Tata Hitachi Construction Machinery Co. Pvt. Ltd. vs DCIT (ITAT Bangalore)
When First Year Is Pending, Consequential Years Can’t Be Decided: ITAT Restores Brand Depreciation Dispute
The Bangalore “C” Bench of the ITAT restored the issue of depreciation on Brand & Technology to the file of the CIT(A), holding that consequential depreciation claims for later years cannot be adjudicated when the very first year of claim remains undecided.
The Assessee had acquired Brand & Technology valued at ₹77.82 crore in AY 2013-14 pursuant to acquisition of two overseas companies. The TPO treated the ALP of the intangible assets as Nil, leading to denial of depreciation for AY 2013-14. The Assessee’s appeal for that year has been pending before the CIT(A), LTU since March 2017.
Despite the pendency of the foundational issue for AY 2013-14, the AO invoked u/s 154 and disallowed depreciation for AYs 2014-15 & 2015-16, which was confirmed by the CIT(A).
The Tribunal held that:
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Depreciation in subsequent years is purely consequential to the determination of “actual cost” in the first year of claim.
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Judicial propriety required the CIT(A) either to tag the later-year appeals with AY 2013-14 or to await the outcome of the first-year appeal.
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Confirming disallowance for later years while the base year remains undecided is procedurally improper.
Accordingly, the ITAT set aside the orders for AYs 2014-15 & 2015-16 and restored the appeals to the CIT(A) with a direction to decide them after disposal of the appeal for AY 2013-14, without expressing any view on merits.
Both appeals were allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
