TaxTMI 
TaxTMI 
2019 (11) TMI 699
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....thy and argumentative, the Revenue has filed revised grounds of appeal vide petition dated 13/02/2019 and the ld.DR requested to take up the revised grounds for adjudication which are 6 in number. Accordingly, the revised grounds are taken up for adjudication. 3. For the sake of convenience, facts are taken from A.Y. 2007-08 which are common in all the pending appeals. 4. Ground Nos. 1 & 6 are general in nature, which do not require any specific adjudication, therefore same are dismissed. 5. Ground No.2 is related to the depreciation on goodwill. The same issue involved for other assessment years i.e. A.Y. 2008-09 & 2009-10. During the course of assessment proceedings, the Assessing Officer found that the assessee claimed the depreciation on goodwill of Rs. 1,14,73,486/- which was included in the total depreciation claimed in the computation of income. The Assessing Officer called for explanation from the assessee as to why the depreciation on goodwill should not be disallowed and in response to which the assessee filed the explanation. The assessee in its reply stated that the assessee company had acquired the shares of Coastal Papers Private Ltd. (CPL), consequently C....
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....or the year ended 31.3.2002 were drawn up, the amalgamation was completed in all respects though numbers as on 31.3.2001 which is the previous year relevant to the assessment year. For income tax purpose, a strict technical compliance is contemplated and the conditions stated above were not fulfilled, the amalgamation has to be considered under purchase method. To meet the conditions prescribed for pooling interest method, share holder representing 54,00,000 shares (90% of 60 lacs) would have been offered in APPM i.e. 18,00,000 shares of APPM could have been issued to, erstwhile shareholders of CPL in the ratio of 3: 1. However, only 5,80,000 shares were issued. Therefore, the condition prescribed under pooling of interest method was not complied with the condition laid down in clause 29 (ii) of Accounting Standard (AS-14) as such, clause '30 of the AS-14 is applicable. Therefore, in our opinion, amalgamation will be under purchase method and the excess consideration of Rs. 1933.97 lacs to be treated as goodwill and should be amortized over the period of useful life. Now the contentions of the assessee is that he wrongly followed the 'pooling method' instead of....
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....he case of CIT Vs.B.C. Srinivasa Setty(128 ITR 294) (SC)it was held that: "Goodwill denotes the benefit arising from connection and reputation. The original definition by Lotd Eldon in Crullwell V. Lye (1810) 17 Ves.335 that goodwill was nothing more than the probability that the old customers would resort to the old places was expanded by Wood V.C. in Churton V. Douglas (1859) John 174 to encompass every positive advantage "that has been acquired by the old firm in carrying on its business, whether connected with the premises in which the business was previously carried on or with the name of the old firm, or with any other matter carrying with it the benefit of the business. In Trego v. Hunt (1896) AC 7 (HL) Lord Herschell described goodwill as a connection which tended to become permanent because of habit or otherwise. The benefit to the business varies with the nature of the business and also from one business to another. No business commenced for the first time possesses goodwill from the start. It is generated as the business is carried on and may be augmented with the passage of time. Lawson in his introduction to the law of Property describes it as property of a hi....
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....demand of process steam at Unit APPM. By this process, any pollution generated at the pulp in process is eliminated in unit CP. Further, the assessee got the Loyal Domestic customers like Sakal Papers (P) Ltd., Shree Krishna Newsprint(East Media), Bhubaneswar, Indo Global Commercial (P) Ltd., Nagpur, Ambica Papers (P) Ltd, Mumbai, SK Impex, Kolkata and Export Customers viz., Assudamal & Sons HK Ltd., Vital Solutions, Hind Exports, Kunicka Holdings, Dinowic Pte Ltd. 15.1. Further assessee got various licenses on account of amalgamation like Factory License, Boiler Operating License, Pollution disposal permission, VAT Registration, Excise Registration, Export License and also got advantages due to proximity of location. Further, Unit CPL is located at a distance of 18 kms from Unit APPM and because of that the various advantages accrue to the assessee. 15.2. Further, the assessee got various infrastructural advantages like CPL has almost all infrastructure capability like captive power plant of 5.74 mw, coal fired boiler, DM plant, Effluent Treatment Plant, and also benefit of sales tax deferment loan for 14 years upto 30-6-2013. Further, the assesee acquired on ope....
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....essing Officer during the course of assessment proceedings found that the assessee has claimed the depreciation @ 60% on printers, UPS and other computer peripherals like network equipment/ installation treating the same in the block of computers. The assessee filed explanation stating that the front-end data entry units and the servers are the data processing units at the back end. There has to be a complete integration between the front end and the back end for any computerized system to work effectively and the same is achieved with the help of LAN, the other output devices like the printers, the high quality optical fibre cables and cards. Hence, argued that the total integration system i.e. inclusive computers and its front end data entry units are eligible for depreciation @ 60%. However, the Assessing Officer did not agree with the submission of the assessee and disallowed the excess depreciation amounting to Rs. 1,14,088/- and added back to the income. The similar disallowance was made in the subsequent years i.e. A.Ys. 2008-09 & 2009-10 also. 11. Against the order of the Assessing Officer, the assessee went on appeal before the CIT(A) and the ld. CIT(A) allowed the appe....
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....consumption. The assessee claimed that the power generated using the steam is also eligible for deduction u/sec. 80IA of the act. During the course of assessment proceedings, the Assessing Officer found that the assessee has claimed the deduction u/sec. 80IA in respect of captive steam plant and captive power plant. Since the return of income did not result into positive income, the assessee did not claim the deduction but made the claim subject to its right to claim deduction u/sec. 80IA in the coming years subject to taxable income, the Assessing Officer called for explanation as to why the deduction u/sec. 80IA should not be disallowed and the assessee filed explanation stating that the captive power plant installed with turbine power is a separate unit generating power and eligible for deduction u/sec. 80IA of the Act. The Assessing Officer did not find favour with the explanation of the assessee and viewed that the assessee is in the business of manufacture of paper and paper boards. As a part of paper manufacturing activity, it was having boilers which manufacture steam and turbines which generate electricity. All these boilers and turbines installed for internal work managem....
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....that the assessee in question i.e. West Coast paper Mills was engaged in the manufacture and sale of paper and paper boards, etcetera. The assessee had four power generation units. However, all the power generated by these units was consumed captively, and was not sold outside, even though it was ready for sale. It was held that in view of the various decisions of the honourable apex court as well as the High Court, the claim of the assessee could not be denied only on the grounds that the power generation set, generated power which was used for captive consumption of the assessee. It was further stated that the provisions of section 80IA(8) stated that where any goods or service of the eligible business are transferred to any other business carried on by the assessee and the consideration if any w.r.t. such transfer recorded in the accounts of the eligible business does not correspond to the market value of such goods or services then for the purposes of deduction under that section, the profit and gain for such transfer business shall be computed as if the transfer has been made at market value as on that date. It was held that the provisions of section 80 IA provide an answer an....
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....hat the electricity generated by the appellant and consumed captively is eligible for deduction u/s 801A of the Income Tax Act. However, as held by the honourable ITAT the transfer price has to be worked out on the basis of average price paid by the appellant during the year to the state Electricity Board minus extraneous charges such as electricity duty etcetera. The aforementioned deduction has to be computed after deduction of notional brought forward losses and depreciation of eligible business even though they have been allowed to be set off against other income in the earlier years. In view of the specific provisions of section 801A(5), as laid down by the special bench of ITAT Ahmedabad in the case of Gold Minds Shares and Financed by the limited 113 ITD 209. The appellant will get relief according to the aforementioned calculations. 7.6 However, with regard to the production of steam, contrary to what the appellant has stated, the aforementioned order of the ITAT is silent and does not even speak about steam generation. During the course of appeal proceedings, the appellant was specifically asked to produce a direct order of the honourable ITAT in the case....
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..... Section 80IA permits tax holiday to an undertaking set up for the generation or generation and distribution of power. The question posed is whether the residual low pressure steam generated by the assessee, after use in generating electricity and taken out for use in other processes, is a form of power eligible for deduction under the aforementioned section. 7.9 The dispute is whether the phrase generation of power pertains to only generation of electricity, or it pertains to generation of any form of energy, be it electrical, thermal, wind or steam, as was the stand of the assessee, so as to qualify for tax holiday under section 80IA. 7.10 In the case of DCIT Vs M/s SIAL SBEC BIOENERGY LTD 2008-TIOL-80-ITAT-DEL the assessee was engaged in the business of generation of power. The process involved was to burn baggage in the boiler to raise steam at high temperature and pressure. The steam, so generated, was transferred to the inlet of turbines through pipes, for rotating them. Rotation of turbines, rotated the alternator, consequently generating the electricity. The low pressure exhaust steam was drawn from the turbines and used to heat sugar juices for evaporati....
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....the word power a wider meaning. Once the Legislature has not used the word electricity in the section, the Courts cannot put in this word. 7.14 The honourable ITAT concluded that the word power has to be given a meaning which in common parlance means energy. The energy can be of any form, be it mechanical, be it electrical, be it wind or be it thermal. Thus, in conclusion, the Tribunal held that the steam produced by the assessee shall be termed as power and shall qualify for the benefits available under section 80IA(4)(iv). 7.15 However, it was noticed that the assessee had supplied electricity for its internal use as well as to UPSEB. For calculating tax holiday profits from generation and distribution of electricity for internal use, the rate charged for supply to UPSEB was applied. [n regard to supply of steam a rate of Rs. 75 per metric ton was applied. The honourable ITAT stated that Section 80IA(10) ordains that if between the eligible undertaking and the assessee, the course of business is so arranged that the business transacted between them produces to the assessee in the eligible business more than the ordinary profits, which might be expected ....
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....rt to controvert the submission of the assessee, respectfully following the view taken by this Tribunal in assessee's own case, we uphold the order of the ld. CIT(A) and dismiss the Revenue's appeals on this issue. 19 Ground No.5 for the A.Y. 2007-08 is related to foreign exchange liability and application of section 43A of the Act. 20 During the course of assessment proceedings, the Assessing Officer found that the assessee-company has reduced the foreign exchange fluctuation gain from the interest charges instead of reducing the cost of the assets. The total foreign exchange gain derived by the assessee was Rs. 702.23 lakhs out of which Rs. 602.00 lakhs represent the gain derived from import of plant and machinery and the balance represent the gain on working capital loan. As per section 43A of the act, where an assessee has acquired any asset in any previous year from a country outside India for the purposes of his business or profession and, in consequence of a change in the rate of exchange during any previous year after the acquisition of such asset, there is an increase or reduction in the liability of the assessee as expressed in Indian currency (as compared to the li....
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.... on actual payment basis. In the instant case, the Assessing Officer proposed to make the adjustments as at the end of the year as per the system of account followed by the assessee instead of making the adjustment at the time of actual payment. Case law relied on by the ld.AR supports the decision of the ld.CIT(A). No other case law was brought on record by the Revenue to controvert the case-law relied on by the ld.AR. Therefore, we do not find any infirmity in the order of the ld.CIT(A) and the same is uphold. 24 Ground No.5 for the A.Y. 2009-10 is related to disallowance u/sec. 14A r.w.r. 8D of the I.T. Rules, 1962. 25 During the course of assessment proceedings, the Assessing Officer found that the assessee has made the investment to the tune of Rs. 16.00 crores in investments and called for assessee's explanation as to why the disallowance should not be made u/sec. 14A r.w.r.8D of I.T. Rules. The assessee explained that the assessee has made the investments out of the interest free funds, therefore argued that there is no disallowance is called for on account of expenditure relatable to the income earned u/sec. 14A of the act. Alternately, the assessee pleaded that in....
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....tuation for foreign exchange on acquisition of capital assets. 30.1 In revenues appeal we, have upheld the order of the Ld.CIT(A) for making adjustments of the cost of asset on actual payment of loan. Accordingly we, direct AO to make necessary adjustments to the cost of the asset on actual payment basis and recompute the income after allowing the correct depreciation under the normal provisions. Thus, this ground of cross objection of the assessee is allowed. 31. Ground No.2 is related to the carry forward of unabsorbed depreciation consequent to making adjustments to the cost of assets as a consequence to making adjustments under section 43A of the Act. The Assessing Officer is directed to determine the correct unabsorbed depreciation and allow the same to be carried forward for the subsequent years. Accordingly, this ground of cross objection is allowed. C.O.No. 14/VIZ/2016 A.Y.2008-09 32. Ground No.1 is related to not considering the revised computation of income submitted by the company at the time of assessment proceedings. 33. In the instant case, the assessee has filed original return of income for the A.Y. 2008-09 on 13/09/2009 declaring gross total income (....
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....owing the correct Depreciation and make necessary rectifications. This ground of CO of the assessee is allowed. 35. Ground No.3 in cross objection for the A.Y. 2008-09 is allowing correct amount of carry forward losses after giving effect to the orders of ld. CIT(A) or ITAT. Similar ground is involved in A.Y. 2009-10 also. The ground raised by the assessee is genuine, therefore we direct the Assessing Officer to determine the correct amount of depreciation loss and allow the same to be carried forward for the subsequent years. This ground of CO of the assessee stands allowed. 36. Ground No.4 is related to the granting of short credit of tax deducted at source while determining the balance income tax payable or refundable to the assessee. It is the obligation of the Assessing Officer or the Income Tax Authorities to determine the correct amount of tax and allow due credit for taxes paid or tax deducted/collected at source. The assessee should not be forced to knock the doors of courts for their legitimate rights. Therefore, we, direct the Assessing Officer to allow the credit for the taxes paid/ TDS made while determining the tax liability. Accordingly, this ground of cross ob....