TaxTMI 
TaxTMI 
2022 (8) TMI 1021
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....ances of the case and in law, the Ld. CIT(Appeals) erred by deleting the disallowance of Rs.4,22,24,655/- on account of depreciation on goodwill when in fact no goodwill was created on account of merger of Narmada Chematur Petrochemicals Limited (NCPL) particularly when assessee itself was the promoter of NCPL." 3. Brief facts of the case are that assessee is a company engaged in business of manufacturing, sale and trading of chemical fertilizers and chemical industrial products. The assessee was setup by Government of Gujarat. The assessee filed its return of income for assessment year 2007-08 on 25.10.2007. Initially the assessment was completed under section 143(3) of the Act on 31.03.2009 by making disallowance of depreciation of certain fixed assets. The matter was carried before the Tribunal. Before Tribunal, the assessee filed its additional ground of appeal for claiming depreciation of Rs.4.222 crore on goodwill. The additional ground of depreciation of goodwill was raised for the first time before the Tribunal. The application for additional evidence was admitted by Tribunal in ITA No.1416/AHD/2010 and the issue of additional evidence was restored back to the file of Ld. ....
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....NCPL i.e. Goodwill 1,688.89 5. The assessee further contended that the working /calculation of goodwill was approved by Hon'ble jurisdictional High Court in the scheme itself. Copy of order of Hon'ble jurisdictional High Court was filed. The assessee also contended that the goodwill of assessees case is in substance to similar tangible assets includes technology for production of Aniline and TDI plants received from the Technical Collaborator Chematur Engineering AB of Sweden; a combined base of higher profitability and assets through developed existing market, efficient production capacity and various researches carried out etc.; full benefit of vertical integration and diversification; strategic clarity and more coherent strategy for growth rather than independent and suboptimal investment decisions; opportunity to plan for future growth avenues with greater choices and larger pool of combined resources; operation synergies in terms of integrated produce mix and production planning decisions based on end-to-end contribution and profitability; seamless integration and coordinated operations at lower costs; an access to a combined pool of marketing setup, research & devel....
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....mpany is not an asset on which depreciation is allowable. The assessee should have been allotted shares of itself, in proportion of shares holding in merged entity, in proportion of shareholding in merged company as has been done for other shareholders of merged company. These shares so allotted could have been kept by the assessee as treasury stock which could have been sold off in proportion by the assessee whenever deemed fit. Thus, while selling the shares the assessee would have paid capital gains tax or claimed capital loss as the case may be. But the assessee has reduced the value of investment in merged company just to create goodwill and claim depreciation thereon. On the aforesaid reasons, Assessing Officer took his view that no goodwill has been created on account of merger of amalgamated company rather it is resulted in amalgamation result of Rs.5266 lakhs. 7. Aggrieved by the disallowance of depreciation on goodwill, assessee filed appeal before Ld. CIT(A). Before Ld. CIT(A) the assessee made similar submission, as made before Assessing Officer, in addition to the assessee submitted once the scheme of amalgamation approved by the High Court, it effect was given in the....
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....by the Assessing Officer. The Hon'ble jurisdictional High Court in para-9(vii) of its order approving the scheme has held "Upon sanction of the scheme, the shares held by the transferee company in the transferor Company shall get cancelled and no new shares shall be issued by the transferee company against such shares." The Ld. CIT(A) on his consideration held that Assessing Officer has made remarks on this issue merely on assumption and without considering the detail written submission made by assessee on the scheme of amalgamation approved by the Hon'ble jurisdictional High Court and the effect of the same was given in the books of account of the assessee in accordance with the direction of Hon'ble jurisdictional High Court. The Ld. CIT(A) further held that similar depreciation of goodwill is allowed in assessment years 2009-10, 2010-11 and 2011-12 and there is no change in the facts during the year under consideration. The Ld. CIT(A) also followed the ratio of decision in Addl. CIT vs. Nestle India Ltd. (2005) 94 TTJ 53 (ITAT-Delhi) and allowed the relief to the assessee on depreciation of goodwill. Aggrieved by the order of Ld. CIT(A) the Revenue has filed present a....
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....f assets" as on 31.03.2020 included goodwill, then the amendment in section 43(6)(c)(ii) requires that the written down value of "block of assets" is to be reduced by the written down value of the goodwill falling within the block. The Ld. AR for the assessee reiterates that amended proviso in withdrawal the depreciation not allowing goodwill will apply prospectively. To support his submission, Ld. AR of the assessee relied upon the following decisions: - * PCIT Vs Zydus Wellness Ltd. [2017) 87 taxmann.com 82 (Guj.) (SLP dismissed by Supreme Court in) 113 taxmann.com 154 * Urmin Marketing P. Ltd. v. DCIT 122 taxmann.com 40 (Ahd-Trib) * Banc Tec TPS India P. Ltd. vs. ACIT 117 taxmann.com 979 (Mum-Trib) * JX Nippon Two Lubricants India Pvt. Ltd. TS-131-ITAT-2021 * Classic Stripes Pvt. Ltd. TS-413-ITAT-2020 12. We have considered the rival submission of both the parties and perused the order of authorities below carefully. We have also seen the order of Hon'ble High Court of Gujarat in Company Petition No. 148 of 2006 dated 09.01.2007 in approving the scheme of amalgamation of Narmada Chematur Petrochemical Limited (NCPL) with assessee. We find that Assessing Officer made t....
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...., Under the present situation, the goodwill amount would have been the same. The cancellation of investment has nothing to do with goodwill and amalgamation reserve as presumed by the Assessing Officer. 13. The Ld. CIT(A) on his consideration held that Assessing Officer has made remarks on this issue merely on assumption and without considering the detail written submission made by assessee on the scheme of amalgamation approved by the Hon'ble jurisdictional High Court and the effect of the same was given in the books of account of the assessee in accordance with the direction of Hon'ble jurisdictional High Court. We also find that Hon'ble jurisdictional High Court in para-9(vii) of its order approving the scheme made observation; "Upon sanction of the scheme, the shares held by the transferee company in the transferor company shall get cancelled and no new shares shall be issued by the transferee company against such shares". 14. The Ld. CIT(A) further held that the issue of depreciation on goodwill no more res integra after the decision of Hon'ble Supreme Court in the case of Smifs Securities Ltd. (supra), wherein it has been held that goodwill is an asset withi....
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....a Chematur Petrochemicals Limited (NCPL) particularly when assessee itself was the promoter of NCPL. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in deleting disallowance of Rs.35,68,134/- claimed as business expenditure incurred towards discharging its corporate social responsibility for social and economic upliftment and education. 5. The appellant craves to add to, amend or alter the above ground as may be deemed necessary. Relief claimed in appeal. The order of the CIT(A) on the above issue be set aside and that of the order u/s 143(3) passed by the Assessing Officer be restored." 17. At the outset of hearing the ld AR for the assessee submits that all the grounds of appeal raised by revenue are covered in favour of the assessee and against the revenue in assessees own case for earlier year or subsequent years. The ld CIT(A) granted relief to the assessee by following such decisions. Ground No.1 relates to deleting addition of Rs. 3.588 crore by treating it as revenue expenditure instead of capital expenditure. The ld. AR for the assessee submits that during the financial year under consideration, the assessee replaced ce....
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....milar disallowance the assessee was allowed relief by Tribunal and granted relief to the assessee in AY 2003-04 to 2005-06, 2008-09 to 2011-12. The revenue filed appeal before High Court against the order of Tribunal in AY 2003-04 to 2005-06, 2008-09 to 2011-12, which has been dismissed. Further, the assessing officer himself allowed similar relief to the assessee from AY 2017-18 onwards. Hence, we find that ground of appeal is squarely covered in favour of assessee and against the Revenue. Thus, following the principal of consistency we affirm the order of Ld. CIT(A). In the result, this ground of appeal is dismissed. 20. Ground No. 2 relates to deleting the disallowance of Rs.4,697 crore under section 40(a)(ia) for non-deduction of tax at source on the discount given to dealers. The ld AR for the assessee submits that this ground of appeal is also covered in favour of the assessee. The ld. AR for the assessee submits that during the year under consideration, the assessee has given discount to its dealers. Such discount is not commission but incentive for getting payment in time. The discount given by the assessee is not commission and is not liable for TDS under section 194H. Th....
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....or the assessee submits that this ground of appeal is also covered in favour of the assessee. The ld. AR for the assessee submits that during the assessment, the assessee, before the assessing officer filed the details of the Corporate Social Responsibility (CSR) contribution and the justification thereof. The assessee is owned and managed by Government of Gujarat and has to mandatory contribute for certain project of social upliftment. The expenses were incurred out of commercial expediency and allowable under section 37 of the Act. Such contribution would help in development of rural area in and around Gujarat and resultantly build brand image of assessee in the mind of customers. The ld AR for the assessee submits that in AY 2010-11 the assessee made contribution to educational institution, trust, and local bodies, the assessing officer disallowed the same, however, on appeal before Tribunal it was allowed to the assessee and further appeal by revenue before High Court was dismissed in Tax Appeal No. 146 of 2019. In AY 2001-02 the assessee contributed to the families t the Kargil War Martyrs and in AY 2009-10 to flood affected people in Bihar and all such contribution was allowe....
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....tate of Gujarat, makes contribution in the ordinary course of its business towards socially useful activities which help in the development particularly of the Bharuch District in which the assessee-company has its manufacturing facilities as also to earn goodwill from people at large and which help assessee-company in running its business smoothly. It is decided by the assessee-company to undertake various activities as a part of its social commitment in and around Bharuch District in particular as also in the state of Gujarat. It is also decided that the thrust areas under CSR policy of the assessee-company will be education providing quality education as also establishing centres for training and skill development, agriculture extension services providing easy access to farm-input, market access to produce, upgradation of farm skills; and socio-economic development of Bharuch Town in particular and district in general. The CSR is a concept whereby assessee-company integrate social and environmental concerns in their business operations and in their inter-action with their stakeholders on a voluntary basis. The emphasis is that business have to endeavour to become responsible act....