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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED&
PER BENCH – ACCOUNTANT MEMBER :
These five appeals (filed by the assessee and the revenue) are directed against the separate orders dated 28.02.2011, 08.11.2011, 02.12.2013 & 04.09.2018 passed by the Commissioner of Income Tax (Appeals)-VI, 6, & 11 Ahmedabad for the Assessment Years (A.Ys.) 2007-08, 2008-09 & 2009-10.
Since all the appeals relate to the same assessee, hence the same are heard analogously and are being disposed of by a common order.
First we take up assessee’s appeal in ITA No.1439/Ahd/2011 for Asst. Year 2007-08. The assessee has raised the following grounds of appeal:- “(1) That on facts and in law the learned Commissioner of Income Tax (Appeals) has grievously erred in confirming the disallowance of depreciation on goodwill of Rs.1,90,09,241/-. (2) That on facts and in law, the learned CIT(A) has grievously erred in holding that the assessee has not acquired any intangible assets and thereby confirming the disallowance by applying inapplicable provisions of the I.T. Act, 1961. (3) That the learned CIT(A) has grievously erred in not deciding the ground regarding alternate valuation of goodwill done by A.O. (4) The appellant craves leave to add, alter, amend any ground of appeal.”
The 1st issue raised by the assessee in ground No. 1 and 2 is that the 3. learned CIT(A) erred in confirming the disallowance of depreciation of � 1,90,09,241/- on the intangible assets/goodwill acquired in the scheme of amalgamation.
ITA Nos.1439/Ahd/2011, 42/Ahd/2012, 597/Ahd/2014, 2249/Ahd/2018 & IT(SS)A No.357/Ahd/18 Bodal Chemicals Pvt. Ltd. Asst.Years –2007-08, 2008-09 & 2009-10 - 3 - 4. The facts in brief are that the assessee company namely Dintex Dye Chem Ltd. (amalgamated co.) has acquired a company namely Bodal Chemical Pvt. Ltd. (amalgamating co.) in a scheme of amalgamation approved by the Hon’ble Gujarat High Court vide order dated 27 April 2006. Subsequently, the name of the assessee company was changed to Bodal Chemical Ltd.
As per the amalgamation scheme, all the assets and liabilities of the amalgamating company were transferred w.e.f. 01.04.2004 to the assessee. But the effect in the books of the assessee was given in the Financial Year 2005-06 corresponding to the A.Y. 2006-07. Thus, the year under consideration is the 2nd year after recording the transaction of all the assets and liabilities acquired in the scheme of amalgamation. The assessee acquired all the assets and liabilities/ general reserve/ investment allowance reserve/ balance of profit and loss account at the book value as shown by the amalgamating company in its books of accounts. However, the assessee paid more consideration against the net assets acquired by it from amalgamating company by way of issuing shares. As such, the excess consideration paid by the assessee amounted to � 10,13,82,620/-, which was treated by it in its books of accounts as goodwill. The assessee accordingly claimed depreciation on such goodwill @ 25% at its written down value amounting to � 1,90,09,241/- (25% of 7,60,36,965.00).
The assessee stated that it has acquired all the assets/ liabilities of the amalgamating/ transferor company including the intangible assets such as licenses, trademark and other commercial rights of the similar nature. Accordingly, the assessee contended that it is eligible for the depreciation u/s 32 of the Act.
ITA Nos.1439/Ahd/2011, 42/Ahd/2012, 597/Ahd/2014, 2249/Ahd/2018 & IT(SS)A No.357/Ahd/18 Bodal Chemicals Pvt. Ltd. Asst.Years –2007-08, 2008-09 & 2009-10 - 4 - However, the AO during the assessment proceedings observed that there was no intangible asset shown by the amalgamating/ transferor company in its balance sheet before the date of the amalgamation. Moreover, the intangible assets acquired by the assessee from the transferor company were representing the self generated assets. Therefore, the value of the intangible asset is zero as per explanation 7 to section 43(1) of the Act.
Similarly, there was no block of assets for the impugned intangibles, therefore, the written down value of such blocks shall be treated at nil as per explanation to section 43(6) of the Act.
In view of the above, the AO determined the value of the intangible assets in the hands of the assessee at nil value as per the provisions of the Income Tax Act despite the fact that the values of these intangibles were approved in the amalgamation scheme. Accordingly, the AO disallowed the claim of the assessee for the year under consideration amounting to �1,90,09,241/- and added to the total income of the assessee.
Aggrieved assessee preferred an appeal to the learned CIT (A).
The assessee before the learned CIT (A) submitted that it is the 2nd year 6. for claiming the depreciation on the goodwill. As such the depreciation under section 32 of the Act was allowed in the assessment framed for the immediately preceding assessment year 2006-07. The assessee has actually incurred the cost by issuing shares to the transferor company. Therefore, the same should be allowed as deduction either by way of depreciation or as revenue expenses.
ITA Nos.1439/Ahd/2011, 42/Ahd/2012, 597/Ahd/2014, 2249/Ahd/2018 & IT(SS)A No.357/Ahd/18 Bodal Chemicals Pvt. Ltd. Asst.Years –2007-08, 2008-09 & 2009-10 - 5 -
There were certain intangible assets with the transfer company such as technical know-how for products, effluent treatment disposal entitlement right, environmental clearances from government for a chemical plant, other commercial rights, registrations, employees with their experiences, customer base, export market, raw material resources, a large banking base and management expertise though not recorded in the books of accounts of the transferor company but their value cannot be ignored for the purpose of goodwill in the hands of the transferee company.
As such, the above said intangible assets were not recorded in the books of the transferor company as the accounting standard 26 issued by the Institute of chartered accountants of India prohibits doing so.
The assessee also claimed that the provisions of section 43(6) explanation 2(b) of the Act deals with the assets already recorded in the books of accounts of the transferor company. As such it doesn’t deal about the intangible assets acquired in the scheme of amalgamation. Similar is the case with the provisions of section 43(1) and its explanation 7 of the Act.
However the learned CIT(A) disregarded the contention of the assessee by observing that the provisions of section 43(1) and 43(6) of the Act requires to take the actual cost of the amalgamating company in the books of the amalgamated company. As there was no block of assessee for the intangibles in the books of the amalgamating company, therefore the same cannot be recorded in the books of the amalgamated company. The learned CIT (A) accordingly confirmed the order of the AO.
ITA Nos.1439/Ahd/2011, 42/Ahd/2012, 597/Ahd/2014, 2249/Ahd/2018 & IT(SS)A No.357/Ahd/18 Bodal Chemicals Pvt. Ltd. Asst.Years –2007-08, 2008-09 & 2009-10 - 6 -
Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us.
The learned AR before us filed a paper book running from pages 1 to 104 and submitted that the value of the good will was duly approved by the order of Hon’ble High Court in the scheme of amalgamation dated 12-04-2006 which is placed on page 57 to 68 of the paper book. All the facts were brought to the notice of the authorities below and no defect of whatsoever was pointed out.
The learned AR also submitted that the amalgamating company were in possession of certain intangibles though the same were not recorded but the value of the same cannot be ignored while determining the purchase consideration. The learned AR in support of his contention drew our attention on pages 93 to 98 of the paper book where the details of such intangibles were placed.
On the other hand, the learned DR before us submitted that under the scheme of the amalgamation, all the assets and liabilities or transferred to the amalgamated company at the books value. Therefore, there is no question of recording the goodwill in the hands of the amalgamated company arises as there was no intangible /goodwill in the hands of the amalgamating company. The learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the case have been duly elaborated
ITA Nos.1439/Ahd/2011, 42/Ahd/2012, 597/Ahd/2014, 2249/Ahd/2018 & IT(SS)A No.357/Ahd/18 Bodal Chemicals Pvt. Ltd. Asst.Years –2007-08, 2008-09 & 2009-10 - 7 - in the preceding paragraphs which are not in dispute. Therefore, we are not inclined to repeat the same for the sake of brevity and convenience.
Admittedly, the assessee claimed the depreciation 1st time on the intangible assets acquired in the scheme of amalgamation at Rs. 2,53,45,655.00 in the assessment 2006-07. The assessee carried forward the written down value to the year under consideration under the intangible block of assets and accordingly claimed depreciation thereon as per the provisions of law. As such, the claim of the assessee for the depreciation was accepted by the Revenue in the immediate preceding assessment year 2006-07. No action was taken by the Revenue under section 263 and 147 of the Act disputing the deduction allowed to the assessee for the depreciation on the intangible assets acquired by it in the scheme of amalgamation. However, there was no information brought before us whether there was any assessment under section 143(3) of the Act pertaining to the assessment year 2006-07 though the assessee before the learned CIT (A) has submitted as under: “The depreciation on goodwill is allowed and was correctly granted as per law in the assessment order for A.Y 2006-07.” The above submission of the assessee before the learner CIT (A) has not been disputed by the learned CIT (A) in his order.
Now, the issue arises whether the Revenue can deny the deduction claimed by the assessee on the written down value in the year under consideration. In our view, the answer stands in favour of the assessee. It is because, the revenue once allowed the deduction for the depreciation claimed by the assessee, then it is debarred to reject the claim of the assessee in the subsequent year on the WDV carried forward from the earlier assessment year.
ITA Nos.1439/Ahd/2011, 42/Ahd/2012, 597/Ahd/2014, 2249/Ahd/2018 & IT(SS)A No.357/Ahd/18 Bodal Chemicals Pvt. Ltd. Asst.Years –2007-08, 2008-09 & 2009-10 - 8 -
As such, in our considered view the Revenue was required to disturb the claim of the assessee in the 1st year itself. Therefore, we are of the view that claim of the assessee should be allowed on the basis of principles of consistency. In this regard we find support and guidance from the judgment of Hon’ble Supreme Court in the case of CIT versus Excel Industries Ltd reported in 358 ITR 295 wherein it was held as under: “28. Secondly, as noted by the Tribunal, a consistent view has been taken in favour of the assessee on the questions raised, starting with the assessment year 1992-93, that the benefits under the advance licences or under the duty entitlement pass book do not represent the real income of the assessee. Consequently, there is no reason for us to take a different view unless there are very convincing reasons, none of which have been pointed out by the learned counsel for the Revenue. 29. In Radhasoami Satsang Saomi Bagh v. CIT [1992] 193 ITR 321/60 Taxman 248 (SC) this Court did not think it appropriate to allow the reconsideration of an issue for a subsequent assessment year if the same "fundamental aspect" permeates in different assessment years. In arriving at this conclusion, this Court referred to an interesting passage from Hoystead v. Commissioner of Taxation, 1926 AC 155 (PC) wherein it was said: "Parties are not permitted to begin fresh litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken.”
ITA Nos.1439/Ahd/2011, 42/Ahd/2012, 597/Ahd/2014, 2249/Ahd/2018 & IT(SS)A No.357/Ahd/18 Bodal Chemicals Pvt. Ltd. Asst.Years –2007-08, 2008-09 & 2009-10 - 9 - In view of the above and after considering the facts in totality, we are of the view that the assessee is eligible for deduction for the depreciation under section 32 of the Act.
However, for the completeness of the case, now we turn to the merit of the case. In the scheme of amalgamation, one company is acquired by another company with all the assets and liabilities including reserve, provisions etc. Upon acquisition, if the purchase consideration to be paid to the shareholders of the amalgamating company exceeds the net asset value (NAV), the excess amount is recorded as goodwill. If not, it is recorded as capital reserves in the books of the amalgamated company.
In the case on hand, the assessee company acquired another company with all the assets, liabilities/reserves against the purchase consideration to the shareholders of the transferor/ amalgamating company exceeding the net asset value (NAV), the excess amount was recorded as goodwill. Admittedly, the assessee incurred the cost more than the NAV acquired by it which has also been approved by the Hon’ble Gujarat High Court in as discussed above. The relevant finding of the Hon’ble High Court reads as under: “9.4 Any excess of the amount of the consideration over the value of the net assets of the Transferor company acquired by the Transferee Company shall be recognized in the Transferee Company’s financial statements as goodwill arising on amalgamation. If the amount of the consideration is lower than the value of the net assets acquired the difference shall be created as the Amalgamation Reserve and the same shall be treated as the Free Reserve of the Transferee Company available for the distribution of dividend.”
Similarly, there is also no dispute in the amount of the purchase consideration and the NAV determined between the companies, as available in
ITA Nos.1439/Ahd/2011, 42/Ahd/2012, 597/Ahd/2014, 2249/Ahd/2018 & IT(SS)A No.357/Ahd/18 Bodal Chemicals Pvt. Ltd. Asst.Years –2007-08, 2008-09 & 2009-10 - 10 - the order of the AO, which was also approved by the Hon’ble Gujarat High Court as well.
Now, to resolve the controversy whether the assessee is entitled for the depreciation under the provisions of section 32 of the Act on the goodwill acquired by it in the scheme of amalgamation, we need to refer certain provisions of law as detailed under: “Depreciation. 1932. (1) 20[In respect of depreciation of— (i) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned 21, wholly or partly, by the assessee 21 and used for the purposes of the business 21 or profession, the following deductions shall be allowed—] 22[(i) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX (ii) 24[in the case of any block of assets, such percentage on the written down value thereof as may be prescribed 25:] XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XX 38[Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets or know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the successor in the case of succession referred to in clause (xiii) and clause (xiv) of section 47 or section 170 or to the amalgamating company and the amalgamated company in the case of amalgamation, or to the demerged company and the resulting company in the case of demerger, as the case may be, shall not exceed in any previous year the deduction calculated at the prescribed rates as if the succession or the amalgamation or the demerger, as the case may be, had not taken place, and such deduction shall be apportioned between the predecessor and the successor, or the amalgamating company and the amalgamated company, or the demerged company and the resulting company, as
ITA Nos.1439/Ahd/2011, 42/Ahd/2012, 597/Ahd/2014, 2249/Ahd/2018 & IT(SS)A No.357/Ahd/18 Bodal Chemicals Pvt. Ltd. Asst.Years –2007-08, 2008-09 & 2009-10 - 11 - the case may be, in the ratio of the number of days for which the assets were used by them.]
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXX
Explanation 2.—For the purposes of this 40[sub-section] “written down value of the block of assets” shall have the same meaning as in clause *(c) of sub-section †(6) of section 43.] 41[Explanation 3.—For the purposes of this sub-section, the expressions “assets” and “block of assets” shall mean— (a) tangible assets, being buildings, machinery, plant or furniture; (b) intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature.”
The above provision of section 32 of the Act requires allowing the depreciation to the amalgamated company in the same manner which would have been allowed to the amalgamating company in the event had there not been any amalgamation.
Similarly, the actual cost of the assets acquired in the scheme of amalgamation in the hands of the amalgamated company will continue to be the same as it would have been in the hands of the amalgamating company in the event, had there not been any amalgamation. The relevant extract of the explanation 7 to section 43(1) reads as under: “Definitions of certain terms relevant to income from profits and gains of business or profession. 43. In sections 28 to 41 and in this section, unless the context otherwise requires 3— 4(1) “actual cost” means the actual cost 3 of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met3 directly or indirectly by any other person or authority:
ITA Nos.1439/Ahd/2011, 42/Ahd/2012, 597/Ahd/2014, 2249/Ahd/2018 & IT(SS)A No.357/Ahd/18 Bodal Chemicals Pvt. Ltd. Asst.Years –2007-08, 2008-09 & 2009-10 - 12 - XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX X 14[Explanation 7.—Where, in a scheme of amalgamation, any capital asset is transferred by the amalgamating company to the amalgamated company and the amalgamated company is an Indian company, the actual cost of the transferred capital asset to the amalgamated company shall be taken to be the same as it would have been if the amalgamating company had continued to hold the capital asset for the purposes of its own business.]”
We further note that the WDV of the assets acquired in the scheme of amalgamation in the hands of the amalgamated company will continue to be the same as it would have been in the hands of the amalgamating company in the event, had there not been any amalgamation. The relevant extract of the explanation 2 to section 43(6)(c) of the Act reads as under: (6) “written down value” means— XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XX 42[Explanation 2.—Where in any previous year, any block of assets is transferred,— (a) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XX (b) by the amalgamating company to the amalgamated company in a scheme of amalgamation, and the amalgamated company is an Indian company, then, notwithstanding anything contained in clause (1), the actual cost of the block of assets in the case of the transferee-company or the amalgamated company, as the case may be, shall be the written down value of the block of assets as in the case of the transferor- company or the amalgamating company for the immediately preceding previous year as reduced by the amount of depreciation actually allowed in relation to the said preceding previous year.]
As per section 32(1) of the IT Act 'depreciation' is to be computed on 'actual cost'/'written down value of the block of assets' ascertained in accordance with section 43 of the Act. Further, a reading of the above provision shows that in respect of 'capital assets' transferred by the
ITA Nos.1439/Ahd/2011, 42/Ahd/2012, 597/Ahd/2014, 2249/Ahd/2018 & IT(SS)A No.357/Ahd/18 Bodal Chemicals Pvt. Ltd. Asst.Years –2007-08, 2008-09 & 2009-10 - 13 - amalgamating company to the amalgamated company, the cost/written down value of the transferred capital asset to the amalgamated company shall be taken to be the same as it would have been had the amalgamating company continued to hold the capital asset for the purposes of its own business.
A combined reading of the above provisions reveals that the intention of the legislature behind the introduction of the amalgamation scheme was to achieve tax neutrality. Besides the above, the intention of the legislature is reflecting from the following provisions: i. There is no capital gain in the hands of the amalgamating company on the transfer of capital assets in the scheme of amalgamation under the provisions of section 47(vi) of the Act. ii. The cost of stock-in –trade in the hands of amalgamated company shall remain the same as in the hands of amalgamating company either as capital asset or stock in trade as provided under section 43C of the Act. iii. Provisions relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger, etc under the provisions of section 72A of the Act. iv. Exemption of capital gains in the hands of shareholders of amalgamating company on transfer of shares of amalgamating company in the scheme of amalgamation under the provisions of section 47 (vii) of the Act. v. Cost of capital assets to be the same as in the hands of previous owner where capital assets became the assets of the successor as a result of transfer under section 47(vi) r.w.s. 49(1)(iii)(e) of the Act. vi. Cost of shares of amalgamated company in the hands of shareholders, received as consideration for transfer of shares of amalgamating company, to be same as the cost of shares of amalgamating company under section 49(2) of the Act.
ITA Nos.1439/Ahd/2011, 42/Ahd/2012, 597/Ahd/2014, 2249/Ahd/2018 & IT(SS)A No.357/Ahd/18 Bodal Chemicals Pvt. Ltd. Asst.Years –2007-08, 2008-09 & 2009-10 - 14 - From the above, it would appear that the intent of the Legislature is to make amalgamation a tax neutral scheme for companies as well as for the shareholders and not to provide a tax planning mechanism to either of them.
Now coming to the present facts of the case we note that Indeed there was no entry in the books of the transferor company for the intangible assets/ goodwill being self generated assets. Thus in the backdrop of the above stated facts we are of the view that impugned transaction for claiming the deduction on account of the depreciation is an arrangement for claiming the higher depreciation which is unwanted under the provisions of law.
Before parting, we are conscious to the fact that the assessee was allowed for depreciation in respect of such goodwill in the 1st year of amalgamation i.e. AY 2006-07. There was no action either under section 263 or 147 of the Act by the revenue. Therefore we can safely presume that the claim of the depreciation of the assessee in the 1st year has attained finality. Admittedly the 1st year is the base assessment year from where the issue of depreciation is emanating.
The question arises once the depreciation has been allowed in the 1st 13. year then the same can be disturbed in the subsequent year without having any change in the facts and circumstances. In our considered view, in such a case the principles of consistency shall be applied as held by the Hon’ble Bombay High Court in the case of PCIT Vs. Quest Investment Advisors Ltd. reported in 96 taxmann.com 157 wherein it was held as under: “Once this principle was accepted and consistently applied and followed, the revenue was bound by it. Unless of course it wanted to change the practice without any change in law or change in facts therein, the basis for the change
ITA Nos.1439/Ahd/2011, 42/Ahd/2012, 597/Ahd/2014, 2249/Ahd/2018 & IT(SS)A No.357/Ahd/18 Bodal Chemicals Pvt. Ltd. Asst.Years –2007-08, 2008-09 & 2009-10 - 15 - in practice should have been mentioned either in the assessment order or atleast pointed out to the Tribunal when it passed the impugned order. None of this has happened. In fact, all have proceeded on the basis that there is no change in the principle which has been consistently applied for the earlier assessment years and also for the subsequent assessment years. Therefore, the view of the Tribunal in allowing the respondent's appeal on the principle of consistency cannot in the present facts be faulted with, as it is in accord with the Apex Court decision in Bharat Sanchar Nigam Ltd. v. Union of India [2006] 282 ITR 273. [Para 9]”
In view of the above, the assessee succeeds on the principle of consistency. Accordingly we set aside the order of the learned CIT (A) and direct the AO to allow the depreciation to the assessee. Hence the ground of appeal of the assessee is allowed.
As, we have decided the main ground of appeal in favour of the assessee, we are not inclined to adjudicate the issue raised in ground 3 as alternate claim for the valuation of the goodwill. Hence, we dismiss the same.
In the result, the appeal of the assessee is partly allowed.
Coming to the Revenue’s appeal in ITA No. 597/AHD/2014 for the Assessment Year 2007-08 :
The Revenue has raised the following grounds of appeal: “(1) The Ld CIT(A) has erred in law and in deleting the penalty of Rs.87,91,233/- levied u/s 271(1)(c) of the Act. (2) On the facts and in the circumstances of the case and in law the CIT(A) has ought to have upheld the penalty order u/s 271(1)(c) of the Act. (3) It is, therefore, prayed that the order of the CIT(A) be set aside and that of the AO be restored to the above extent.”
ITA Nos.1439/Ahd/2011, 42/Ahd/2012, 597/Ahd/2014, 2249/Ahd/2018 & IT(SS)A No.357/Ahd/18 Bodal Chemicals Pvt. Ltd. Asst.Years –2007-08, 2008-09 & 2009-10 - 16 - 17. At the outset, we note that, the impugned appeal is emanating from the quantum appeal bearing ITA No. 1439/Ahd/2011 which we have decided in favour of the assessee vide paragraph number 9 to 13 of this order. For the detailed discussion, please refer the relevant paragraph. Once the quantum addition has been deleted, then the penalty against such addition does not survive. Accordingly we dismiss the ground of appeal of the Revenue.
In the result the appeal filed by the revenue is dismissed.
Coming to the assessee’s appeal in ITA No. 42/AHD/2012 for the Assessment Year 2008-09 :
The assessee has raised the following grounds of appeal: “(1) That on facts and in law the learned Commissioner of Income Tax (Appeals) has grievously erred in confirming the disallowance of depreciation on goodwill of Rs.1,50,81,301/-. (2) That on facts and in law, the learned CIT(A) has grievously erred in holding that the assessee has not acquired any intangible assets and thereby confirming the disallowance by applying inapplicable provisions of the I.T. Act, 1961. (3) That the learned CIT(A) has grievously erred in not deciding the ground regarding alternate valuation of goodwill done by A.O. (4) The appellant craves leave to add, alter, amend any ground of appeal.”
At the outset, we note that the identical issue raised in ground No. 1 and 2 in the own case of the assessee in ITA No. 1439/AHD/2011 has been decided by us in its favor vide paragraph number 9 to 13 of this order. For the detailed discussion, please refer the relevant paragraph. Respectfully, following the same we allow the ground of appeal of the assessee.
ITA Nos.1439/Ahd/2011, 42/Ahd/2012, 597/Ahd/2014, 2249/Ahd/2018 & IT(SS)A No.357/Ahd/18 Bodal Chemicals Pvt. Ltd. Asst.Years –2007-08, 2008-09 & 2009-10 - 17 - 21. Similarly, the issue raised in ground No. 3 has also been dismissed by us in the own case of the assessee in ITA No. 1439/AHD/2011 vide paragraph number 14 of this order. For the detailed discussion, please refer the relevant paragraph. Respectfully following the same we dismiss the ground of appeal of the assessee.
In the result, assessee’s appeal is partly allowed.
Coming to the assessee’s and Revenue’s appeals in ITA No. 2249/AHD/2018 and IT(SS)A No. 397/AHD/2018 for the Assessment Year 2009-10 : 23. The assessee has raised the following grounds of appeal: “1.1 The order passed u/s 250 on 04.09.2018 for A.Y. 2009-10 by CIT(A)- 11, Ahmedabad confirming the disallowance of depreciation on Goodwill of Rs.1,13,10,975/- and not adjudicating the ground of appeal relating to addition of Rs.40,76,854/- towards unutilized CENVAT credit is wholly illegal, ulawful and against the principles of natural justice. 1.2 The Ld.CIT(A) has grievously erred in law and or on facts in adjudicating the ground of appeal against the order u/s 143(3) r.w.s. 153A dated ………. Instead of the order of regular assessment passed u/s 143(3) on 27.12.2011. 2.1 The Ld. CIT(A) has grievously erred in law and or on facts in confirming the disallowance of deprecation on Goodwill of Rs.1,13,10,975/- and not adjudicating the ground of appeal relating to addition of Rs.40,76,854/- towards unutilized CENVAT credit. 2.2 That in the facts and circumstances of the case, the Ld. CIT(A) has erred in confirming the disallowance of deprecation on Goodwill of Rs.1,13,10,975/- and not adjudicating the ground of appeal relating to addition of Rs.40,76,854/- towards unutilized CENVAT credit. It is, therefore, prayed that the disallowance of Rs.1,13,10,975/- towards depreciation and addition of Rs.40,76,854/- towards unutilized CENVAT credit may please be deleted.”
ITA Nos.1439/Ahd/2011, 42/Ahd/2012, 597/Ahd/2014, 2249/Ahd/2018 & IT(SS)A No.357/Ahd/18 Bodal Chemicals Pvt. Ltd. Asst.Years –2007-08, 2008-09 & 2009-10 - 18 - Coming to the Revenue’s appeal in IT(SS)A No. 357/AHD/2018 for the Assessment Year 2009-10 :
The Revenue has raised the following grounds of appeal: “1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in law and on facts is not appreciating the provisions of section 153A of the I T Act, 1961 which requires the total income to be brought under tax without any restrictions. 2. On the facts and in the circumstance of the case and in law. the Ld.CIT(A) has erred in law and on facts in holding that such assessment or reassessment u/s 153A of the I T Act, 1961 is to be restricted only to the incriminating materials found during the search. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs.9,85,57,184/- made by the AO on account of Forex Derivatives Losses. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs.1,13,10,975/- made by the AO on account of depreciation of goodwill. 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs.2,07,518/- made by the AO u/s 14A of the I T Act. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 7. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.”
At the outset, we note that the appeal filed by the assessee and the Revenue are emanating from the order of the AO framed under section 143(3) r.w.s. 153A of the Act but the learned CIT(A) has passed the order recording the fact that the appeal was filed by the assessee before him against the assessment order framed under section 143(3) of the Act. The relevant observation of the learned CIT (A) in his order dated 4th of September 2018 stands as under:
ITA Nos.1439/Ahd/2011, 42/Ahd/2012, 597/Ahd/2014, 2249/Ahd/2018 & IT(SS)A No.357/Ahd/18 Bodal Chemicals Pvt. Ltd. Asst.Years –2007-08, 2008-09 & 2009-10 - 19 - “Instituted on 30-01-2012 from the assessment order u/s 143(3) of the ACIT Central Circle-1(1) Ahmedabad [ Shri R.K. Dhanesta]” We also find from the order of the learned CIT (A) wherein it was recorded that in column No. 5 reproduced as under: 5 Section and subsection under : 143(3) of the Act, 1961 which the appealed order is passed
We also note that the learned CIT (A) has recorded in his order that the appeal has been preferred against the assessment order framed under section 143(3) of the Act. The relevant finding of the CIT (A) stands as under: “This appeal is filed on 30-01-2012 against the assessment order u/s. 143(3) of the I.T. Act, 1961 dated 27-12-2011 passed by ACIT, Central Circle-1(1), Ahmedabad for A.Y. 2009-10.”
In view of the above, we hold that the observation made by the learned CIT (A) in his order dated 4th of September 2018 is not in pursuance to the provisions of law. As such, we opined that the learned CIT (A) was to record the correct section of the Act against which the appeal was preferred by the assessee.
Before us, the learned AR for the assessee requested to restore the matter to the file of the learned CIT-A with the direction to record the correct section of the Act in which the assessment was framed by the AO to adjudicate the issue afresh as per the provisions of law.
The learned DR raised no objection if the matter is set aside to the file of the learned CIT (A).
ITA Nos.1439/Ahd/2011, 42/Ahd/2012, 597/Ahd/2014, 2249/Ahd/2018 & IT(SS)A No.357/Ahd/18 Bodal Chemicals Pvt. Ltd. Asst.Years –2007-08, 2008-09 & 2009-10 - 20 - In view of the above facts discussed above and the prayer of the learned AR and the no objection from the DR, we, in the interest of justice and fair play are inclined to restore this issue to the file of the learned CIT-A to adjudicate the issue afresh in the light of the above stated discussion and in accordance to the provisions of law. Hence, the appeal filed by the assessee and the Revenue are allowed for the statistical purposes.
In the combined result, assessee’s appeals bearing ITA Nos.1439/Ahd/2011 and 42/Ahd/2012 are partly allowed and revenue’s appeal bearing ITA No.597/Ahd/2014 is dismissed and assessee’s and revenue’s appeals bearing ITA No.2249/Ahd/2018 and IT(SS)A No.357/Ahd/2018 are allowed for statistical purposes. This Order pronounced in Open Court on 16/10/2019
Sd/- Sd/- ( MADHUMITA ROY ) (WASEEM AHMED ) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 16/10/2019 Priti Yadav, Sr.PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-Ahmedabad. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad
ITA Nos.1439/Ahd/2011, 42/Ahd/2012, 597/Ahd/2014, 2249/Ahd/2018 & IT(SS)A No.357/Ahd/18 Bodal Chemicals Pvt. Ltd. Asst.Years –2007-08, 2008-09 & 2009-10 - 21 -
Date of dictation 07.10.2019 2. Date on which the typed draft is placed before the Dictating Member 09.10.2019 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S …14.10.2019 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S……. 7. Date on which the file goes to the Bench Clerk………………… 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order……………………………………