DCIT Vs Trent Limited (ITAT Mumbai)
In DCIT Vs Trent Limited, the Mumbai ITAT dealt with cross appeals filed by the Revenue and the assessee against the order passed by the NFAC for Assessment Year 2016-17. The disputes mainly related to disallowance under Section 14A, treatment of brand equity fees paid to Tata Sons Ltd., deduction of discounts on gift cards and gift vouchers, and computation of book profit under Section 115JB.
The Revenue challenged the relief granted by the CIT(A) in relation to Section 14A disallowance despite the assessee having earned exempt income of only Rs. 6.99 lakh. The Assessing Officer had invoked Rule 8D and made a disallowance of Rs. 8.12 crore after rejecting the assessee’s suo motu disallowance. The assessee argued that identical issues had already been decided in its favour in earlier years by the ITAT. The Tribunal noted that the coordinate benches in the assessee’s own cases for earlier assessment years had already accepted the assessee’s suo motu disallowance and held that the Assessing Officer failed to properly record dissatisfaction as required under Section 14A(2). Following earlier decisions, the Tribunal upheld the CIT(A)’s order and dismissed the Revenue’s grounds.
The Revenue also challenged deletion of disallowance of brand equity fees paid to Tata Sons Ltd. The Assessing Officer had treated the expenditure as not wholly incurred for business purposes and also argued that the brands “Westside” and “Landmark” were independently established. The assessee submitted that it had entered into a brand agreement with Tata Sons Ltd. in 1999 for use of business name, marks, and marketing indicia, and that similar payments by Tata group companies had already been allowed by the Tribunal in earlier cases. The ITAT observed that the CIT(A) had correctly followed earlier Tribunal decisions in cases involving Tata group entities, where similar brand equity fees were held allowable under Section 37(1). The Tribunal therefore upheld deletion of the disallowance.
