THE PR. COMMISSIONER OF INCOME TAX vs. M/S. KONTOOR BRANDS INDIA PVT. LTD.,

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ITA/36/2023HC KarnatakaKAHC01002628202330 September 2024Bench: S.G.PANDIT,C.M. POONACHA4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court disposed of the appeal with liberty to the Revenue to revive it as prayed for by its counsel. The Court noted the submission by the assessee regarding the tax effect being below Rs. 2 Crores, referencing CBDT Circular No. 09/2024. The Revenue sought liberty to revive the appeal in case the matter falls within the exceptions of the said circulars. Consequently, the Court kept the substantial questions of law open to be adjudicated in an appropriate proceeding. No decision was made on the merits of the questions regarding the allowability of depreciation on design and technical know-how under Section 32(1)(ii) of the Act.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income Tax and the Assistant Commissioner of Income Tax, filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated 23/09/2021 passed by the Income Tax Appellate Tribunal, C Bench, Bangalore. The appeal pertains to Assessment Year 2012-2013 and concerns the respondent-assessee, M/s. Kontoor Brands India Pvt. Ltd. (formerly VF Brands India Pvt. Ltd.). The core of the dispute revolves around the allowability of depreciation on design and technical know-how.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether, on the facts and circumstances, the Tribunal was correct in law in holding that depreciation on design and technical know-how is allowable under Section 32(1)(ii) of the Act in view of Explanation 4 to Section 32, when the assessee had not demonstrated acquisition or use of such technical know-how? 2. Whether, on the facts and circumstances, the Tribunal's order allowing depreciation on design and technical know-how was perverse in law, ignoring that these do not fall under 'Any other business or commercial rights of a similar nature' stipulated under Section 32(1)(ii) read with Explanation 4 to Section 32? Assessee's Contention: The assessee argued that the tax effect in this appeal is less than Rs. 2 Crores, and therefore, the appeal should not be entertained by the Revenue in view of Circular No. 09/2024 dated 17.09.2024 issued by the Central Board of Direct Taxes, which binds the Revenue. Revenue's Contention: The Revenue requested liberty to revive the appeal if the matter falls within the exceptions under Circular No. 09/2024 and Circular No. 5/2024 dated 15.03.2024.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 32(1)(ii),Section 32

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:41543-DB ITA No. 36 of 2023

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 30TH DAY OF SEPTEMBER, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA INCOME TAX APPEAL NO. 36 OF 2023 BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME TAX KORMANGALA, BANGALORE.

2.

THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-4(1)(1), BANGALORE. …APPELLANTS (BY SRI. SANMATHI E I.,ADVOCATE)

AND:

M/S. KONTOOR BRANDS INDIA PVT. LTD., (FORMERLY VF BRANDS INDIA PVT. LTD.,) BAGMANE LAUREL , BLOCK B, LEVEL 9, 8TH FLOOR, BAGMANE TECH PARK C.V. RAMAN NAGAR, BANGALORE-560 093. …RESPONDENT (BY SRI. NAGESHWAR RAO D. D., ADVOCATE (THROUGH V/C))

THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HONBLE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED 23/9/21 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, BANGALORE, AS SOUGHT FOR, IN THE RESPONDENT-ASSESSEES CASE, IN APPEAL

Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:41543-DB ITA No. 36 of 2023

PROCEEDINGS IN IT(TP)A NO. 1285/BANG/2017 FOR A.Y. 2012- 2013 (ANNEXURE-A) AND GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE AND ETC.

THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: HON'BLE MR JUSTICE S.G.PANDIT and HON'BLE MR JUSTICE C.M. POONACHA

ORAL JUDGMENT (PER: HON'BLE MR JUSTICE S.G.PANDIT)

Heard the learned counsel Sri. Snmathi. E.I., for appellants/Revenue and learned counsel Sri. Nageshwar Rao. D.D., learned counsel for the respondent/assessee.

2.

The Revenue is in appeal under Section 260-A of the Income Tax Act, 1961 (for short, ‘the Act’) questioning the correctness and legality of order dated 23.09.2021 passed by the Income Tax Appellate Tribunal, ‘c’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A No.1285/Bang/2017 for the assessment year 2012-13, raising the following substantial questions of law:

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NC: 2024:KHC:41543-DB ITA No. 36 of 2023

“1. Whether on the present facts and circumstances of the case, the Tribunal is correct in law in holding that depreciation on design and technical knowhow, is allowable under section 32(1)(ii) of he Act in view of explanation 4 to Section 32 of the Act when assessee has not been able to demonstrate that it has acquired any technical knowhow or the same has been put to use by the assessee? 2. Whether in the present facts and circumstances of the case, the order passed by Tribunal can be said as perverse in law in allowing claim of depreciation on design and technical knowhow ignoring that the same does not fall under ‘Any other business or commercial rights of the similar nature’ stipulated under Section 32(1)(ii) of the Act read with Explanation 4 to Section 32 ?”

3.

Learned counsel for the assessee submits that the tax effect in this appeal is less than Rs.2 Crores and therefore, the appeal should not be entertained at the instance of the revenue in view of the Circular No.09/2024 dated 17.09.2024 issued by the Central Board of Direct

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NC: 2024:KHC:41543-DB ITA No. 36 of 2023

Taxes. It is also submitted that the aforesaid Circular binds the revenue.

4.

On the other hand, learned counsel for the revenue submits that he be granted liberty to revive the appeal in case the matter falls within the exceptions under the aforesaid Circular dated 17.09.2024 and Circular No.5/2024 dated 15.03.2024.

5.

In view of the aforesaid submissions, the appeal is disposed of with liberty as prayed for by the learned counsel for the revenue. However, the questions of law are kept open to be adjudicated in an appropriate proceeding.

Sd/- (S.G.PANDIT) JUDGE

Sd/- (C.M. POONACHA) JUDGE

BS List No.: 4 Sl No.: 18

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