AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (1) TMI 1495
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....ng the following questions of law: "(1) Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal has erred in deleting the disallowance of Rs. 75,15,081/- on account of depreciation on goodwill, when in fact, no goodwill was created on account of merger of Narmada Chematur Petrochemicals Limited (NPCL) particularly when assessee itself was the promoter of NPCL? (2) Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal has erred in deleting the disallowance of Rs. 17,13,60,400/- u/s. 37(1) of the Act in respect of Corporate Social Responsibility expenses being contribution/donation educational/rural development societies? to (3) Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal was justified in dismissing the appeal of the revenue in relation to downward adjustment amounting to Rs. 86,28,49,633/- without appreciating the approach adopted by TPO? (4) Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal was justified in taking non-eligible unit as tested party and taking rate charged by distrib....
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....deduction of profits from transfer of steam u/s 80IA though the assessee-company neither made the claim of deduction u/s 80IA on profits from steam generation and used for captive consumption in manufacturing?" 5. Brief facts of Tax Appeal No. 414 of 2023 are that the assessee is a Joint Sector Company and is engaged in the business of manufacturing, sale and trading of Chemical Fertilizers and Chemical Industrial products. 6. The assessee filed e-return of income for AY 2013-2014 on 29.11.2013 declaring gross total income at Rs. 4,02,59,85,064/-. 7. Case of the assessee was selected for scrutiny assessment and assessment order dated 30.12.2016 came to be passed under section 143(3) read with section 144 of the Act. 8. Being aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals-3), Vadodara who vide order dated 31.08.2018 allowed the appeal of the assessee. 9. Being aggrieved by the order passed by CIT(Appeals), the Revenue filed appeal before the Tribunal who vide impugned order dated 31.10.2022 dismissed the appeal. 10. Brief facts of Tax Appeal No. 424 of 2023 are that the assessee filed e-return of i....
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....ed company 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. The Assessing Officer held that no goodwill has been created on account of merger of amalgamated company rather it is resulted in amalgamation result of Rs. 5266 lakh. As recorded above before Id CIT(A) the assessee filed detailed written submissions. We find that the Id CIT(A) granted relief to the assessee by taking view that his predecessor in assessee own case in assessment years 2009-10, 2010-11 and 2011-12 has allowed depreciation. The Ld. CIT(A) further held that assessee has paid a consideration of Rs. 7849.25 lakhs consisting of Rs. 6,955 lakhs against shares of its own and remaining amount of Rs.894.25 against the share of other shareholders. The assessee has passed entry in its books of account on amalgamation, investment of Rs. 6,955 lakhs....
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....ited (supra). Similar view was taken by Ahmedabad Tribunal in Urmin Marketing (P) Limited (supra), Mumbai Tribunal in Banc Tec TPS India (P) Limited Vs ACIT (supra). So far as objection of Id CIT-DR for the revenue that due to the amendment in section 32, the goodwill is no more depreciable asset, we are of the view that the amendment brought in the Act by way of Finance Act 2021 will be applicable prospectively and not in the year under consideration. In view of the aforesaid factual and legal discussion, we do not find any legality in finding of Ld. CIT(A), which we affirm. In the result, the grounds of appeal raised by the revenue are rejected." 15. Considering the decision of Tribunal in assessee's own case for A.Y. 2007-08 and 2012-13 and by following the principle of consistency, we do not find merit in the grounds of appeal raised by the revenue, hence, we affirm the order passed by the Id. CIT(A). In the result, this ground of appeal is dismissed." 16. Question No. 1 proposed by the Revenue is squarely covered by the following judgments of this Court and Hon'ble Supreme Court: 1) In case of Principal Commissioner of Income Tax-4 v. Zydus Wellness ltd. r....
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....ined to the powers of the assessing officer and accepting a claim without revised return. This is what Supreme Court observed in the said judgment while distinguishing the judgment in the case of National Thermal Power Co. Ltd. vs. Commissioner of Income-tax (supra) and that is how various High Courts have viewed the dictum of the decision in the case of Goetze (India) Ltd. vs. Commissioner of Income-tax (supra). When it comes to the power of Appellate Commissioner or the Tribunal, the Courts have recognized their jurisdiction to entertain a new ground or a legal contention. A ground would have a reference to an argument touching a question of fact or a question of law or mixed question of law or facts. A legal contention would ordinarily be a pure question of law without raising any dispute about the facts. Not only such additional ground or contention, the Courts have also, as noted above, recognized the powers of the Appellate Commissioner and the Tribunal to entertain a new claim for the first time though not made before the assessing officer. Income Tax proceedings are not strictly speaking adversarial in nature and the intention of the Revenue would be to tax real income. ....
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....goodwill was given as under: "In accordance with Scheme of Amalgamation of YSN Shares & Securities (P) Ltd with Smifs Securities Ltd (duly sanctioned by Hon'ble High Courts of Bombay and Calcutta) with retrospective effect from 1st April, 1998, assets and liabilities of YSN Shares & Securities (P) Ltd were transferred to and vest in the company. In the process goodwill has arisen in the books of the company." It was further explained that excess consideration paid by the assessee over the value of net assets acquired of YSN Shares and Securities Private Limited [Amalgamating Company] should be considered as goodwill arising on amalgamation. It was claimed that the extra consideration was paid towards the reputation which the Amalgamating Company was enjoying in order to retain its existing clientele. The Assessing Officer held that goodwill was not an asset falling under Explanation 3 to Section 32(1) of the Income Tax Act, 1961 ['Act', for short]. We quote hereinbelow Explanation 3 to Section 32(1) of the Act: "Explanation 3.-- For the purposes of this sub-section, the expressions 'assets' and 'block of assets' shall mean-- [a]....
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.... favour of the assessee. 17. Thus, question No. 1 is answered in favour of the assessee and against the Revenue. 18. Insofar as question no. 2 is concerned, the Tribunal has held as under: "18. We have considered the submissions of both the parties and have gone through the orders of lower authorities. We find that the assessing officer disallowed the expenses by taking view that payments was not made for the purpose of business. However, the assessing officer held that such payment was made to approved institution and allowed 50% of the amount under section 80G. The Id CIT(A) allowed relief to the assessee by taking view that such contribution was not for doing any charity but for sound business consideration and in building brand image of assessee. We find that nature of expenses is not in dispute. Further it is not in dispute that the assessee was setup by State Government and incurring similar expenses in earlier years. We find that similar issue has been decided by this combination in assessees own case for the A.Y. 2012-13 in ITA No. 432/Srt/2018 order dated 22/08/2022 wherein following order has been passed: "27. We have considered the submissions of ....
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....t 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 actors in society so that their every action leads to sustainable growth and economic development. The CSR is no longer charity or philanthropy instead it should be imbibed in the corporate culture that leads to responsible business. The assessee stated that the CSR contribution has helped in building brand image of the company and publicity among the agrarian community. The activities implemented in the rural areas are publicized on account of large scale so message reaches to the masses. To ensure that the assessee-company gets better publicity, representatives from its team participates in every event like designing the programme, discussion with sarpanch & gram Sabha, Bhoomi Pooja, concurrent monitoring & evaluation, inauguration event, etc., for the said project. To get wider acceptability, the assessee also installs inaugural stone, boards, banners, etc. wherever and whenever applicable and said project implemented by assessee helps to bu....
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....on 37(1) of the Act. NIRDES is an institute engaged in social activities and is entitled to get donations on which deduction is allowable at the rate of 50% to the donors under section 80G(5) of the Act. The assessee also submitted a copy of certificate issued by the said institute under section 80G(5) of the Act. The Assessing Officer disallowed the aforesaid claim of Rs.25 lakhs as non-business expenditure. He, however, entertained the claim separately under section 80G(5) of the Act. In assessee's appeal before Commissioner (Appeals), it was pointed out that actually the donation had been given to NIRDES as per order of the Gujarat State Government who was a major shareholder in the assessee company. Moreover, it was in the interest of the company also because the assessee company being a fertilizer producing company, the future prospects for the assessee were better because of expansion of irrigated area of land and the prospective demand of fertilizer for agricultural activities therein. It was contended that if these things are taken into consideration, the expenditure is in the nature of commercial expediency and should be allowed to the assessee under section 3....
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....ase of Sri Venkata Satyanarayana Rice Mill Contractors Co. vs. Commissioner of Income-Tax (supra) has held thus: "From the aforesaid discussion it follows that any contribution made by an assessee to a public welfare fund which is directly connected or related with the carrying on of the assessee's business or which results in benefit to the assessee's business has to be regarded as an allowable deduction under section 37(1) of the Act. Such a donation, whether voluntary or at the instance of the authorities concerned, when made to a Chief Minister's Drought Relief Fund or a District Welfare Fund established by the District Collector or any other fund for the benefit of the public and with a view to secure benefit to the assessee's business, cannot be regarded as payment opposed to public policy. It is not as if the payment in the present case had been made as an illegal gratification. There is no law which prohibits the making of such a donation. The mere fact that making of a donation for a charitable or public cause or in public interest results in the Government giving patronage or benefit can be no ground to deny the assessee a deduction of that amount under section 3....
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....wer generating unit and provided electricity to its another unit and claimed deduction under section 80-IA in respect of profits arising out of such activity, valuation of electricity provided to another unit should be at rate at which electricity distribution companies were allowed to supply electricity to consumers. Thus, in view of the aforesaid factual and legal position, we do not find any infirmity in the order passed by ld CIT(A), which we affirm. Resultantly, the corresponding grounds of appeal raised by revenue are dismissed." 21. This Court in case of the Principal Commissioner of Income Tax, Vadodara I v. Gujarat Fluorochemicals Ltd (judgment dated 17.06.2019 in Tax Appeal No. 11 of 2018 and allied matter) has held as under : "25. The fourth question proposed by the revenue is with respect to the deduction under section80IA(4) of the Act at the rate on which the GEB supplied power to its customers ignoring the rate at which the power generating company supplied to the GEB. This issue is directly covered by the decision of this Court in the case of CIT Vs. Gujarat Alkalies and Chemicals Ltd.; 395 ITR 247. It is also covered by the decision of the Supreme Court....
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....he CPP Unit to the general unit would be the same being charged by GEB from the consumers. 5. Counsel for the Revenue contended that the component of 8 paise per unit was the electricity duty which GEB was not authorized to retain but had to pass on to the Government. In essence, GEB was only collecting 8 paise per unit as electricity duty for and on behalf of the Government. He submitted that the market value of the electricity should be reckoned on Rs.5.32 ps. per unit as was done by the Revenue authority. 6. Under sub-Section(8) of Section 80IA of the Act, if it is found that where any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the eligible business and in either case the consideration for such transfer does not correspond to the market value of such goods as on the date of the transfer, then for the purposes of deduction under Section 80IA in case of the eligible business as if the transfer had been made at the market value of such goods or services. It is....
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....low the claim of the assessee qua Rs. 21,47,672/- 46. So far as payment of Rs. 17,22,105/ and Rs. 15,121/ are concerned, we find that the Revenue authorities have not verified the details furnished by the assessee. The reasons explained by the assessee cannot be bruised aside. Therefore, we send back the issue of addition qua these two payments to the file of AO for verification of the details of payments. If on verification the reasons assigned by the assessee are found to be correct, then, the AO is directed to give benefit of section 43B of the Act to the assessee. 29. We take notice of the fact that the ITAT answered this question in favour of the assessee keeping in mind the peculiar facts and circumstances of the case. Though the decision of this Court in the case of GSRTC (supra) is against the assessee." 22. The Hon'ble Supreme Court in case of Commissioner of Income tax v. Jindal Steel & Power Ltd. reported in (2023) 157 taxmann.com 207(SC), has held as under: "15. Since the core issue is relatable to Section 80-IA of the Act, it would be apposite to advert to and analyse the aforesaid provision. Section 80-IA deals with deductions in respect ....
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.... develops an industrial park or generates power or commences transmission or distribution of power. In the proviso, there is a reference to clause (b) of the explanation to clause (i) of sub-section (4). Where the assessee begins operating and maintaining any infrastructure facility referred to in the said provision, the benefit can be availed of by the assessee for twenty years in place of fifteen years. 15.3. Sub-section (4) of Section 80-IA has some relevance to the present proceeding. Therefore, the same is extracted as under: (4) This section applies to- (i) any enterprise carrying on the business of (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating any infrastructure facility which fulfils all the following conditions, namely :- (a) it is owned by a company registered in India or by a consortium of such companies; (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating a new infrastructure facili....
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....s or maintains and operates an industrial park notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2002 : Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 and transfers the operation and maintenance of such industrial park to another undertaking (hereafter in this section referred to as the transferee undertaking) the deduction under sub-Section (1), shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years in a manner as if the operation and maintenance were not so transferred to the transferee undertaking; (iv) an industrial undertaking which,- (a) is set up in any part of India for the generation or generation and distribution of power if it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 2003; (b) starts transmission or distribution by laying a network of new transmission or distribution lines at any ti....
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.... 15.6. Sub-section (8) says that where any goods held for the purposes of the eligible business are transferred to any other business carried on by the assessee or where any goods held for the purposes of any other business carried on by the assessee are transferred to the eligible business but the consideration for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods as on the date of the transfer, then for the purposes of deduction under Section 80-IA, the profits and gains of such eligible business shall be computed as if the transfer had been made at the market value of such goods as on that date. The proviso says that if the assessing officer finds exceptional difficulties in computing the profits and gains of the eligible business in the manner specified in sub-section (8), then in such a case, the assessing officer may compute such profits and gains on such reasonable basis as he may deem fit. The explanation below the proviso defines "market value" for the purpose of sub-section (8). It says that market value in relation to any goods means the price that such goods would ordinarily fetch on sale in t....
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..... As per Section 44, no person can establish or acquire a generating station or generate electricity without the previous consent in writing of the State Electricity Board. However, such an embargo would not be applicable to the Central Government or any corporation created by a central act or any generating company. As per Section 45, the State Electricity Board has been empowered to enter upon and shut down a generating station if the same is in operation contravening certain provisions of the 1948 Act. 17. In so far facts of the present case are concerned, there is no dispute. Since electricity from the State Electricity Board to the industrial units of the assessee was inadequate, the assessee had set up captive power plants to supply electricity to its industrial units. For disposal of the surplus electricity, the assessee could not supply the same to any third-party consumer. Therefore, in terms of the provisions of Section 43A of the 1948 Act, the assessee had entered into an agreement dated 15.07.1999 with the State Electricity Board as per which, the assessee had supplied the surplus electricity to the State Electricity Board at the rate of Rs. 2.32 per unit deter....
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....e. Assessee had computed the profits and gains by taking Rs. 3.72 as the price of electricity per unit supplied by its captive power plants to its industrial units. The basis for taking this figure was that it was the rate at which the State Electricity Board was supplying electricity to its industrial consumers. Assessing officer repudiated such claim. According to him, the rate at which the assessee had supplied the surplus electricity to the State Electricity Board i.e. Rs. 2.32 per unit, should be the market value of electricity. Assessee cannot claim two rates for the same good i.e., electricity. When it supplies electricity to the State Electricity Board at the rate of Rs. 2.32 per unit, it cannot claim Rs. 3.72 per unit for supplying the same electricity to its sister concern i.e., the industrial units. This view of the assessing officer was confirmed by the CIT (A). 21. We have noticed that the Tribunal had rejected such contention of the revenue which has been affirmed by the High Court. In this proceeding, we are called upon to decide as to which of the two views is the correct one. 22. Reverting back to sub-section (8) of Section 80-IA, it is seen that ....
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....set up a power generating unit having restrictions on the use of power generated and at the same time, the tariff at which the said power plant could supply surplus power to the State Electricity Board was also liable to be determined in accordance with the statutory requirements. In the present case, as the electricity from the State Electricity Board was inadequate to meet power requirements of the industrial units of the assessee, it set up captive power plants to supply electricity to its industrial units. However, the captive power plants of the assessee could sell or supply the surplus electricity (after supplying electricity to its industrial units) to the State Electricity Board only and not to any other authority or person. Therefore, the surplus electricity had to be compulsorily supplied by the assessee to the State Electricity Board and in terms of Sections 43 and 43A of the 1948 Act, a contract was entered into between the assessee and the State Electricity Board for supply of the surplus electricity by the former to the latter. The price for supply of such electricity by the assessee to the State Electricity Board was fixed at Rs. 2.32 per unit as per the contract. ....
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....t, it is only upon granting of specific consent that a private entity could set up a power generating unit. However, such a unit would have restrictions not only on the use of the power generated but also regarding determination of tariff at which the power generating unit could supply surplus power to the concerned State Electricity Board. Thus, determination of tariff of the surplus electricity between a power generating company and the State Electricity Board cannot be said to be an exercise between a buyer and a seller under a competitive environment or a transaction carried out in the ordinary course of trade and commerce. It is determined in an environment where one of the players has the compulsive legislative mandate not only in the realm of enforcing buying but also to set the buying tariff in terms of the extant statutory guidelines. Therefore, the price determined in such a scenario cannot be equated with a situation where the price is determined in the normal course of trade and competition. Consequently, the price determined as per the power purchase agreement cannot be equated with the market value of power as understood in the common parlance. The price at which the ....
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....per unit, the same could not be availed of by the assessee. The electricity generated was sold by the assessee entirely to its paper unit. There was no surplus electricity to be supplied to the State Electricity Board and consequently, there was no contract between the assessee and the State Electricity Board determining the rate of tariff for the electricity supplied by the assessee to the State Electricity Board. On the other hand, it was noticed that the Electricity Act, 2003 had come into force whereby and whereunder, the rate at which electricity could be supplied is determined, notably by Sections 21 and 22 thereof. That apart, there is the tariff regulatory commission which has the mandate for fixing the rates for sale and purchase of electricity by the distribution licensee. Thus it was noted that there is an inbuilt mechanism to ensure permissible profit both to the generating companies and to the distribution licensees. Therefore, it was held by the High Court that the assessee's generating unit could not claim any benefit under Section 80-IA of the Act computing the profits and gains on the basis of the rate chargeable by the distribution licensee from the consumer and t....
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....h Court in Jay Chemical Limited (supra) held that steam produced by the assessee can be termed as power and would be qualified for the benefit of deduction under section 80IA(4). Thus, keeping in view the aforesaid factual and legal position, we do not find any infirmity in the order of Id CIT(A), which we affirmed. Consequently, the corresponding ground of appeal is dismissed." 24. This Court in case of Principal Commissioner of Income Tax v. Jay Chemical Industries ltd. reported in (2020) 422 ITR 449 in similar facts held as under: "19. This Court took notice of the fact that the assessee had installed turbine for power generation which relied on the excess steam production capacity of the plant. This Court ultimately took the view that the installation of turbine for power generation could be said to setting up of a new industrial unit and therefore, the assessee would not be entitled for deduction of sum under Section 80IA of the Act. 20. In our view, the facts in the case of Commissioner of Income-tax Vs. Atul Ltd. (Supra) are quite different and the ratio, as propounded in the same, will have no applicability to the case on hand, more particularly, the qu....