VF Brands India Private Limited, Bangalore V. The Assistant Commissioner of Income TAx Circle-7(1)(2), Bangalore

ITA 1285/BANG/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4995 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 09-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; Opportunity of being heard; International transaction; Set aside
• Section: 271(1)(c); 143(3); 234B; 143(1); 201; 144C; 72; 13; 32; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI B.R BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER IT(TP)A NO.1285/BANG/2017 ASSESSMENT YEAR : 2012-13 KONTOOR BRANDS PVT. LTD., [FORMERLY VF BRANDS PVT. LTD.] BAGMANE LAUREL, BLOCK B. LEVEL 9, 8 TH FLOOR, BAGMANE TECH PARK, CV RAMAN NAGAR, BENGALURU-560 093. PAN A ACCV 2727 L VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-4(1)(1), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI NAGESHWAR RAO, ADVOCATE REVENUE BY : SHRI PRADEEP KUMAR, CIT (DR) DATE OF HEARING : 16-08-2021 DATE OF PRONOUNCEMENT : 23-09-2021 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST O RDER DATED 28/01/2017 PASSED BY LD. ACIT CIRCLE 7 (1) (2 ), BANGALORE FOR ASSESSMENT YEAR 2011-12 ON FOLLOWING GROUNDS OF APPEAL: BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, KONTOOR BRANDS INDIA PRIVATE LIMITED [FORMERLY KNOWN AS VF BRANDS INDIA PRIVATE LIMITED] ('KONTOOR INDIA' OR 'ASSESSEE' OR 'APPELLANT') RESPECTFULLY CRAVES LEAVE TO PREFER AN APPEAL AGAINST THE ORDER ISSUED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 7(1)(2 ), BANGALORE (LD. PAGE 2 OF 11 IT(TP)A NO.1285/BANG/2017 AO'), DATED 28 JANUARY 2017 (SERVED ON THE APPELLAN T ON 13 APRIL 2017), UNDER SECTION 143(3) READ WITH SECTION 144C(13) OF THE INCOME TAX ACT, 1961 (ACT') IN PURSUANCE OF THE DIRECTIONS ISSUED B Y THE DISPUTE RESOLUTION PANEL ('DRP'), BANGALORE DATED 06 DECEMB ER 2016 (RECEIVED BY THE APPELLANT ON 23 DECEMBER 2016) UNDER SECTION 144C(5) OF THE ACT ON THE FOLLOWING GROUNDS: EACH OF THE FOLLOWING GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER: THE ASSESSMENT ORDER PASSED BY LD. AO IS INVALID AN D BAD IN LAW THE ASSESSMENT ORDER ISSUED UNDER SECTION 143(3) OF THE ACT DATED 28 JANUARY 2017 (SERVED ON THE APPELLANT ON 13 APRIL 2 017) BY THE LD. AO PURSUANT TO DRP DIRECTIONS UNDER SECTION 144C IS TI ME BARRED AND INVALID IN LAW 2. LD. AO HAS ERRED, IN ASSESSING THE TOTAL INCOME AT INR 15,40,63,273 AS AGAINST THE RETURNED INCOME OF INR NIL COMPUTED BY THE APPELLANT WITHOUT PREJUDICE TO THE ABOVE, WE HAVE PROVIDED BE LOW TRANSFER PRICING AND CORPORATE TAX GROUNDS: GROUNDS RELATING TO TRANSFER PRICING MATTER: 3. LD. AO/ TRANSFER PRICING OFFICER ('TPO')/ DRP ER RED IN LAW AND IN FACT, BY MAKING AN ADDITION OF INR 9,67,47,546 TO T HE TOTAL INCOME OF THE APPELLANT BY TREATING THE ADVERTISEMENT, MARKETING AND PROMOTION ('AMP') EXPENDITURE INCURRED BY THE APPELLANT AS AN INTERNATIONAL TRANSACTION 4. LD. AO/ TPO/ DRP ERRED IN LAW AND IN FACTS, BY C OMPUTING TRANSFER PRICING ADJUSTMENT BY APPLYING BRIGHT LINE TEST ('B LT') WHILE NAMING IT AS COST PLUS METHOD 5, CONTRARY TO DECISION OF HON'BLE COURTS, LD. AO/ TPO/ DRP ERRED IN LAW AND IN FACT, BY NOT SEPARATING SELLING EXPENSES FRO M OTHER AMP EXPENSES, FOR THE PURPOSE OF DETERMINING THE EXCESS AMP EXPEN DITURE 6. LD. AO/ TPO/ DRP HAS ERRED IN LAW AND IN FACT, B Y CONCLUDING THAT THE APPELLANT PROVIDES MARKETING SUPPORT PROVIDED TO IT S ASSOCIATED ENTERPRISES ('AES') AND MUST BE REMUNERATED WITH A MARK-UP FOR THE SAME, DISREGARDING THE FACT THAT THE APPELLANT IS A FULL-FLEDGED DISTRIBUTOR 7. LD. AO/ TPO/ DRP ERRED IN NOT FOLLOWING LAW LAID DOWN BY HON'BLE COURTS IN IDENTICAL SITUATION 8. LD. AO/ TPO/ DRP ERRED IN LAW, IN APPLYING BLT I N THE GARB OF COST PLUS METHOD CONSIDERING THE MARGINS EARNED BY FUNCT IONALLY DIFFERENT COMPANIES 9. LD. AO/ TPO! DRP FAILED TO APPRECIATE THAT EVEN IF THE INCURRENCE OF EXCESSIVE AMP EXPENDITURE IS CONSIDERED AS A SEPARA TE INTERNATIONAL TRANSACTION, THE APPELLANT HAS ALREADY BEEN ADEQUAT ELY REMUNERATED/ COMPENSATED FOR THE SAME. 10. LD. AO/ TPO / DRIP ERRED IN LAW AND IN FACT, BY TREATING THE AMP EXPENDITURE INCURRED BY THE APPELLANT AS A SEPARATE INTERNATIONAL TRANSACTION AND BENCHMARKING IT SEPARATELY, AS IN T HE ABSENCE OF ANY PAGE 3 OF 11 IT(TP)A NO.1285/BANG/2017 COMPUTATION MECHANISM PRESCRIBED UNDER THE ACT OR T HE RULES MADE THEREUNDER, THE MACHINERY PROVISION FAILS GROUNDS RELATING TO CORPORATE TAX MATTERS: 11. LD. AO! DRIP HAS ERRED IN LAW AND IN FACT, IN H OLDING THAT DESIGN & TECHNICAL KNOW-HOW, VENDOR NETWORK RELATIONSHIP AND CUSTOMER NETWORK RELATIONSHIP ACQUIRED AS A PART OF SLUMP SA LE ARE NOT ENTITLED TO DEPRECIATION UNDER SECTION 32(1)(II) OF THE ACT 12. LD. AO/DRP HAS ERRED IN LAW AND IN FACT, IN NOT APPRECIATING THAT THE APPELLANT HAD ACQUIRED THE BUSINESS OF ARVIND FASHI ONS LIMITED ('AFL'), AS A GOING CONCERN ON A SLUMP SALE BASIS, FOR A LUM P SUM CONSIDERATION WITHOUT ASSIGNING VALUES TO INDIVIDUAL ASSETS AND L IABILITIES IN SUCH SALE 13. LD. AO/ DRP HAS ERRED IN UPHOLDING DISALLOWANCE MADE IN RESPECT OF DEPRECIATION ON INTANGIBLES ON SURMISES AND CONJECT URES AND THEREFORE, THE ORDER ISSUED IS BAD IN LAW 14. LD, AO/ DRP HAS ERRED IN UPHOLDING THE DISALLOW ANCE MADE IN RESPECT OF DEPRECIATION ON INTANGIBLES, WITHOUT APP RECIATING THE SUBMISSIONS/ ARGUMENTS PUT FORTH BY THE APPELLANT D URING THE COURSE OF ASSESSMENT! DRP PROCEEDINGS 15. LD. AO/ DRP HAS ERRED IN NOT FOLLOWING THE PRIN CIPLE OF JUDICIAL DISCIPLINE AND ACCORDINGLY, THE ORDER ISSUED IS BAD IN LAW 16. LD. AO/ DRP HAS ERRED IN LAW AND IN FACT, IN HO LDING THAT ASSIGNMENT OF VALUES TO INTANGIBLE ASSETS IN THE BOOKS OF AFL IS NECESSARY FOR THE PURPOSE OF CLAIMING DEPRECIATION 17. LD. AO! DRIP HAS ERRED IN FACT, IN HOLDING THAT DESIGN & TECHNICAL KNOW-HOW HAS NOT BEEN ACQUIRED BY VF INDIA AND USED FOR THE PURPOSE OF ITS BUSINESS 18. LD. AO/ DRP HAS ERRED IN FACTS, IN OBSERVING TH AT NO RIGHT TOWARDS VENDOR NETWORK RELATIONSHIP AND CUSTOMER NETWORK RE LATIONSHIP HAS ACTUALLY ARISEN/ ACQUIRED BY VF INDIA PURSUANT TO S LUMP SALE 19. LD. AO! DRP HAS ERRED IN LAW, IN DISREGARDING T HAT VENDOR NETWORK RELATIONSHIP AND CUSTOMER NETWORK RELATIONSHIP IS I N THE NATURE OF 'ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF SIMILAR NATUR E' AND HENCE, AN INTANGIBLE ASSET UNDER SECTION 32(1 )(II) OF THE AC T 20. WITHOUT PREJUDICE TO THE ABOVE, LD. AO/ DRP HAS ERRED IN NOT APPRECIATING THAT IF CONSIDERATION PAID BY THE APPE LLANT FOR DESIGN & TECHNICAL KNOW-HOW, VENDOR NETWORK RELATIONSHIP AND CUSTOMER NETWORK RELATIONSHIP IS NOT FOUND TO BE INCLUDED WI THIN THE TERMS SPECIFIED UNDER SECTION 32(1)(II) OF THE ACT, THE S AME WOULD BE TREATED AS GOODWILL AND THEREFORE, ELIGIBLE FOR DEPRECIATION 21. WITHOUT PREJUDICE TO THE ABOVE, LD. AO/ DRP HAS ERRED IN NOT CONSIDERING THE SETTLED LAW THAT ONCE ANY ASSET HAS FORMED PART OF BLOCK OF ASSETS, THE VALUE IN THE SAID BLOCK SHOULD NOT B E ALTERED UNLESS THE CONDITIONS PRESCRIBED ARE SATISFIED PAGE 4 OF 11 IT(TP)A NO.1285/BANG/2017 22. LD. AO/ DRP HAS ERRED IN DISREGARDING THAT DEPR ECIATION UNDER SECTION 32 IS MANDATORY AND HAS TO BE ALLOWED TO TH E ASSESSEE AS PER EXPLANATION 5 TO SECTION 32 OF THE ACT 23. LD. AO/ DRP HAS ERRED IN LAW AND IN FACTS, BY N OT ALLOWING DEPRECIATION ON GOODWILL ACQUIRED AT THE TIME OF AC QUISITION OF BUSINESS OF AFL, WITHOUT APPRECIATING THAT GOODWILL IS COVER ED UNDER THE DEFINITION OF INTANGIBLE ASSET AS PROVIDED UNDER SECTION 32 (1 )(II) OF THE ACT 24. WITHOUT PREJUDICE TO THE ABOVE, LD. AO/ DRP HAS ERRED IN NOT APPRECIATING THAT EXCESS CONSIDERATION PAID OVER NE T ASSETS ACQUIRED ON ACQUISITION OF BUSINESS THROUGH SLUMP SALE WOULD BE CLASSIFIED AS AN INTANGIBLE ASSET! GOODWILL, ENTITLED TO DEPRECIATIO N AS PER THE PROVISIONS OF SECTION 32(1 )(II) OF THE ACT 25. LD. AO HAS ERRED, IN NOT FOLLOWING CBDT CIRCULA R NO. 14 (XL-35) IN RESPECT OF ASSESSEE'S CLAIM FOR DEPRECIATION ON GOO DWILL, WHICH MAKES IT INCUMBENT ON THE INCOME-TAX OFFICER TO GRANT RELIEF WHICH A TAXPAYER IS ENTITLED TO, THOUGH NOT MADE IN THE RETURN OF INCOM E 26. WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT P RAYS TO THE HONORABLE ITAT, BEING AN APPELLATE AUTHORITY TO ADMIT! CONSID ER VF INDIA'S CLAIM FOR DEPRECIATION ON GOODWILL NOT MADE BY WAY OF A RETUR N OF INCOME GENERAL GROUNDS 27. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, LD. AO HAS ERRED IN NOT GRANTING BENEFIT OF BROUGHT FORWARD LOSSES OF INR 1 ,16,05,65,133 PERTAINING TO AYS 2007-08, 2008-09, 2009-10 AND 201 0-11 AS PER THE PROVISIONS OF SECTION 72 OF THE ACT WHILE COMPUTING TAX LIABILITY ON ASSESSED INCOME 28. LD. AO/ DRIP HAS ERRED IN LAW AND IN FACTS, BY COMPUTING TAX LIABILITY OF INR 4,99,85,282 AND CONSEQUENTIAL INTE REST OF INR 2,38,71,312 AND INR 25,11,462 UNDER SECTION 234B AN D 234C OF THE ACT, RESPECTIVELY 29. LD. AO HAS ERRED, IN LAW AND IN FACTS IN INITIA TING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT THE APPELLANT SUBMITS THAT EACH OF THE ABOVE GROUND S IS INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. 2.1 AT THE OUTSET THE LD.AR AND THE LD. CIT DR SUBM ITTED THAT IDENTICAL ISSUES HAVE BEEN CONSIDERED BY COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2012-13 BY ORDER DATED 16/02/2021 IN ITA (TP) A NO. 2491/B/201 9. IT HAS BEEN SUBMITTED BY BOTH SIDES THAT NO NEW ISSUES HAV E BEEN RAISED IN THE PRESENT APPEAL. PAGE 5 OF 11 IT(TP)A NO.1285/BANG/2017 2.2 ON PERUSAL OF THE RECORD BASED ON THE SUBMISSIO NS MADE BY ASSESSEE AS WELL AS LD.CIT.DR, WE NOTE THAT IN THE PRESENT APPEAL BEFORE, FOLLOWING ISSUES ARISE. 1. TRANSFER PRICING ADJUSTMENT MADE IN RESPECT OF AMP EXPENDITURE AND 2. REJECTION OF DEPRECIATION CLAIMED ON INTANGIBLE ASS ETS. 2.3 IT IS SUBMITTED BY THE LD.AR THAT THERE IS NO A GREEMENT IN ORDER TO COMPUTE AMP IN THE HANDS OF ASSESSEE AND T HE ISSUE STANDS SQUARELY COVERED BY THE DECISION OF ORDERABL E DELHI HIGH COURT IN CASE OF MARUTI SUZUKI LTD. REPORTED IN 381 ITR 117. 2.4 WE NOTE THAT COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE (SUPRA) DECIDED BOTH THESE ISSUES AS UNDER : 4. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND MARKETING OF READYMADE GARMENTS. 5. WE SHALL FIRST TAKE UP THE SECOND ISSUE URGED BY THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O . NOTICED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.2,41,80 ,072/- ON INTANGIBLE ASSETS AS DETAILED BELOW: IT(TP)A NO.249 1/BANG/2019 THE A.O. NOTICED THAT THE ASSESSEE HAD CLAIMED DEPR ECIATION ON THE ABOVE SAID INTANGIBLE ASSETS IN THE PAST YEA RS ALSO AND THE SAME WAS DISALLOWED IN THOSE YEARS BY THE AO. ACCOR DINGLY, THE A.O. DISALLOWED THE ABOVE SAID CLAIM OF DEPRECIATION IN THIS YEAR ALSO, AFTER DISCUSSING IN DETAIL ABOUT THE MERITS OF CLAI M. THE LD. DRP CONFIRMED THE DISALLOWANCE BY FOLLOWING ITS DECISIO N RENDERED FOR PAGE 6 OF 11 IT(TP)A NO.1285/BANG/2017 ASSESSMENT YEAR 2012-13. 6. THE LD. A.R. SUBMITTED THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE COORDINATE BA NGALORE BENCH OF TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12 (ITA NO.42/BANG/2017 DATED 28.6.2019). AT THAT TIME THE NAME OF THE ASSESSEE WAS VF BRANDS INDIA PVT. LTD. AND EARL IER TO THAT THE ASSESSEE WAS KNOWN AS VF ARVIND BRANDS PVT. LTD. ID ENTICAL ISSUE WAS CONSIDERED IN ASSESSMENT YEAR 2008-09 BY AHMEDA BAD BENCH OF TRIBUNAL IN THE HANDS OF VF ARVIND BRANDS PVT. L TD. (ITA NO.1904/AHD/2013 AND CO 204/AHD/2013 DATED 1.1.2019 ). THE LD. A.R. SUBMITTED THAT THE DISALLOWANCE OF DEPRECI ATION MADE IN RESPECT OF ABOVE SAID INTANGIBLE ASSETS HAS BEEN DE LETED BY THE TRIBUNAL IN BOTH THE YEARS REFERRED ABOVE. IN AY 20 11-12 THE TRIBUNAL FOLLOWED THE DECISION RENDERED IN AY 2008-09. 7. WE HEARD LD. D.R. AND PERUSED THE RECORD. WE NO TICE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED IN THE ASSES SEES OWN CASE BY THE COORDINATE BENCH IN AY 2011-12 (REFERRED SUP RA) WHEN THE NAME OF THE ASSESSEE WAS M/S. VF BRANDS INDIA PVT. LTD. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE OPERATIVE PORTION OF THE ORDER OF THE TRIBUNAL IN RESPECT OF THIS ISSUE. 5. NOW THE ISSUE ON MERIT IS REGARDING ALLOWABILIT Y OF DEPRECIATION ON INTANGIBLE ASSETS. ON THIS ASPECT, THE ISSUE IS COVERED BY THE TRIBUNAL ORDER RENDERED IN THE CASE OF DCIT VS. V.F. ARVIND BRANDS PVT. LTD. (SUPRA). PARA NOS. 12 TO 12.5 OF T HIS TRIBUNAL ORDER ARE RELEVANT IN THIS REGARD AND HENCE, THE SAME ARE REPRODUCED HEREINBELOW. '12. THE NEXT QUESTION ARISES ABOUT THE ALLOWABILIT Y OF THE COST INCURRED BY THE ASSESSEE IN CONNECTION WITH THE BUS INESS. IN OUR VIEW, SUCH DEDUCTIONS CANNOT BE DISALLOWED ON A TEC HNICAL BASIS. SUPPOSING THE ASSESSEE DOES NOT ALLOCATE THE EXPENS ES UNDER THE HEAD DESIGN AND TECHNICAL KNOW-HOW AND IT PREFERS T O ALLOCATE THE SAME UNDER THE HEAD GOODWILL. THERE IS NO DISPUTE F OR THE DEPRECIATION ON THE GOODWILL AS HELD BY THE HONOURA BLE SUPREME COURT IN THE CASE OF SEMIFS SECURITIES LTD. REPORTE D IN 348 ITR 302 WHEREIN IT WAS HELD AS UNDER: 4. EXPLANATION 3 STATES THAT THE EXPRESSION 'ASSET' SHALL MEAN AN INTANGIBLE ASSET, BEING KNOW-HOW, PATENTS, COPYR IGHTS, TRADEMARKS, LICENCES, FRANCHISES OR ANY OTHER BUSIN ESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE. A READING THE WORDS 'ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' IN CLAUSE (B) OF EXPLANATION 3 INDICATES THAT GOODWILL WOULD FALL UNDER THE EXPRES SION 'ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF A SIMILAR NATURE'. THE PRINCIPLE OF EJUSDEM GENERIS WOULD STRICTLY APPLY WHILE INTERPRE TING THE SAID EXPRESSION WHICH FINDS PLACE IN EXPLANATION 3(B). PAGE 7 OF 11 IT(TP)A NO.1285/BANG/2017 5. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT ' GOODWILL' IS AN ASSET ITA NO. 42/BANG/2017 UNDER EXPLANATION 3(B ) TO SECTION 32(1) OF THE ACT. 6. ONE MORE ASPECT NEEDS TO BE HIGHLIGHTED. IN THE PRESENT CASE, THE ASSESSING OFFICER, AS A MATTER OF FACT, C AME TO THE CONCLUSION THAT NO AMOUNT WAS ACTUALLY PAID ON ACCO UNT OF GOODWILL. THIS IS A FACTUAL FINDING. THE COMMISSIONER OF INCO ME TAX (APPEALS) ['CIT(A)', FOR SHORT] HAS COME TO THE CONCLUSION TH AT THE AUTHORISED REPRESENTATIVES HAD FILED COPIES OF THE ORDERS OF T HE HIGH COURT ORDERING AMALGAMATION OF THE ABOVE TWO COMPANIES; T HAT THE ASSETS AND LIABILITIES OF M/S. YSN SHARES AND SECURITIES P RIVATE LIMITED IT(TP)A NO.2491/BANG/2019 M/S. KONTOOR BRANDS INDIA PVT. LTD., BANGALORE PAGE 9 OF 13 WERE TRANSFERRED TO THE ASSE SSEE FOR A CONSIDERATION; THAT THE DIFFERENCE BETWEEN THE COST OF AN ASSET AND THE AMOUNT PAID CONSTITUTED GOODWILL AND THAT THE A SSESSEE- COMPANY IN THE PROCESS OF AMALGAMATION HAD ACQUIRED A CAPITAL RIGHT IN THE FORM OF GOODWILL BECAUSE OF WHICH THE MARKET WORTH OF THE ASSESSEECOMPANY STOOD INCREASED. THIS FINDING HAS A LSO BEEN UPHELD BY INCOME TAX APPELLATE TRIBUNAL ['ITAT', FO R SHORT]. WE SEE NO REASON TO INTERFERE WITH THE FACTUAL FINDING. 7. ONE MORE ASPECT WHICH NEEDS TO BE MENTIONED IS T HAT, AGAINST THE DECISION OF ITAT, THE REVENUE HAD PREFE RRED AN APPEAL TO THE HIGH COURT IN WHICH IT HAD RAISED ONLY THE QUES TION AS TO WHETHER GOODWILL IS AN ASSET UNDER SECTION 32 OF THE ACT. I N THE CIRCUMSTANCES, BEFORE THE HIGH COURT, THE REVENUE D ID NOT FILE AN APPEAL ON THE FINDING OF FACT REFERRED TO HEREINABO VE. 8. FOR THE AFORE-STATED REASONS, WE ANSWER QUESTION NO.[B] ALSO IN FAVOUR OF THE ASSESSEE. 12.1 THUS IN OUR CONSIDERED VIEW THERE COULD NOT HA VE BEEN ANY DISPUTE REGARDING THE CLAIM OF DEPRECIATION ON THE GOODWILL AS DISCUSSED ABOVE. THEREFORE, IN OUR CONSIDERED VIEW, THE EXPENSES INCURRED BY THE ASSESSEE IN CONNECTION WITH THE BUS INESS CANNOT BE DISALLOWED MERELY ON THE GROUND THAT THESE HAVE BEE N CLAIMED UNDER DIFFERENT NOMENCLATURAL. THUS, WE HOLD THAT THE EXP ENSES HAVE BEEN INCURRED FOR THE BUSINESS THEN THE DEDUCTION HAS TO BE ALLOWED TO THE ASSESSEE UNDER THE PROVISIONS OF THE ACT. 12.2 WE ALSO NOTE THAT THE ASSESSEE HAS CLAIMED DEP RECIATION ON THE SAME INTANGIBLE ASSETS IN THE IMMEDIATELY PR ECEDING YEAR IN ITS INCOME TAX RETURN WHICH WAS PROCESSED UNDER SEC TION 143(1) OF THE ACT. THUS, IT IS CLEAR THAT THERE WAS WRITTEN D OWN VALUE OF THESE INTANGIBLE ASSETS WHICH WERE BROUGHT FORWARD IN THE YEAR UNDER CONSIDERATION. THUS, IN OUR CONSIDERED VIEW THE OPE NING WRITTEN DOWN VALUE IN THE YEAR CANNOT BE DISPUTED. IN THIS REGARD WE FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HON'BLE H IGH COURT OF PAGE 8 OF 11 IT(TP)A NO.1285/BANG/2017 BOMBAY IN CASE OF HSBC ASSET MANAGEMENT INDIA PVT. LTD. REPORTED IN 47 TAXMANN.COM 286 WHEREIN IT WAS HELD AS UNDER: 'HAVING PERUSED THIS APPEAL MEMO INCLUDING THE IMPU GNED ORDERS, ITA NO. 42/BANG/2017 WE ARE OF THE OPINION THAT THE DELHI HIGH COURT JUDGMENT HAS BEEN DELIVERED ON 5TH NOVEM BER 2012 AND THE IMPUGNED ORDER WAS PASSED ON 15TH JUNE 2011. TH E TRIBUNAL HAS ESSENTIALLY BASED ITS CONCLUSION ON THE CONSIST ENT STAND OF THE ASSESSEE AND THAT OF THE ASSESSING OFFICER. IN DEAL ING WITH THE SHIFT IN STAND FOR THE SUBJECT ASSESSMENT YEAR, THE TRIBU NAL FOUND THAT THIS CLAIM OF DEPRECIATION WAS RAISED IN THE ASSESSMENT YEAR 2003-2004. THE ASSESSEE CLAIMED THAT IT IS ALLOWABLE AS PER TH E PROVISIONS OF INCOME TAX ACT ON BLOCK OF ASSETS UNDER THE HEAD 'I NTANGIBLE ASSETS'. THE ASSESSING OFFICER ALLOWED THE CLAIM FOR THAT AS SESSMENT YEAR BY AN ORDER UNDER SECTION 143(3) DATED 28.03.2006. THE TRIBUNAL THEN, PROCEEDS TO HOLD THAT WHEN THE ASSESSING OFFICER HA D TO ALLOW DEPRECIATION ON THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS, THEN, IT CANNOT IN THE PRESENT ASSESSMENT YEAR DISPUTE THE O PENING WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS NOR CAN HE EXAMIN E THE CORRECTNESS OR OTHERWISE OF THE OPENING WRITTEN DOWN VALUE BROU GHT FORWARD FROM THE EARLIER YEAR. THE ORDER UNDER SECTION 143(3) FO R THE ASSESSMENT YEAR 20032004 CONTINUES TO OPERATE AND NO PROCEEDIN GS UNDER THE ACT WERE INITIATED TO DISTURB THE SAME.' 12.3 WE ALSO NOTE THAT THE LD. DR HAVE NOT BROUGHT ANYTHING ON RECORDS SUGGESTING THAT ANY ACTION AGAINST THE A SSESSEE WAS TAKEN UNDER SECTION 147 OF THE ACT ON ACCOUNT OF ES CAPEMENT OF INCOME. 12.4 IN VIEW OF ABOVE THERE REMAINS NO AMBIGUITY T HAT THE ASSESSEE IS ELIGIBLE FOR THE DEPRECIATION IN RESPEC T OF THE INTANGIBLE ASSETS AS DISCUSSED ABOVE. ACCORDINGLY, WE DO NOT F IND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). 12.5. THUS, THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED.' IN AY 2011-12, THE LD CIT(A) HAD DELETED THE DISALL OWANCE OF DEPRECIATION ON INTANGIBLE ASSETS AND HENCE THE REV ENUE WAS IN APPEAL BEFORE THE TRIBUNAL. THE COORDINATE BENCH, F OLLOWING THE DECISION RENDERED IN 2008-09, CONFIRMED THE ORDER O F LD. CIT(A) IN DELETING THE DISALLOWANCE IN AY 2011-12. 8. WE NOTICE THAT THE CO-ORDINATE BENCHES ARE TAKIN G A CONSISTENT VIEW ON THIS MATTER. ACCORDINGLY, FOLLOW ING THE ABOVE SAID DECISION OF COORDINATE BENCH, WE DIRECT THE ASSESSI NG OFFICER TO DELETE THE DISALLOWANCE OF DEPRECIATION ON INTANGIBLE ASSE TS. 9. WE SHALL NOW TAKE UP THE FIRST ISSUE RELATING TO THE TRANSFER PRICING ADJUSTMENT MADE IN RESPECT OF AMP EXPENDITU RE. IN ITS TRANSFER PRICING REPORT, THE ASSESSEE DID NOT DISCL OSE AMP EXPENSES AS AN ITEM OF INTERNATIONAL TRANSACTION. THE ASSESS EE HAD PAID PAGE 9 OF 11 IT(TP)A NO.1285/BANG/2017 ROYALTY OF RS.31.67 CRORES TO ITS AE AND THE ASSESS EE HAD FOLLOWED CUP METHOD TO BENCH MARK THE SAME. 10. THE TPO TOOK THE VIEW THAT THE AMP EXPENSES INC URRED BY THE ASSESSEE IS ON THE HIGHER SIDE AND HENCE, BY AP PLYING BRIGHT LINE TEST, SPLIT THE AMP EXPENSES INTO ROUTINE EXPENSES AND NONROUTINE EXPENSES. THE TPO CHOSE TO ADOPT PROFIT SPLIT METH OD TO BENCH MARK BOTH ROYALTY AND AMP EXPENSES. FOR THIS PURPOS E, THE TPO RE- WORKED THE PROFIT MARGIN OF THE ASSESSEE BY CONSIDE RING ONLY ROUTINE AMP EXPENSES AND THE SAME WORKED OUT TO 21.58%. THE TPO WORKED OUT THE PROFIT MARGIN OF COMPARABLE COMPANIES WITHO UT INCLUDING BRAND EXPENSES AND THE AVERAGE PROFIT MARGIN WORKED OUT TO 7.76%. ACCORDINGLY, THE TPO HELD THAT THE DIFFERENCE BETWE EN 21.58% AND 7.76%, I.E., 13.82% IS THE NON-ROUTINE PROFIT. HE H ELD THAT THIS PROFIT SHOULD BE SHARED BETWEEN THE ASSESSEE AND ITS AE. T HE TPO DETERMINED THE AES SHARE TO BE 25% AND ACCORDINGLY WORKED OUT AES SHARE IN NONROUTINE PROFIT AT RS.18.41 CRORES. THE AGGREGATE AMOUNT OF ROYALTY PAYMENT AND NON-ROUTINE AMP EXPEN SES WAS RS.40.25 CRORES. THE TPO ACCORDINGLY HELD THAT THE DIFFERENCE BETWEEN THE ABOVE SAID AMOUNT OF RS.40.25 CRORES AN D RS.18.41 CRORES IS LIABLE TO BE ADJUSTED. ACCORDINGLY, HE AD JUSTED RS.21.94 CRORES AS TRANSFER PRICING ADJUSTMENT. THE LD DISPU TE RESOLUTION PANEL (DRP) ALSO CONFIRMED THE SAME. 11. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. BEFORE US, THE LD A.R PLACED HIS RELIANCE ON THE DE CISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF SONY ERICSS ON (374 ITR 118) AND SUBMITTED THAT RESIDUAL PROFIT SPLIT METHOD I S NOT APPROPRIATE METHOD TO BENCH MARK AMP TRANSACTIONS. HE FURTHER S UBMITTED THAT THE TPO WAS NOT JUSTIFIED IN CONSIDERING ROYALTY PA YMENTS ALONG WITH AMP EXPENSES. THE LD D.R, HOWEVER, SUPPORTED T HE ORDER PASSED BY TAX AUTHORITIES. 12. THE QUESTION OF BENCH MARKING THE AMP EXPENSES HAS BEEN EXAMINED AND DECIDED BY HONBLE DELHI HIGH COURT IN THE CASE OF SONY ERICSSON (SUPRA) AND MARUTI SUZUKI LTD (381 IT R 117). THE BRIGHT LINE TEST ADOPTED BY THE TPO HAS BEEN SPECIF ICALLY REJECTED IN THE CASE OF SONY ERICSSON (SUPRA). THE HONBLE DELH I HIGH COURT HAS HELD IN THE CASE OF MARUTI SUZUKI LTD (SUPRA) THAT THE REVENUE NEEDS TO ESTABLISH THE EXISTENCE OF INTERNATIONAL TRANSAC TION BEFORE UNDERTAKING BENCHMARKING OF AMP EXPENSES. HENCE, TH E APPROACH OF THE TPO CANNOT BE UPHELD. SINCE THE TPO HAS COMBINE D ROYALTY PAYMENTS ALSO ALONG WITH AMP EXPENSES WHILE MAKING TRANSFER PRICING ADJUSTMENTS BY ADOPTING RESIDUAL PROFIT SPL IT METHOD, SINCE THE EXISTENCE OF INTERNATIONAL TRANSACTIONS IN AMP EXPENSES IS REQUIRED TO BE SHOWN SEPARATELY, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF AO/TPO. AC CORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE AO ON AMP EXPENSE S AND RESTORE PAGE 10 OF 11 IT(TP)A NO.1285/BANG/2017 THE SAME TO THE FILE OF AO/TPO FOR EXAMINING IT AFR ESH. AFTER AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD, THE AO/TPO MAY TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TR EATED AS ALLOWED. 2.5 THERE IS NOTHING HAS THAT HAS BEEN BROUGHT ON R ECORD BY THE REVENUE IN ORDER TO DEVIATE FROM THE AFORESTATED VI EW. RESPECTFULLY FOLLOWING THE VIEW TAKEN BY COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE, WE DIRECT LD.AO TO COMPUTE DEPRECIATION IN ACCORDANCE WITH LAW. ACCORDINGLY, THE GROUNDS RAISED BY ASSESSEE STANDS ALLOWED. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPT, 2021 SD/- SD/- (B.R BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 23 RD SEPT, 2021. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE PAGE 11 OF 11 IT(TP)A NO.1285/BANG/2017 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -9-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -9-2021 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -9-2021 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -9-2021 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -9-2021 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -9-2021 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -9-2021 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS