Tribunal allows appeal, disallows depreciation on IP rights, directs deletion of Section 14A disallowance.

The Tribunal allowed the appeal by the assessee, directing the deletion of the disallowance under Section 14A read with Rule 8D as no exempt income was received. However, the disallowance of depreciation on intellectual property rights was upheld as the Authorized Representative chose not to press this ground. The judgment was pronounced on 17/08/2023.

---

---

Issues:
The judgment involves the disallowance under section 14A read with Rule 8D of the Income Tax Act, 1961 and the disallowance of depreciation on intellectual property rights.

Disallowance under Section 14A read with Rule 8D:
The assessee challenged the disallowance of Rs. 18,45,867 made by the Assessing Officer under Section 14A read with Rule 8D. The assessee contended that since no dividend income was earned, Section 14A should not apply. The CIT(A) upheld the disallowance. The Tribunal noted that the assessee did not receive any dividend income during the relevant year and had not claimed any exemption under section 10(34) of the Act. Citing judicial precedents, the Tribunal held that if no exempt income is received or receivable, Section 14A will not apply. The Tribunal also considered the amendment by the Finance Act, 2022, which clarified the applicability of Section 14A. Following the judicial decisions, the Tribunal concluded that the disallowance under Section 14A read with Rule 8D was not sustainable and directed its deletion. Therefore, the ground raised in the assessee's appeal regarding this issue was allowed.

Disallowance of Depreciation on Intellectual Property Rights:
The assessee contested the disallowance of Rs. 1,30,924 claimed as depreciation on intellectual property rights under Section 32 of the Act. The CIT(A) disallowed the depreciation, which the assessee argued was allowable. During the hearing, the Authorized Representative chose not to press this ground, leading to its dismissal. As a result, the Tribunal did not delve further into this issue due to the ground being dismissed.

Conclusion:
The Tribunal partially allowed the appeal by the assessee, directing the deletion of the disallowance under Section 14A read with Rule 8D while dismissing the ground related to the disallowance of depreciation on intellectual property rights. The judgment was pronounced on 17/08/2023.

---