Tribunal directs AO to allow brand depreciation, orders fresh assessment for disallowance under section 14A r.w.r. 8D.

The Tribunal allowed the appeal partly, directing the AO to allow depreciation on brands for the current years in line with previous consistent allowance. Regarding the disallowance under section 14A r.w.r. 8D, the Tribunal set aside the order of the CIT(A) and instructed a fresh assessment by the AO, emphasizing the need for the assessee to provide relevant details to support their claims due to the lack of documentation and the applicability of Rule 8D from 2008-2009 onwards.

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Issues:
1. Disallowance of depreciation on brands under section 32(1)(ii)
2. Disallowance under section 14A r.w.r. 8D

Analysis:

Issue 1: Disallowance of depreciation on brands under section 32(1)(ii)

The assessee appealed against the disallowance of depreciation on brands for assessment years 2009-10 and 2010-11. The AO disallowed the claim based on the acquisition cost of the brand in 1999-2000. However, the assessee argued citing precedents such as the decision of the Hon'ble Bombay High Court in the case of "CIT vs. Glen Mark Pharmaceuticals Ltd." and the ITAT decision in the case of "KEC International Ltd. vs. ACIT" that brand names are intellectual property rights eligible for depreciation under section 32(1)(ii). The Tribunal, considering the consistent allowance of depreciation in earlier years, directed the AO to allow the claim of depreciation for the current years.

Issue 2: Disallowance under section 14A r.w.r. 8D

The second ground of appeal involved the disallowance under section 14A r.w.r. 8D for the assessment years in question. The AO disallowed expenses related to exempt income like dividends and profits on the sale of mutual funds. The assessee challenged this disallowance, arguing that there was no direct nexus between the expenses and the exempt income, and that no actual expenditure was incurred to earn the tax-free income. The Tribunal noted that the assessee failed to provide relevant documents to support these claims. However, considering the lack of details and the applicability of Rule 8D from 2008-2009 onwards, the Tribunal set aside the order of the CIT(A) and directed a fresh assessment by the AO after giving the assessee an opportunity to present relevant details.

In conclusion, the appeal was partly allowed, with the Tribunal providing detailed reasoning and legal analysis for each issue raised by the assessee.

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