The ITO, Ward-1(3), Ahmedabad V. Arvind Brands Ltd., Ahmedabad

ITA 3080/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6727 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 29-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 18-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIGNESH K DAS
• Assessee Lawyers: P M MEHTA
• Keywords: Depreciation; Royalty expenses; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 29.4.11 DRAFTED ON: 29.4 .11 ITA NO.3080/AHD/2010 ASSESSMENT YEAR : 2005-06 THE ITO WARD-1(3) AHMEDABAD VS. ARVIND BRANDS LTD. ARVIND MILLS PREMISES NARODA ROAD AHMEDABAD PAN/GIR NO. : AAACE 4173 D ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI RIGNESH K.DAS, D.R. RESPONDENT BY: SHRI P.M. MEHTA O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WH ICH HAS EMANATED FROM THE ORDER OF THE LEARNED CIT(APPEALS) -VI, AHMEDABAD DATED 17/09/2010 PASSED FOR ASSESSMENT YEAR 2005-06 . 2. GROUND NO.1 THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETI NG THE ADDITION OF RS.3,80,67,627/- ON ACCOUNT OF DEPRECI ATION ON MARKETING & DISTRIBUTION RIGHT AND LICENCE TO USE TRADEMARK. 2.1. FACTS IS BRIEF AS EMERGED FROM THE CORRESPOND ING ASSESSMENT ORDER PASSED U/S.143(3) OF THE ACT DATED 20/12/2006 WERE THAT THE ITA NO.3080/AHD /2010 ITO VS. ARVIND BRANDS LTD. ASST.YEAR - 2005-06 - 2 - ASSESSEE-COMPANY IS IN THE BUSINESS OF MANUFACTURIN G AND SALE OF GARMENTS. THE ASSESSEE HAS USED THE TRADE-MARK AR VIND AND AS PER AO, IT WAS NOTHING BUT GOOD-WILL AND THE OWNERS HIP HAS NOT BEEN TRANSFERRED, THEREFORE, NOT ENTITLED FOR DEPRE CIATION AS IT WAS HELD IN A.Y. 2001-02. HOWEVER, THE AO HAS ALSO MEN TIONED THAT IN THE PAST THE LD.CIT(A) HAS REVERSED THE ACTION OF T HE AO. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY LD.CIT(A) HAS ALSO MADE A REFERENCE OF A PAST HISTORY AND ALS O HELD THAT FOR A.Y. 2004-05 THE APPEAL OF THE ASSESSEE WAS ALLOWED . THE LD.CIT(A) HAS ALSO MENTIONED THAT FOR A.Y.2001-02, THE TRIBUNAL HAS ALSO UPHELD THE ORDER OF CIT(A), THEREFORE, THE STAND OF THE ASSESSEE WAS AFFIRMED AND THE APPEAL WAS ALLOWED. 3. ON HEARING THE SUBMISSIONS OF BOTH THE SIDES, A DECISION OF THE ITAT BENCH B AHMEDABAD IN ASSESSEES OWN CASE BEARING ITA NO.1679/AHD/2005 FOR A.Y. 2001-02 ORDER DATED 2 4/10/2008 TITLED AS ACIT VS. ARVIND BRANDS LTD. HAS BEEN CITE D WHEREIN THE ISSUE OF CLAIM OF DEPRECIATION ON THE INTANGIBLE AS SETS HAS BEEN DECIDED IN ASSESSEES FAVOUR VIDE PARAGRAPH NO.6; R EPRODUCED BELOW:- 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GO NE THROUGH THE RECORDS. BEFORE US, THE LEARNED AR OF THE ASSESSEE REITERATED THE SUBMISSIONS AS WERE MADE BE FORE THE AUTHORITIES BELOW AND STRONGLY SUPPORTED THE IMPUGN ED ORDER OF THE LEARNED CIT(A). THE LEARNED DR, ON THE OTHE R HAND, ITA NO.3080/AHD /2010 ITO VS. ARVIND BRANDS LTD. ASST.YEAR - 2005-06 - 3 - SUPPORTED THE IMPUGNED ORDER OF THE ASSESSING OFFIC ER. THE MOOT QUESTION THAT IS TO BE DECIDED WHETHER THE DEP RECIATION CLAIMED ON THE INTANGIBLE ASSETS AMOUNTING TO RS.12 ,03,12,500 WHICH RELATES TO THESE TWO ASSETS IN THE NAMES OF B RAND NAME ARVIND AND MARKETING AND DISTRIBUTION NETWORK IS ALLOWABLE U/S.32(1)(II) OF THE INCOME-TAX ACT, 1961 . GOING THROUGH THE SAID SECTION, IT IS VERY MUCH CLEAR THA T THIS SECTION INCLUDES KNOW-HOW, PATENTS, COPYRIGHTS, TRADE MARKS , LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGH TS OF SIMILAR NATURE, BEING INTANGIBLE ASSETS. THE REVEN UE IS NOT DISPUTING THAT THE ASSESSEE HAS ACQUIRED THESE TWO INTANGIBLE ASSETS IN QUESTION UNDER AN AGREEMENT. THE ITEMS M ENTIONED IN SECTION 32(1)(II) ARE WIDE ENOUGH SO AS TO INCLU DE THESE TYPES OF INTANGIBLE ASSETS UNDER CONSIDERATION. TH EREFORE, IN OUR CONSIDERED VIEW, THE LEARNED CIT(A) HAS RIGHTLY ALLOWED THE DEPRECIATION CLAIMED BY THE ASSESSEE AND AS SUC H, IT NEEDS NO INTERFERENCE. 4. SINCE IN THE PAST REVENUES GROUND HAS ALREADY BEEN DISMISSED, THEREFORE, RESPECTFULLY FOLLOWING THE AB OVE PRECEDENT FOR THIS YEAR AS WELL THIS GROUND OF THE REVENUE IS HER EBY DISMISSED. 5. GROUND NO.2 THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.57,22,216/- ON ACCOUNT OF CLAIM FOR ROYALTY TREATING THE SAME AS REVENUE EXPENDITURE. 5.1. IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAS PAID ROYALTY TO M/S.AWI, USA. THE AO HAS REFERRED THE PAST ASSESSM ENT ORDER FOR A.Y. 2001-02 AND IN IDENTICAL MANNER 1/4 TH OF THE ROYALTY CLAIM WAS DISALLOWED. WHEN THE MATTER WAS CARRIED BEFORE TH E FIRST APPELLATE ITA NO.3080/AHD /2010 ITO VS. ARVIND BRANDS LTD. ASST.YEAR - 2005-06 - 4 - AUTHORITY, IT WAS OBSERVED THAT IN THE PAST THE TR IBUNAL HAD ALREADY CONSIDERED THE SAID ISSUE AND DECIDED IN ASSESSEES FAVOUR. NOW BEFORE US, A DECISION OF THE TRIBUNAL BENCH C AHM EDABAD FOR A.Y. 2004-05 BEARING ITA NO.2320/AHD/2007 ORDER DAT ED 30/07/2010 TITLED AS DCIT VS. ARVIND BRANDS LTD. HA S BEEN PLACED WHEREIN AFTER DETAILED DISCUSSION IT WAS HELD THAT FOLLOWING FEW DECISIONS OF THE TRIBUNAL, THE DISALLOWANCE @ 1/4 TH OF THE ROYALTY EXPENSES WAS DELETED. SINCE IN ASSESSEES OWN CAS E RESPECTED CO- ORDINATE BENCH HAS TAKEN A VIEW IN FAVOUR OF THE AS SESSEE AND NO MATERIAL HAS BEEN PLACED TO DISTINGUISH THE FACTS, THEREFORE, JUDICIAL PROPRIETY REQUIRES ONE BENCH OF THE TRIBUNAL TO FOL LOW ANOTHER BENCH. HENCE, IN THE LIKE MANNER, FOR THIS YEAR AS WELL WE HEREBY UPHOLD THE VIEW TAKEN BY THE LD.CIT(A) AND THIS GRO UND OF THE REVENUE IS DISMISSED. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 29/ 4 /2011. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL KR. SH RAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 29/ 04 /2011 T.C. NAIR, SR. PS ITA NO.3080/AHD /2010 ITO VS. ARVIND BRANDS LTD. ASST.YEAR - 2005-06 - 5 - COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-VI, AHMEDABAD 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD 1. DATE OF DICTATION..29.4.11 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 29.4.11 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S29.4.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 29.4.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER