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

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ITA/578/2022HC KarnatakaKAHC01055022202224 September 2024Bench: S.G.PANDIT,C.M. POONACHA4 pages
AI SummaryWithdrawn

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 that the tax effect in the appeal was less than Rs. 2 Crores, making it potentially non-maintainable under CBDT Circular No. 09/2024, which binds the Revenue. The Court explicitly stated that the questions of law were kept open to be adjudicated in an appropriate proceeding. Therefore, no decision was made on the merits of whether depreciation on design and technical know-how is allowable under Section 32(1)(ii) of the Act, nor on whether the Tribunal's order was perverse. The operative direction was to dispose of the appeal with liberty to revive.

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 September 23, 2021, passed by the Income Tax Appellate Tribunal, 'C' Bench, Bengaluru. The appeal pertains to Assessment Year 2012-2013 and concerns the 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. The High Court noted that the tax effect in this appeal was less than Rs. 2 Crores, making it potentially non-maintainable under CBDT Circular No. 09/2024.

What were the issues?

1. Whether, in the given facts and circumstances, the Tribunal was legally correct in holding that depreciation on design and technical know-how is allowable under Section 32(1)(ii) of the Income Tax Act, 1961, in light of Explanation 4 to Section 32, when the assessee failed to demonstrate the acquisition or use of such technical know-how? (Question of law and fact) 2. Whether, in the given facts and circumstances, the Tribunal's order allowing depreciation on design and technical know-how is perverse in law, considering that these items do not fall under 'Any other business or commercial rights of a similar nature' as stipulated under Section 32(1)(ii) of the Act read with Explanation 4 to Section 32? (Question of law) Assessee's Contentions: Not recorded in the judgment. Revenue's Contentions: The Revenue argued that the appeal would not be maintainable due to the tax effect being less than Rs. 2 Crores, as per CBDT Circular No. 09/2024. The Revenue sought liberty to revive the appeal if the matter fell within the exceptions of Circular No. 09/2024 and Circular No. 5/2024.

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:39691-DB ITA No. 578 of 2022

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24TH 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. 578 OF 2022 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., ADV.)

AND:

M/S. KONTOOR BRANDS INDIA PVT. LTD., (FORMERLY VF BRANDS INDIA PVT. LTD.,) BAGMANE TECH PARK BLOCK ‘B’, LEVEL 9, 8TH FLOOR CV RAMAN NAGAR BANGALORE-560093. …RESPONDENT

THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 23.09.2021 PASSED IN IT(TP)A NO.1285/BANG/2017 ASSESSMENT YEAR 2012-2013, PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AND/ OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED 23.09.2021 PASSED BY

Digitally signed by MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39691-DB ITA No. 578 of 2022

THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH, BANGALORE, AS SOUGHT FOR, IN THE RESPONDENT- ASSESSEES CASE, IN APPEAL PROCEEDINGS IN IT(TP)A NO. 1285/BANG/2017 (ANNEXURE-A) FOR A.Y. 2012-2013 AND GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE.

THIS APPEAL, COMING ON FOR ORDERS, 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.E.I.Sanmathi., for appellants/Revenue.

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:39691-DB ITA No. 578 of 2022

“1. Whether in 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 the 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 in 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.

It is noticed that the tax effect in this appeal is less than Rs.2 Crores and therefore, the appeal would not be maintainable at the instance of the revenue in view of the Circular No.09/2024 dated 17.09.2024 issued by the

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NC: 2024:KHC:39691-DB ITA No. 578 of 2022

Central Board of Direct 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 question of law is kept open to be adjudicated in an appropriate proceeding.

Sd/- (S.G.PANDIT) JUDGE

Sd/- (C.M. POONACHA) JUDGE

MPK CT:bms List No.: 2 Sl No.: 2

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