of the Income Tax Act. 3. Disallowance of depreciation by Assessing Officer based on Transfer Pricing Officer's findings. 4. Appeal before Commissioner of Income Tax (Appeals) and subsequent rejection. 5. Appeal before Income Tax Appellate Tribunal and subsequent remand for fresh examination. 6. Jurisdictional issue regarding the reference to Transfer Pricing Officer. 7. Request for directions to Assessing Officer to compute depreciation on trademark. Analysis: The petitioner challenged an order passed by the Transfer Pricing Officer (TPO) regarding the assessment year 2011-12, specifically focusing on the depreciation claim for the trademark 'FABINDIA' acquired during the financial year 2006-07. The TPO rejected the transfer pricing documentation and determined the arm's length price (ALP) of the international transaction as Nil, leading to disallowance of depreciation by the Assessing Officer. The petitioner's appeal before the Commissioner of Income Tax (Appeals) was unsuccessful on this issue, prompting an appeal before the Income Tax Appellate Tribunal (ITAT). The ITAT found fault with the TPO's determination of ALP and set aside the orders, directing a fresh examination. The ITAT emphasized that the TPO cannot decide on the business expediency of intangible assets purchased by the assessee. The ITAT's order remanded the matter to the Assessing Officer for reconsideration, focusing on the admissibility and quantum of depreciation for the trademark 'FABINDIA'. A key contention arose regarding the jurisdictional issue of the reference to the TPO for assessment year 2010-11, where no international transaction occurred. The court held that the reference made by the AO to the TPO was flawed, rendering the TPO's order under Section 92(CA) of the Act without jurisdiction. The court set aside the impugned order and clarified that the AO should reevaluate the depreciation claim in line with the ITAT's directions. In conclusion, the court disposed of the petition, emphasizing the need for the AO to reassess the depreciation claim on the trademark 'FABINDIA' in accordance with the ITAT's order and the present judgment, without issuing specific directions for computing depreciation on the written down value of the trademark as requested by the petitioner.
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