TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1183
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.... of the Income Tax Act, 1961 [hereinafter referred to as "the Act"] by the Deputy/Assistant Commissioner of Income Tax, Circle 3(1)(1), Ahmedabad [hereinafter referred to as "the Assessing Officer / AO"]. Facts in Brief 2. The assessee company, M/s Nirma Limited, is a public limited company engaged in the business of manufacturing and marketing a wide range of consumer and industrial products. Its principal consumer products include detergent powder, detergent cakes, toilet soaps and shampoos sold under the brand names "Nirma" and "Nima". In addition, the company manufactures intermediate industrial products such as sulphuric acid, Alpha Olephine Sulphonate (AOS), glycerine, acid slurry, fatty acid etc. The assessee has also diversified into large-scale industrial projects, namely the Soda Ash Project at Kala Talav, Bhavnagar and the Linear Alkyl Benzene (LAB) Project at Alindra, Baroda, both of which commenced production in F.Y. 1999-2000. The products from these units are partly consumed captively for the manufacture of soaps and detergents and partly sold to outside parties. The assessee also operates wind farm projects at Dhank, Bhavnagar District, Gujarat. Further, the B....
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....to subsequent year, and (v) disallowance of deduction u/s 80IA for power units. Book profit was recomputed at Rs. 8,15,36,38,898/-. 5. Following is the tabulated summary of assessments for both the years: Sr Particulars A.Y. 2015-16 A.Y. 2016-17 1 Date of filing original Return of income 28-11-2015 29-11-2016 2 Total Income as per original Return of income in Rs. Nil 4,12,91,90,560 3 Book Profit as per section 115JB in Rs. 2,46,69,60,565/- 8,15,15,29,966/- 4 Date of filing original Revised return of income 23-03-2017 - 5 Total Income as per Revised Return of income in Rs. 46,72,792/- - 6 Book Profit as per section 115JB in revised return Rs. 2,46,69,60,565/- - 7 Date of Assessment Order u/s 143(3) 30-03-2017 14-03-2018 8 Additions / Disallowances Rs. Rs. - Sales Tax Subsidy 7,22,34,860/- 0 - Excess Claim of Depreciation on Intangible Assets 4,11,60,577/- 3,08,70,433/- - Disallowance u/s 14A r.w.r. 8D 4,69,60,198/- 21,08,932/-  ....
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....(A) has grossly erred in confirming disallowance of depreciation on Goodwill arising out of amalgamation of Saurashtra Chemicals Limited for Rs. 9,71,72,064/- 4. In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in dismissing appellant's ground regarding initiation of penalty proceedings u/s. 271(1)(c) of Income- tax Act. 5. Your appellant reserves the right to add, alter, amend all or any of the above grounds of appeal as may be advised from time to time. ADDITIONAL GROUNDS OF APPEAL 1. In law and in facts and circumstances of the Appellant's case, sales tax benefit of Rs. 7,22,34,860/- should be excluded from the book profit u/s. 115JB of the I.T. Act. 2. In law and in facts and circumstances of the Appellant's case, learned Assessing Officer has grossly erred in making disallowance of delayed payment of ESIC twice for Rs. 9,70,103/-. The same was already disallowed in the return of income. 3. On the facts and in the circumstances of the case and in law, education cess and secondary & higher education cess ('education cess') paid on income tax and surcharge during t....
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..... 5. Whether the Ld. CIT(A) was correct in allowing the assessee not to treat the income chargeable to tax of Rs. 21,92,625/- pertaining to the corporate guarantee for financial assistance to wholly owned subsidiary 'Karnavati Holding Inc, USA 6. 6. On the facts and circumstances of the case, Ld CIT(A) ought to have upheld the order of the Assessing Officer. 7. It is, therefore, prayed that the order of Ld CIT(A) may be set aside and that of the Assessing Officer be restored. 12. Revenue's Appeal for A.Y. 2016-17 - ITA No. 1437/Ahd/2019 1. Whether the Ld. CIT(A) was correct in deleting the disallowance of R$. 3,08,70,433/- made on account of excess claim of depreciation on intangible assets. 2. Whether the Ld. CIT(A) was correct in deleting the disallowance of deduction of Rs. 1,25,35,47,080/- U/s 80IA in respect of Power Generation Unit at Bhavnagar & Porbandar. 3. On the facts and circumstances of the case, Ld CIT(A) ought to have upheld the order of the Assessing Officer. 4. It is, therefore, prayed that the order of Ld CIT(A) may be set aside and that of the Assessing Officer be restored. 13. Grounds of As....
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....the issues may be decided in favour of the assessee. Since the said decision is already on record, we shall examine, issue-wise, whether the ratio laid down therein is applicable mutatis mutandis to the facts of the present assessment years under appeal, or whether there are any distinguishing features that warrant a departure. • Issue relating to Sales Tax Subsidy - Revenue's Ground No. 1 for A.Y. 2015-16 and additional ground No. 1 in assessee's appeal for the same year. 16. During the year, the assessee claimed sales tax subsidy of Rs. 7,67,88,328/- in the return, later revised to Rs. 7,22,34,860/, in respect of its Kala Talav Unit, Bhavnagar. The assessee treated this subsidy as a capital receipt not chargeable to tax, relying upon the order of the Co-ordinate Bench in its own case for A.Y. 1992-93. The Assessing Officer, however, rejected the claim, observing that the subsidy was linked to sale of finished goods and purchase of raw material, rather than to capital investment. The AO further noted that the assessee made no entries in its books of account to reflect the subsidy, claimed deduction only in the computation of income, and thereby avoided inclusion of....
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....gh Court (Tax Appeal No. 226 of 2010, order dated 08.06.2016), and ultimately fortified by the Hon'ble Supreme Court in CIT v. Chaphalkar Brothers, Pune (2017) 88 taxmann.com 178 (SC). We therefore see no reason to depart from the settled judicial view. Respectfully following the binding precedents and in absence of any material change in facts or legal position, we uphold the order of the CIT(A) and hold that the sales tax subsidy of Rs. 7,22,34,860/- is a capital receipt not chargeable to tax. Accordingly, the Revenue's ground is dismissed. 20. By way of an additional ground, the assessee has contended that the sales tax subsidy of Rs. 7,22,34,860/-, already held to be a capital receipt not chargeable to tax under the normal provisions, ought to be excluded from the computation of book profit under section 115JB as well. It was submitted that Explanation 1 to section 115JB is exhaustive and provides specific adjustments to be made to the net profit as per the profit and loss account. Since a receipt of capital nature, not liable to tax under the Act, cannot be brought to tax indirectly through the deeming fiction of section 115JB unless specifically included in the adjustments....
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....re the Hon'ble Gujarat High Court. 25. In appeal, the learned CIT(A) examined the issue in detail. The CIT(A) referred to the order of the Co-ordinate Bench in the case of M/s. Nirma Industries Pvt. Ltd. for A.Y. 2001-02 in ITA No. 386/Ahd/2010 dated 24.01.2013, wherein the Bench had accepted the valuation of intangible assets at Rs. 500 crores, transferred into the assessee company under the scheme of demerger. The CIT(A) also noticed that in subsequent years from A.Ys. 2006-07 onwards, similar claims were consistently allowed either by the CIT(A) or by the Co-ordinate Bench, including in ITA No. 2022/Ahd/2009 order dated 31.07.2017 for A.Y. 2005-06. It was further observed that Explanation (3) to section 43(1), invoked by the Assessing Officer, had been considered by the Co- ordinate Bench in earlier years and rejected, since the Assessing Officer had not established that the main purpose of acquisition of the intangible assets was reduction of liability to tax by claiming extra depreciation. On these facts, the CIT(A) held that the assessee was entitled to depreciation on the written down value of intangible assets taking Rs. 500 crores as the base cost and directed the Asses....
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....ights which are in the capital field. He therefore treated the registration rights as intangible assets within the meaning of section 32(1)(ii) of the Act, held the expenditure to be capital in nature, and disallowed the claim of revenue deduction. However, the AO allowed depreciation on such intangible assets, including depreciation of Rs. 76,64,945/- pertaining to earlier years and added back the balance disallowance of Rs. 15,79,142/- to the income of the assessee. 30. Before the CIT(A), the assessee contended that the expenditure incurred towards registration of products in foreign countries was wholly and exclusively for the purpose of carrying on its business. It was submitted that without such registration, the assessee would not be able to export its products, and therefore the expenditure is in the nature of facilitating the carrying on of business rather than resulting in acquisition of any new capital asset. It was further emphasized that the expenses were non-refundable in nature, did not bring into existence any new asset, and only enabled the company to continue its business in the ordinary course. The assessee placed reliance upon the judgment of the Hon'ble Gujar....
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....ital field, but are part of the process of carrying on business and hence allowable as revenue expenditure. The Hon'ble High Court in Cadila Healthcare Ltd. (Tax Appeal No. 752 of 2012 dated 28.01.2013) has further reiterated this view. We also notice that in assessee's own case for earlier assessment years, the appellate authorities have consistently accepted this claim and there is no material on record to suggest that the said decisions have been overturned by any higher forum. In such circumstances, judicial discipline demands that we follow the binding precedent of the jurisdictional High Court and the consistent view taken in assessee's own case. 33. Accordingly, we hold that the product registration expenses incurred by the assessee during the year under consideration are allowable as revenue expenditure under section 37(1) of the Act. The contrary stand of the Assessing Officer treating the same as capital expenditure and allowing depreciation thereon cannot be sustained. We therefore uphold the order of the CIT(A) in deleting the disallowance of Rs. 15,79,142/-. Related ground of the Revenue is dismissed. • Issue relating to Deduction under Section 80IA (Po....
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.... units. We also note that the Revenue has not brought any contrary decision of the jurisdictional High Court to our notice. Accordingly, we uphold the order of the CIT(A) in deleting the disallowance of Rs. 74,00,90,123/- for A.Y. 2015-16 and Rs. 1,25,35,47,080/- for A.Y. 2016-17. 37. We also take note of the alternate finding recorded by the Assessing Officer in para 11.2 of the assessment order. The Assessing Officer had, without prejudice to the main rejection, observed that if deduction under section 80IA was to be held allowable at any appellate stage, then such deduction had to be restricted after - (i) excluding other income not derived from the eligible business as laid down by the Hon'ble Supreme Court in Liberty India Ltd. v. CIT (317 ITR 218), (ii) setting off the brought forward losses of the eligible undertaking before computing the current year's profits, and (iii) allocating the administrative and financial costs to the eligible unit on a reasonable basis. 38. We find that the learned CIT(A) while allowing the claim in principle, has not dealt with these consequential aspects. In our considered opinion, these adjustments are integral ....
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....nstitute income chargeable to tax. Accordingly, he directed the Assessing Officer to delete the addition of Rs. 21,92,625/- made on this account and to exclude the same while giving effect to the appellate order. 42. We have considered the rival submissions, examined the order of the learned CIT(A), and perused the material available on record. We note that similar issues had come up for consideration in the assessee's own case for A.Ys. 2009-10 to 2011-12, wherein the Co-ordinate Bench had held, following the decision of the Hon'ble Delhi Tribunal in Bharti Airtel Ltd. v. CIT (43 taxmann.com 150), that corporate guarantees extended without incurring any cost do not fall within the ambit of "international transaction" under section 92B, and accordingly deleted the additions made. 43. However, in subsequent years i.e., A.Ys. 2013-14 and 2014- 15, the Co-ordinate Bench, which followed the decision of Co- ordinate Bench in assessee's own case for AYs 2009-10 to 2011- 12, had an occasion to revisit this issue in the assessee's own case in light of the later judgment of the Hon'ble Madras High Court in PCIT v. Redington (India) Ltd. (122 taxmann.com 136). The Bench, after consider....
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....e Assessing Officer observed that SCL was a sick company before the BIFR and had incurred heavy accumulated losses. According to him, it was inconceivable that any commercial reputation or goodwill could be attached to SCL which could pass on to the amalgamated company. It was further held that no consideration had in fact been paid by the assessee company for acquisition of any goodwill; the alleged goodwill was only an accounting entry created to balance the debit and credit sides of the balance sheet. Referring to Explanation 7 to section 43(1) of the Act, the Assessing Officer noted that in a scheme of amalgamation the cost of any asset in the hands of the amalgamated company has to be taken as the cost in the hands of the amalgamating company, and since SCL did not have any goodwill recorded in its books, the cost in the hands of the assessee was Nil. Reliance was also placed by the Assessing Officer on the judgments of the Hon'ble Supreme Court in the case of Rustom Cavasjee Cooper v. Union of India (1970) 1 SCC 248 and CIT v. B.C. Srinivasa Shetty (1981) 128 ITR 294 (SC) for the proposition that self-generated goodwill is nebulous in character and cannot be depreciated. The ....
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....placed reliance on the decision of the Co-ordinate Bench in assessee's own case for A.Ys. 2012-13 to 2014-15 (ITA Nos. 2007 & 2008/Ahd/2017 and ITA No. 516/Ahd/2018, order dated 30.06.2025). We find that the issue relating to allowability of depreciation on goodwill arising on amalgamation of Saurashtra Chemicals Ltd. with the assessee stood adjudicated by the Co- ordinate Bench in favour of the assessee. 51. The Co-ordinate Bench in the aforesaid order, after an elaborate discussion of the scheme of amalgamation, provisions of section 32, Explanation 3, judicial precedents including Smifs Securities Ltd. (348 ITR 302, SC), and the subsequent amendment by Finance Act, 2021, recorded the following findings at paras 6.3 to 6.6: 6.3 We also find that in the case of Aditya Birla Nuvo Ltd., the Hon'ble High Court of Mumbai has followed Hon'ble Supreme Court in the case of Smifs Securities Ltd. In the present case under consideration, it is an accepted proposition that goodwill is an intangible asset on which the assessee can claim depreciation. In the case of Zydus Wellness Centre Ltd. Vs. DCIT, the ITAT allowed the claim of depreciation on goodwill arising on amalgamation c....
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....ment year 2020-21 and depreciation has been claimed, the written down value of the block and short-term capital gains would be determined in the prescribed manner. Rule 8AC has been prescribed for this purpose. - Section 55: Meaning of 'Cost of Acquisition' in case of Goodwill of Business or Profession has been amended to provide that o in case it is acquired from a previous owner, the cost would be the amount of purchase price paid. o in case it is acquired as a result of gift, amalgamation etc. and goodwill was acquired by previous owner, cost will be the cost to the previous owner. o all other cases- cost will be NIL. 6.5 The reasoning given in the Memorandum explaining the Finance Bill, 2021 for excluding goodwill from the ambit of intangible assets is that the actual calculation of depreciation of goodwill is required to be carried out in accordance with various other provision of the Act. Once those provisions are applied, in some situations there could be no depreciation on account of actual cost being zero and the WDV of that asset in the hands of the amalgamating company being zero. It is further stated that goodwill, in....