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2026 (4) TMI 773
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....are being decided by way of this consolidated order. With the consent of the parties, the Revenue's appeal and the assessee's cross objection for the assessment year 2017-18 are considered as a lead case, and the decision rendered therein shall apply mutatis mutandis to the other matters before us. ITA No. 2693/Mum/2025 and CO No. 187/Mum/2025 Assessment Year 2017-18 3. In its appeal for the assessment year 2017-18, the Revenue has raised the following grounds: - "1. On the facts and the circumstances of the case, the Ld.CIT(A) erred in allowing the depreciation u/s 32 of the Act on trademarks amounting to Rs. 2,98,50,000/- ignoring the categorical finding by the Assessing Officer that the intangible asset created in the books of the assessee was fictitious. 2. On the facts and the circumstances of the case, the Ld. CIT(A) erred in allowing the appeal of the assessee without considering that the valuation of shares done at time of amalgamation by the assessee was excessive. 3. On the facts and the circumstances of the case, the Ld. CIT(A) erred in not appreciating that the trademark was created in the books of the assessee as a result of amalgama....
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....the value determined by the independent valuer. As per the assessee, the independent valuer determined the value of the assessee's share at Rs. 231 per share as on 31/03/2015, while the value of the share of the Transferor Company was determined at Rs. 23 per share. Accordingly, as per the assessee, it issued 20,09,880 equity shares to the shareholders of the Transferor Company. Thus, the total consideration paid pursuant to the amalgamation was to the tune of Rs. 46.42 crore (i.e. 20,09,800 equity shares multiplied by Rs. 231 per share of the assessee). 7. During the assessment proceedings, the assessee was asked to provide the details on the basis of which the valuation of shares was done for both the Transferor Company and the assessee by the valuer. Also, the assessee was asked to explain how an intangible asset named "Trademark" was created in the books of the assessee pursuant to the amalgamation, when it was not recorded in the books of the Transferor Company as on 31/03/2015. In response, the assessee submitted the valuation report and the report on SWAP ratio. 8. The Assessing Officer ("AO"), vide order dated 24/12/2019 passed under section 143(3) of the Act, noted t....
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....) 348 ITR 302 (SC), held that depreciation claimed on Trademark is allowable under section 32(1)(ii) of the Act. Being aggrieved, the Revenue is in appeal before us. As the learned CIT(A), inter alia, rejected the submission of the assessee that the AO cannot examine the depreciation claim in the successive year, when it has already accepted the claim in the first year of its existence, the assessee has filed the cross-objection in Revenue's appeal before us. 11. During the hearing, the learned Senior Counsel appearing for the assessee, submitted that the Transferor Company was established on 14/12/2005, and was carrying on the business in fertilisers with operating licences in 14 states in India. The learned Senior Counsel further submitted that by using its Trademark "Nutrifeed" since the financial year 2007-08, the Transferor Company had significantly increased its sales. Accordingly, pursuant to the merger, the trademark "Nutrifeed" was transferred to the assessee along with other assets and liabilities. The learned Senior Counsel further submitted that since the appointed date of the scheme of merger was 01/04/2015, i.e. the assessment year 2016-17, the year under considera....
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....amation was effective on 01/04/2015, the assessee claimed depreciation on Trademark for the first time in the assessment year 2016-17. From the perusal of the documents forming part of the paper book, we find that during the scrutiny proceedings for the assessment year 2016-17, vide notice dated 16/11/2018 issued under section 142(1) of the Act, forming part of the paper book from pages 103-112, the AO specifically raised a query regarding the depreciation claimed by the assessee @25% on Trademark, and asked the assessee to show clause as to why such depreciation should not be disallowed. The relevant query raised by the AO vide aforesaid notice, is reproduced as follows: - "3. It is observed that you have claimed Depreciation u/s 32 on Intangible Assets at Rs. 3,98,73,094/-being @25% of Rs. 15,95,80,509/-. As per note below Note-12 to accounts, the said addition is pursuant to Amalgamation of Trans Agro India Pvt. Ltd. with you as per order issued by NCLT, Mumbai, and that the Intangible asset is created as per the valuation report by an independent valuer. In regard to above, please submit as under: a) Please submit the details of assets/ liabilities acquired sh....
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....e assessee, an application seeking a change in the name of the Applicant was also filed along with the order of amalgamation passed by the Hon'ble National Company Law Tribunal. Accordingly, on 29/11/2020, the certificate of registration of Trademark was issued under the Trade Marks Act, 1999, registering the Trademark "Nutrifeed" in the name of the assessee. Having perused these documents, which form part of the separate compilation filed by the assessee pursuant to the directions during the hearing, we do not find any merit in the findings of the AO that the Trademark transferred to the assessee pursuant to amalgamation was fictitious. 17. Be that as it may, since the year under consideration is the second year of the claim of depreciation on Trademark by the assessee, which has already been allowed to the assessee in the first year of its claim, i.e. assessment year 2016-17, therefore the entire exercise of determining the eligibility of claim in the year under consideration is merely academic, in the absence of any change in facts and circumstances, as in this year the depreciation on Trademark is to be calculated on its opening Written Down Value. At this stage, it is also ....
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....he Tribunal found that this claim of depreciation was raised in the assessment year 2003-2004. The Assessee claimed that it is allowable as per the provisions of Income Tax Act on block of assets under the head "intangible assets". The Assessing Officer allowed the claim for that assessment year by an order under Section 143(3) dated 28.03.2006. The Tribunal then, proceeds to hold that when the Assessing Officer had to allow depreciation on the written down value of the block of assets, then, it cannot in the present assessment year dispute the opening written down value of the block of assets nor can he examine the correctness or otherwise of the opening written down value brought forward from the earlier year. The order under Section 143(3) for the assessment year 2003- 2004 continues to operate and no proceedings under the Act were initiated to disturb the same." 21. Before concluding, we may also note that the decisions relied upon by the learned CIT(A) for rejecting a similar submission of the assessee in para- 7.4 of the impugned order do not pertain to the claim of depreciation on intangible assets. Therefore, these decisions are not applicable to the present case, and th....
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....of the assessee without appreciating the provisions of clause (f) of explanation 1 to section 115JB(2) of the Income Tax Act, 1961 and the decision of the Hon'ble ITAT Mumbai 'F' Bench in the case of Deputy Commissioner of Income Tax, Central Circle-18 & 19, Mumbai vs. Viraj Profiles Ltd. in ITA No.4439/(Mum.) of 2013." 28. While the assessee has raised the following grounds in its cross-objection: - "1. That on the facts and circumstances of the case and in law, the learned. CIT(A) erred in holding that the learned Assessing Officer can challenge the valuation of the assets though the valuation has been accepted by the National Company Law Tribunal (NCLT) and the scheme of amalgamation is approved by the NCLT without appreciating that the scheme of amalgamation upon its approval by NCLT acts like a statute and is binding on the income tax authorities and hence the learned Assessing Officer cannot challenge the valuation of assets in the scheme of amalgamation after its approval by NCLT. 2. That on the facts and circumstances of the case and in law, the learned CIT(A) erred in holding that the learned Assessing Officer can challenge the valuation of....
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....ngible asset created in the books of the assessee was fictitious. 2. On the facts and the circumstances of the case, the Ld. CIT(A) erred in allowing the appeal of the assessee without considering that the valuation of shares done at time of amalgamation by the assessee was excessive. 3. On the facts and the circumstances of the case, the Ld. CIT(A) erred in not appreciating that the trademark was created in the books of the assessee as a result of amalgamation and without any consideration. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in restricting disallowance made under section 14A of the I.T. Act to the extent of tax exempt income earned during the year by overlooking the clarification of legislative intent provided by the CBDT vide Circular No. 5/2014 dated 11.02.2014 and to this effect even an amendment was made by Finance Act, 2022 by way of insertion of Explanation to Section 14A of the Act. 5. On the facts and circumstances of the case, the Ld. CIT(A) erred in restricting the disallowance u/s 14A of the Income Tax Act r.w.r. 8D(2) (iii), to the extent of exempt income received by the assessee during the yea....
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....tion 10(34) of the Act while filing its return of income. We find that the Hon'ble Delhi High Court in Cheminvest Ltd. vs. CIT, reported in [2015] 378 ITR 33 (Delhi), held that section 14A will not apply if no exempt income is received or receivable during the relevant previous year. We further find that the Hon'ble Jurisdictional High Court in Pr. CIT vs. Kohinoor Project (P) Ltd., reported in [2020] 121 taxmann.com 177 (Bom.), rendered similar findings and dismissed the Revenue's appeal on a similar issue. Since, in the present case, the assessee has not earned any dividend income, therefore, respectfully following the aforesaid judicial pronouncements, disallowance of expenditure under section 14A read with Rule 8D is not sustainable. 38. We further find that vide amendment by the Finance Act, 2022, the non-obstante clause and explanation were inserted in section 14A of the Act to the effect that the section shall apply even if no exempt income has accrued or arisen or has been received during the year. We find that while dealing with the issue of whether the aforesaid amendment by the Finance Act, 2022 is prospective or retrospective in operation, the Hon'ble....