TaxTMI 
TaxTMI 
2026 (8) TMI 1476
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....4,465/- made by the Assessing Officer on account of disallowance of depreciation on goodwill arising out of amalgamation of Saurashtra Chemicals Limited, without appreciating that the amalgamating company was a sick, loss-making entity with negative net worth referred to BIFR, and therefore could not possess any genuine goodwill capable of depreciation. The so-called goodwill was merely a balancing entry created as an accounting facade to evade taxes rather than a genuine asset. 2) On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in deleting the addition of Rs. 1,73,64,618/- made by the Assessing Officer on account of disallowance of depreciation on intangible assets (brands and trade names) transferred from the demerged unit of Nirma Industries Ltd., without appreciating that the assessee failed to provide proper details in response to notice dated 26.08.2021 and the correct allowable depreciation based on the opening WDV determined for A.Y. 2017-18 was only Rs. 11,61,995/-, whereas the assessee claimed an excessive amount. 3) On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred to appreciate....
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....nality. The reliance placed on the ITAT's decision for earlier assessment years is premature as the Revenue has challenged the said decision before the Hon'ble High Court. 2) On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in deleting the addition of Rs. 2,30,59,386/- made by the Assessing Officer on account of disallowance of depreciation on goodwill arising from the amalgamation of Saurashtra Chemicals Limited, without appreciating that the amalgamating company was a sick industrial unit referred to BIFR with huge accumulated losses and negative net worth, and therefore could not possess any genuine goodwill capable of depreciation. The so-called goodwill was merely a balancing entry created for accounting convenience and not an asset acquired for any specific payment. Since the amalgamating company had only self-generated goodwill costing nil, the assessee cannot claim depreciation on an artificially created asset. 3) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 20,17,23,105/- by accepting the assessee's benchmarking for inter-unit sale of el....
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....to note that an identical issue in the appellant's own case has already been decided in its favour by the Hon'ble ITAT, Ahmedabad. The issue was adjudicated vide ITA Nos. 2007 & 2008/Ahd/2017 and ITA No. 516/Ahd/2018 for Assessment Years 2012-13, 2013-14 and 2014-15; ITA Nos. 2224/Ahd/2017 and 791/Ahd/2018 for Assessment Years 2013-14 and 2014-15; and ITA Nos. 1412 & 1413/Ahd/2019 for Assessment Years 2015-16 and 2016-17..." 6. As the Ld. CIT(A) has relied upon the decision of this Tribunal in the case of the Assessee itself for earlier assessment years, the order of Ld. CIT(A) is upheld and the grounds raised by the Revenue are dismissed. Ground No. 2 read with Ground No. 3: 7. Ground No. 2 read with Ground No. 3 relates to the deletion of Rs. 1,73,64,613/- being disallowance of depreciation of intangible assets being brand and names transferred from the demerged unit. The observations of the Ld. CIT(A) for Assessment Years 2015-16 and 2016-17 are as under: "7.4 It is relevant to note that an identical issue in the appellant's own case has already been adjudicated in its favour by the Hon'ble ITAT, Ahmedabad. The Tribunal decided the matter vide I....
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....d Nos. 1 and 2 of the appeal ITA No. 1569/Ahd/2026 discussed herein above, respectively. Ground Nos. 3 to 5 of the present appeal correspond to Ground Nos. 4 to 7 of ITA No. 1569/Ahd/2026, dealt with herein above. 9.1 All the above Ground Nos. 1 to 5 are covered by the decision of the coordinate bench of the Tribunal for the earlier Assessment Years in the case of the Assessee itself. Accordingly, these grounds of appeals raised by the Revenue are also dismissed. Ground Nos. 6 and 7: 10. This leaves us with Ground Nos. 6 and 7 of the present appeal, wherein by way of the impugned order, the Ld. CIT(A) has deleted the addition of Rs. 1,06,55,75,141/- made by the AO/TPO by accepting the benchmarking done by the Assessee for the sale of steam. 10.1 Brief facts relating to Ground Nos. 6 and 7 are that the AO made an adjustment of Rs. 1,06,55,75,141/- holding that the steam is generated by the power generating unit as a by-product. While working out the cost of power, the cost incurred by the Assessee is taken into consideration and, therefore, steam being a by-product has got no cost. The AO accordingly held the arm's length price for this transaction to be nil. The Ld.....
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....llowed the consistent line of judicial reasoning that where power/steam generated by eligible units is transferred to other units, the adoption of arm's length price based on external market comparables is permissible. Hon'ble ITAT has upheld that cost is only one component and external market data cannot be ignored when such data is reliable and appropriately adjusted. Hon'ble Gujarat High Court in the case of Gujarat Alkalies and Chemicals Ltd. (395 ITR 247 (Guj) (2017)), on somewhat analogous facts, held that for the purposes of deduction under Section 80-IA(4) of the Act, the meaningful comparables are not restricted to internal cost; instead, the prevailing market rate at which power is sold to independent customers/distribution companies constitutes the appropriate yardstick for valuation. This judicial approach underscores that internal transfer pricing must reflect market realities. 6.8 In the present case, the appellant has adopted the price at which electricity companies supply power (after making reliable and acceptable adjustments), as the benchmark for the inter-unit price of steam. There is no infirmity in relying on such external market data wher....