Depreciation on business rights and transfer pricing benchmarking were examined for intangible assets and fresh segmental review.

The note addresses depreciation on exclusive business rights and goodwill, stating that an intangible business right acquired for consideration was treated as eligible for depreciation, with the earlier year view in the assessee's own case followed and no separate interference shown on goodwill. It also discusses transfer pricing of imported finished goods, where benchmarking was found defective because manufacturing activity had been wrongly clubbed with the international transaction and the segmental nature of the business was not properly addressed. The matter was therefore sent back for fresh examination by the tax authorities, including review of the most appropriate method and comparables after hearing the assessee.

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Issues: (i) Whether depreciation on exclusive business rights and goodwill was rightly allowed as an intangible asset. (ii) Whether the transfer pricing benchmarking of the import of finished goods required reconsideration and fresh examination.

Issue (i): Whether depreciation on exclusive business rights and goodwill was rightly allowed as an intangible asset.

Analysis: The dispute was covered by the Tribunal's earlier decision in the assessee's own case for the preceding assessment year. The Court followed the earlier finding that the amount paid for exclusive business rights formed an intangible asset eligible for depreciation under the Income-tax Act, while depreciation on goodwill was not disturbed in the present appeal because no distinguishing facts were shown.

Conclusion: The issue was decided in favour of the assessee and against the revenue.

Issue (ii): Whether the transfer pricing benchmarking of the import of finished goods required reconsideration and fresh examination.

Analysis: The benchmarking was found to have proceeded on erroneous facts because manufacturing activity had been clubbed with the international transaction, and the method applied did not properly address the segmental nature of the business. The Court held that the matter needed a fresh examination by the Assessing Officer and the Transfer Pricing Officer, with exclusion of manufacturing activity and reconsideration of the most appropriate method and comparables after hearing the assessee.

Conclusion: The issue was restored for fresh adjudication and the assessee's grounds were allowed for statistical purposes.

Final Conclusion: The revenue's challenge to depreciation failed, while the assessee obtained a remand on the transfer pricing dispute, leaving the matter open for fresh determination at the assessment stage.

Ratio Decidendi: An intangible business right acquired for consideration is eligible for depreciation where earlier year findings on identical facts govern the issue, and transfer pricing must be re-examined where the benchmarking exercise is vitiated by incorrect functional aggregation.

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