AMRIT BANASPATI COMPANY LTD.,NOIDA vs. DCIT, CENTRAL CIRCLE , GHAZIABAD
Before: SHRI SATBEER SINGH GODARA & SHRI M. BALAGANESH
PER SATBEER SINGH GODARA, JM
These assessee’s and Revenue’s three cross appeals each ITA
Nos.3432, 3433 & 3434/Del/2018 with ITA Nos.4923, 4924 &
Assessee by Sh. Rohit Jain, Adv.
Ms. Somya Jain, CA
Department by Ms. Monika Singh, CIT(DR)
Date of hearing
03.03.2026
Date of pronouncement
13.03.2026
ITA Nos.3432, 3433 & 3434/Del/2018
ITA Nos.4923, 4924 & 4925/Del/2018
2 | P a g e
4925/Del/2018 for assessment years 2010-11, 2011-12 and 2012-
13, arise against the Commissioner of Income Tax (Appeals) [in short, the “CIT(A)”], Meerut’s orders, all dated 06.04.2018 passed in case nos. 106/2014-15, 107/2014-15 and 108/2014-15, involving proceedings under section 143(3)/153A of the Income- tax Act, 1961 (hereinafter referred to as ‘the Act’), respectively.
Heard both the parties at length. Case files perused.
2. This assessee’s “lead” appeal ITA No.3432/Del/2018 herein raises the following substantive grounds:
“1. That the Commissioner of Income Tax (Appeals) ['CIT(A)'] erred on facts and in law in upholding the validity of the assessment order dated
30.03.2014 passed under section 143(3)/153A of the Income Tax Act,
1961 ('the Act').
1 That the CIT(A) erred on facts and in law in not appreciating that the assessment order having been passed relying upon ex-parte material/evidence collected behind the back of the appellant without confronting the same to the appellant, in gross violation of principles of natural justice, is illegal and bad in law.
That the CIT(A) erred on facts and in law in not deleting addition of Rs.44,60,407/- on account of royalty on brand paid by the appellant.
1 That the CIT(A) erred on facts and in law in not appreciating that the aforesaid disallowance of royalty, was made by the assessing officer without providing adequate opportunity of being heard to the appellant.
That the CIT(A) erred on facts and in law in not deleting the addition of Rs.2,41,546 on account of undervaluation of closing stock.
That the CIT(A) erred on facts and in law in not deleting addition of Rs.52,560 out of depreciation claimed, holding the same to be relatable to capital subsidy of Rs.50 lakhs received by the appellant.
ITA Nos.3432, 3433 & 3434/Del/2018
ITA Nos.4923, 4924 & 4925/Del/2018
3 | P a g e
1 That the CIT(A) erred on facts and in law in upholding the action of the assessing officer in treating the capital subsidy to be received for meeting the cost of fixed assets and, therefore was, required to be reduced from their cost in terms of Explanation 10 to section 43(1) of the Act.
2 That the CIT(A) failed to appreciate that capital subsidy of Rs.50 lakhs was: (a) received during the previous year relevant to assessment year 1999-2000, 00, and (b) towards industrial development in the State of Punjab and not as reimbursement of cost of fixed assets.
That the CIT(A) erred on facts and in law in not deleting interest under sections 234B, 234C, 234D of the Act.
Learned counsel fairly submits that the assessee does not wish to press for its first and foremost substantive ground challenging validity of the impugned section 143(3) r.w.s. 153A assessment. Rejected as not pressed. 4. Next comes the second issue between the parties involving the assessee’s disallowance of royalty claimed on “logo” paid to the tune of Rs.44,60,407/-, made in assessment and upheld in the CIT(A)’s lower appellate discussion, reading as under:
“5.1 Decision & Reasons:
Identical issue has been considered by me in my appellate order dated 22nd
March, 2018 in appeal No. 117/P/2010-11 for assessment year 2007-08, wherein it has been held that the appellant is entitled to deduction of payment of royalty by observing as under:
"5.2 I have carefully perused the assessment order and also, considered the submissions of the appellant along with the documents placed on record.
This ground of appeal is a subset of the ground of appeal no.3 supra.
Considering that I have decided the above ground of appeal no.3 in favour of the appellant holding that 'Edible Oil brands' are separable from 'Edible
Oil Undertaking', therefore, the payment of royalty made by the appellant to ACL for use of 'Gagan' brand which was retained by ACL is allowable as deduction. This retention of Brand by ACL was part of the scheme of ITA Nos.3432, 3433 & 3434/Del/2018
ITA Nos.4923, 4924 & 4925/Del/2018
4 | P a g e demerger as is evident from the petitions filed by the Hon'ble High Court.
The fact that 'Gagan' brand was used by the appellant is not disputed by the AO. In such circumstances, once the use of brand is not disputed, royalty paid for use of the brand cannot be disallowed. More so, when both the companies are in the same tax bracket and the fact that subsequently the brand was sold at a consideration of Rs.104.50 crore and tax of 23.68
Crores was paid by ACL on it in financial year 2011-12 which highlights the brand value on which the Royalty was paid by the assessee. Thus, the Royalty expenditure was an allowable expenditure.
In view of the above, this Grounds of Appeal nos.4 to 4.2 are decided in favour of the appellant."
In A.Y 2008-09 I have taken note of the enhanced value of royalty paid, I have also noted that the evidence in the form of revised License Agreements in this regard were submitted before AO in that year vide letter dated
5.10.2010 which I have considered along with the precedent of A.Y 2007-
08 on this issue wherein it was held that 'edible oil undertaking' and 'edible oil brands' constituted two separate components of the demerger plan approved by the Hon'ble High Court and also taking note of the fact that the rate of Royalty on edible oil brands as also the fact that royalty on rice and salt are as old under the same brand 'Gagan' are well within prescribed limits of Ministry of Commerce Circular and the judicial precedents cited.
However, from the perusal of this year's details it is again seen that the assessee has continued to claim the royalty payment on the 'logo' of the brand. The claim of Royalty on the LOGO is to the tune of Rs.44,60,407/-
This aspect of royalty was never before the Hon'ble High Court when the scheme of demerger of 'edible oil undertaking' and 'edible oil brands' was examined and approved. This system was followed by the assessee diligently in the same spirit in A.Y 2008-09 where only royalty was claimed vide a revised License agreement dated 05.07.2007. The same was examined and allowed as it was directly emanating from the scheme of demerger in the preceding year which was financial year 2006-07 relevant to assessment year 2007-08. In the present year however as in the preceding year, a new element of royalty on logo has been separately introduced and payment to the tune of Rs. 44,60,407/- has been made for use of 'logo'. Since this was never envisaged as a separate entity of royalty in the original scheme of demerger in A.Y 2007-08 and was not present in A.Y 2008-09, it has been introduced for the first time in assessment year 2009-10 wherein after examination it was disallowed.
In this year also my findings remain the same on this issue as dealt with in the preceding assessment year. I find from the perusal of the paper-book that the agreement pertaining to logo constitutes fresh evidence and has never been produced before the AO. This agreement bearing stamp paper no. 43318 has been submitted for the first time before me therefore it constitutes fresh evidence under Rule 46A and therefore it cannot be admitted at this stage. I have also checked the paper-book submitted before
ITA Nos.3432, 3433 & 3434/Del/2018
ITA Nos.4923, 4924 & 4925/Del/2018
5 | P a g e the AO vide letter dated 5.10.2010, this particular License agreement bearing stamp paper no. 43318 has not been submitted before the AO. Even in the broad submissions given during appeal before my predecessor, this evidence has not been filed.
Even on merits since logo as a separate entity of Royalty payment was never a part of the demerger scheme and has come into reckoning only in the current financial year; I find no justification of the same. Therefore, royalty attributable to logo amounting to Rs. 44,60,407/- has not been justified by the appellant and the same is hereby disallowed.
In view of the above, this Grounds of Appeal nos.4 to 4.2 are decided as allowed in part. The expenditure on royalty amounting to 51,66,450/- is allowed following the preceding year precedents while the expenditure payment on 'LOGO' are disallowed for reasons given herein above confirming addition of Rs. 44,60,407/-.”
The Revenue vehemently supports the impugned royalty disallowance based on the earlier years’ findings between the parties going against the assessee. It could hardly dispute that the assessee has raised the impugned claim of royalty payment on “LOGO” and its use which was duly supported by filing the corresponding additional evidence as rejected in the CIT(A)’s lower appellate discussion. We notice that the learned CIT(A) has neither found any specific fault in the assessee’s additional evidence comprising of the relevant agreement etc. since he held this royalty claim as not “justifiable” than having concluded the same as not incurred “wholly” and “exclusively” for the purpose of business as contemplated under section 37(1) of the Act. We thus find merit in ITA Nos.3432, 3433 & 3434/Del/2018 ITA Nos.4923, 4924 & 4925/Del/2018 6 | P a g e the assessee’s instant royalty claim of “LOGO” to the tune of Rs.44,60,407/- which stands accepted in very terms. 6. The assessee’s third and fourth substantive grounds raise as many twin issues of undervaluation of closing stock valuation amounting to Rs.2,41,546/- and capital subsidy issue of Rs.50 lakhs; respectively, which stand covered in its favour as per the learned coordinate bench’s order in its case in the preceding assessment year 2008-09, as follows:
“2. The first grievance relates to the addition of Rs. 5,19,848/– on account of undervaluation of stock.
During the year under consideration, the assessee has disclosed closing stock of salt at Rs. 23,66,343/– and closing stock of rice at Rs.1,58,36,461/–. The Assessing Officer was of the opinion that since freight expenses have separately been debited to the profit and loss account, but not included in the valuation of closing stock, the assessee has undervalued its closing stock. Taking freight charges into consideration, the Assessing Officer computed the undervaluation of closing stock for salt at Rs.1,44,177/– and for rice Rs.3,75,671/–, making addition of Rs.5,19,848/–.
The ld. CIT(A) confirmed the addition following its order for A.Y 2007–08. 5. Before us, the ld. counsel for the assessee vehemently stated that the assessee has been consistently following the system of valuing the stock of traded goods at cost or market price, whichever is lower by following FIFO method.
It is the say of the ld. counsel that the method of valuation of closing stock is regularly and consistently followed by the assessee and accepted by the department. Therefore, there is no reason for making the impugned addition.
The ld. DR strongly supported the findings of the Assessing Officer /CITA.
ITA Nos.3432, 3433 & 3434/Del/2018
ITA Nos.4923, 4924 & 4925/Del/2018
7 | P a g e
We have carefully perused the orders of the authorities below. At the very outset, we have to state that any adjustment in the closing stock requires simultaneous adjustment in the subsequent opening stock. Thus, the entire exercise becomes tax neutral. Having said that, we find that the assessee has been consistently following the same method of valuation of closing stock, which has been accepted by the revenue in the earlier assessment years.
Therefore, we do not find any reason for deviating from the same. The assessee has never included freight charges while valuing its closing stock. Therefore, we do not find any reason for doing the same during the year under consideration. The findings of the ld. CIT(A) are set aside and the Assessing Officer is directed to delete the addition of Rs. 5,19,848/–. Thus, ground is allowed.
Second grievance of the assessee relates to the addition on account of subsidy.
The peculiar facts in this issue are that during the A.Y 1999–2000, the assessee has received capital subsidy of Rs.50 lakhs sanctioned by the Director of Industries, Government of Punjab in the year 1995 under Industrial Policy issued by the Government of Punjab. Since the said subsidy was received with a view to promote growth of industry in the State of Punjab and for generation of employment, the subsidy, being on capital account, was directly credited by the assessee to the capital reserve in the books of accounts for the year ending on 31.3.1999 and the same was accepted by the revenue.
During the year under consideration, the Assessing Officer took a completely different view, holding that the aforesaid capital subsidy ought to have been reduced to from the actual cost of fixed asset in terms of Explanation 10 to section 43(1) of the Act, and with this belief, the Assessing Officer computed the excess depreciation by reducing the actual cost by capital subsidy in the F.Y 1998–99 and adjusted in the WDV of each A.Y till the A.Y under consideration, which action of the Assessing Officer was confirmed by the ld. CIT(A).
We have carefully perused the orders of the authorities below. It is strange to find that the Assessing Officer has taken such a view for the year under consideration. Though the Assessing Officer has revisited the WDV of the A.Y after 1999–2000, till the A.Y under consideration, yet, he chose not to take any action for any A.Y. earlier to the present A.Y.
Be that as it may, there is no dispute that subsidy was sanctioned for promoting of growth in industry in the State of Punjab under the policy in new unit which has come into commercial production on 01.10.1992, shall be eligible to claim incentive computed on the basis of ‘Fixed Capital Incentive’ made by such a unit in land, building and plant and machinery. The quantum of incentive so receivable was dependent on the value of fixed capital investment made in the specified area(s) of the state.
ITA Nos.3432, 3433 & 3434/Del/2018
ITA Nos.4923, 4924 & 4925/Del/2018
8 | P a g e
This policy was introduced for promoting growth of industry in the State and since the assessee satisfied all the conditions for being eligible, it received subsidy of Rs.50 lakhs during the financial year 1998-99. The said incentive was taken to the ‘capital reserve account’ and was claimed as non- taxable in the return of income for assessment year 1999-00, treating the same as capital receipt. The same was accepted by the Assessing Officer.
However, during the year, the Assessing Officer has taken a position that since it has been given a part of capital investment, cost of assets needs to be reduced as per Explanation 10 to section 43(1) of the Act. We are of the considered view that the said section is not applicable on the facts of the case in hand in as much as the subsidy has not been granted for meeting cost of any asset but for larger public interest of industrial development of the State of Punjab.
An identical issue was considered by the Hon'ble Supreme Court in the case of P.J. Chemicals Ltd. 210 ITR 830. In that case, the assessee had received a capital subsidy, which was claimed as capital receipt, not exigible to Income-tax. The Assessing Officer held that such subsidy is liable to be reduced form the cost of assets, in terms of the provisions of section 43(1) of the Act. The matter travelled upto the Hon'ble Supreme Court and the Hon'ble Supreme Court, inter alia, held as under:
“The question in the present context is not whether if a portion of the cost is met directly or indirectly by any other person or authority, it should be deducted or not. Quite obviously, the plain meaning of the section is that it shall be. But the real question is as to the character and nature of a subsidy whether it was really intended to subsidise the cost of the capital or was intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, the specified percentage of the fixed capital cost which is the basis for determining the subsidy being only a measure adopted under the scheme to quantify the financial aid. The contention is that it is not a payment, directly or indirectly, to meet any portion of the "actual cost" but intended as an incentive to entrepreneurs, its quantification determined at a percentage of the fixed capital cost.
The Government subsidy, it is not unreasonable to say, is an incentive not for the specific purpose of meeting a portion of the cost of the assets, though quantified as or geared to a percentage of such cost. If that be so, it does not partake of the character of a payment intended either directly or indirectly to meet the "actual cost". We should prefer the reasoning of the majority of the High Courts to the one found acceptable by the High Court of Punjab and Haryana.” (emphasis supplied).
In a similar case, the Hon'ble Gujarat High Court in the case of Ellora Time Pvt Ltd. Tax Appeal No. 1011 of 2010 (Guj.), held as under:
“the assessee was, inter alia, engaged in the business of generation of power through windmills. During the relevant assessment year, i.e., 2004-
05, the assessee installed windmills and received subsidy of ITA Nos.3432, 3433 & 3434/Del/2018
ITA Nos.4923, 4924 & 4925/Del/2018
9 | P a g e
Rs.10,10,59,625, from the State Government in relation to the same. The subsidy was quantified with respect to Sales Tax payable by the assessee.
The assessee's contention was that subsidy was not linked to any capital asset and accordingly, the same should not be reduced from the cost of asset for the purpose of granting depreciation. The assessing officer, however, held that the amount of subsidy is liable to be reduced from the cost of the machinery for the purposes of computing depreciation thereon. The CIT(A) reversed the decision of the assessing officer and observed that the assessee received salestax incentives for establishing windmill, which is an alternative source of energy. Such subsidy was an incentive for encouraging development of non-traditional source of energy and not for simply meeting the cost of acquisition of windmills. While holding as above, the CIT(A) relied upon the decision of the apex Court in the case of P.J Chemicals Ltd. (supra).
The Tribunal dismissed the appeal filed by the Revenue and observed that the assessee's case was not hit by the insertion of explanation 10 to sec.43(1) and the same is covered by the decision of Supreme Court in P.J.
Chemicals reported in 210 ITR 830. On further appeal preferred by the Revenue, the High Court affirmed the decision of the Tribunal and dismissed the appeal filed by the Revenue.”
It would not be out of place to mention that even if the action of the Assessing Officer has to be accepted, then the same should have been taken in A.Y 1999-2000. However, we find that no action has been taken from A.Y 1999-2000 to A.Y 2006-07. Therefore, there being no change in the facts, it would be incorrect to take a different stand after a gap of 10 years. Considering the facts of the case in totality, we do not find any merit in the action of the Assessing Officer/ld. CIT(A). We, accordingly, direct the Assessing Officer to delete the impugned addition.”
The Revenue could not pinpoint any specific distinction on facts or law; as the case may be, that both these issues already stand adjudicated in the assessee’s favour. We thus adopt judicial consistency to reverse both the learned lower authorities’ findings on these twin issues in very terms. 8. The assessee’s fifth substantive ground of section 234B, 234C & 234D interest is treated as consequential in nature. Its instant “lead” appeal ITA No. 3432/Del/2018 partly succeeds in very terms.
ITA Nos.3432, 3433 & 3434/Del/2018
ITA Nos.4923, 4924 & 4925/Del/2018
10 | P a g e
Same order to follow in the assessee’s latter twin appeals ITA
Nos.3433 & 3434/Del/2018 for assessment years 2011-12 and 2012-13 raising the legal issue of validity of the assessment, royalty payment on brand in former, and validity issue and royalty; as the case may be, involving varying sums; respectively. Both these appeals are partly allowed in the foregoing terms.
9. Coming to the Revenue’s as many cross appeals ITA Nos.
4923, 4924 & 4925/Del/2018, learned counsel has invited our attention to the relevant tax effects involve of Rs.44,76,343/-,
43,19,853/-and 22,65,344/-; respectively, i.e. less than the minimum tax effect prescribed of Rs.60 lakhs in the CBDT latest
Circular No. 9/2024, dated 17.09.2024 with retrospective effect.
Learned CIT(DR) is indeed very fair in not disputing the fact that the CBDT’s foregoing tax effect circular has been made applicable on all pending appeals as well. We thus reject the Revenue’s instant appeals for this precise reason subject to all just exceptions.
No other ground or argument has been pressed.
10. To sum up, these assessee’s three appeals ITA Nos.3432,
3433 & 3434/Del/2018 are partly allowed and Revenue’s appeals
ITA Nos.3432, 3433 & 3434/Del/2018
ITA Nos.4923, 4924 & 4925/Del/2018
11 | P a g e
ITA Nos. 4923, 4924 & 4925/Del/2018 are dismissed. A copy of this common order be placed in the respective case files.
Order pronounced in the open court on 13th March, 2026 (M. BALAGANESH)
JUDICIAL MEMBER
Dated: 13th March, 2026. RK/-