Tribunal favors assessee, permits depreciation & deductions, condones filing delay.

The Tribunal allowed the appeal, condoning the delay in filing, permitting depreciation on the trademark, and allowing the deduction of advertisement expenditure and professional charges. The decision was in favor of the assessee and was pronounced on 16th September 2021 in Chennai.

---

---

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Disallowance of depreciation on trademark.
3. Disallowance of advertisement expenditure and professional charges.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal was filed with a delay of 396 days. The assessee argued that the delay was due to the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016, which caused a shortage of personnel. The Tribunal accepted this explanation, noting that the respondent did not raise any serious objection. Hence, the delay was condoned, and the appeal was admitted for adjudication.

2. Disallowance of Depreciation on Trademark:
The Assessing Officer disallowed Rs. 32,11,523/- claimed as depreciation on the trademark "Univercell," citing several reasons:
- The Deed of Assignment was invalid because Mr. D. Satish Babu signed in multiple capacities.
- The agreement was executed on a post-dated stamp paper.
- The agreement was signed twice on the last page.
- The designation of the person representing the company was not mentioned.
- The trademark was not transferred to the company's name but remained in Mr. D. Satish Babu's name.

The CIT(A) confirmed this disallowance. However, the Tribunal referred to its earlier decisions in the assessee’s own case for previous assessment years (2007-08, 2008-09, and 2015-16), where similar disallowances were overturned. The Tribunal noted that:
- The substance of the transaction was genuine, and the post-dated stamp paper was immaterial.
- The transaction was not a device to evade taxes as both parties disclosed the income.
- The necessity of the transaction cannot be questioned by the Assessing Officer.

The Tribunal concluded that intangible assets like trademarks qualify for depreciation and allowed the appeal, setting aside the orders of the lower authorities.

3. Disallowance of Advertisement Expenditure and Professional Charges:
The Assessing Officer disallowed Rs. 2,64,81,387/- towards advertisement expenditure and Rs. 2,04,05,500/- towards professional charges. The CIT(A) upheld this disallowance. The Tribunal, however, referred to its previous orders in the assessee’s own case, where such expenditures were allowed as they were deemed necessary for business promotion in a competitive market. The Tribunal reiterated that the Assessing Officer is not expected to question the necessity of the expenditure and that branding expenditure is a revenue expense allowable as a deduction.

The Tribunal, therefore, set aside the orders of the lower authorities and directed the Assessing Officer to allow the deduction of advertisement expenditure and professional charges.

Conclusion:
The Tribunal allowed the appeal in favor of the assessee, condoning the delay in filing, allowing depreciation on the trademark, and permitting the deduction of advertisement expenditure and professional charges. The decision was pronounced on 16th September 2021 in Chennai.

---