Kitty Industries Private Limited vs. Pr. CIT

Parties Involved

Facts Summary

Kitty Industries Private Limited, a company engaged in the manufacturing of bread and bakery products, filed an income return for the Assessment Year 2022-23. The case was subjected to complete scrutiny, and issues such as non-compliance with Accounting Standards Rules, 2015 and deemed income under Section 41 were identified. Multiple notices were issued by the Assessing Officer (AO) calling for various details from the assessee. The assessee responded to these notices and furnished various explanations and documents. The AO raised specific queries regarding the addition to fixed assets and computation of income. The assessee furnished details of additions to fixed assets, including the acquisition of a trademark, and relevant invoices. The AO examined the same and accepted the claim of depreciation on the trademark. The Principal Commissioner of Income Tax (Pr. CIT) questioned the valuation of the trademark, the commercial rationale for the purchase, and the acquisition of the trademark from a related party. The assessee furnished a valuation report and deed of assignment in support of its claim. The Pr. CIT observed that the AO had not examined the basis of the valuation, the method adopted for determining the fair market value, or the justification for such a significant capitalization of an intangible asset. The AO was directed to conduct proper inquiry and verification on all these aspects, including independent valuation of the trademark through a registered valuer, gen…

Legal Issues

• 1. Non-compliance of Accounting Standards Rules, 2015 and issue of deemed income u/s 41.
• 2. Purchase of trademark for Rs.50.37 Crores and depreciation of Rs.6.29 Crores as claimed thereon.

Judgment Outcome

Decided in favour of Assessee.

Precedents Relied Upon

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