INVESCO(INDIA) PRIVATE LIMITED,HYDERABAD vs. DCIT, CIRCLE -2 (1), HYDERABAD
Income Tax Appellate Tribunal, HYDERABAD “A” BENCH: HYDERABAD
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G
PER MANJUNATHA G. :
This appeal has been filed by the assessee against the Final Assessment Order dated 15.02.2022 passed by the Assessing Officer u/sec.143(3) r.w.s.144C(13) r.w.s.144B of the Income Tax Act, 1961, in pursuance to the Directions dated 10.01.2022 of the Disputes Resolution Panel-1 [in short “DRP”], Bengaluru, passed u/sec.144C(5) of the Act, relating to the assessment year 2017-2018. 2
ITA.No.111/Hyd./2022
The assessee pleads the following grounds in the instant appeal :
“Each of the following grounds and / or sub-grounds of appeal, are independent and without prejudice to each other :
That on the facts and in the circumstances of the case and in law, the Ld. TPO/Ld. AD erred in making a transfer pricing (TF) adjustment/addition of INR 9,06,55,341 towards interest paid on Compulsory Convertible Debentures (CCD) by the Appellant and the Hon'ble DRP has further erred in upholding the said action of the Ld. TPO/AO. 1.1 That on the farts and in the circumstances of the case and in law, the Ld. TPO/Ld. AO has erred in not appreciating that the CCDs' issued by the Appellant is denominated in INR and not in foreign currency and that such CCDs are nut repayable in any foreign currency but are compulsorily convertible in equity shares of the issuing company in the Appellant and the Hon'ble DRP has further erred in upholding the action of Ld. TPO/AO. 1.2 That on the facts and in the circumstances of the case and in law, the Ld. TPO/LA. AO erred in not considering/analysing the economic analysis undertaken by the Appellant in accordance with the 3 ITA.No.111/Hyd./2022
provisions of The Income-tax Act, 1961 ('Act") read with the Income-tax Rules, 1962 (Rules) and arbitrarily disregarding the search process furnished by the Appellant without providing any reasoning and the Hon'ble DRP has further erred in upholding the action of Ld. TPO/AO.
1.3 That on the farts and circumstances of the case and in law, the Ld. TPO/Ld. AO erred in applying Singapore
Inter Bank Offer Rate (SIBOR) plus 200 basis points i.e.,
3.2%, as an arm's length interest on CCD on ad hoc basis and in complete violation of transfer pricing provisions and the Hon'ble DRP has further erred in upholding the action of Ld. TPO/AO.
1.4 That on the facts and in the circumstances of the case and in law, the Ld. TPO/Ld. AO has erred in disregarding the judicial precedent of the Hon'ble
Income-Tax Appellate Tribunal (ITAT), Hyderabad in the case of Adama
India
Private
Limited
(ITA
No.
497/HYD/2016) and Hyderabad Infratech Private
Limited (ITA No. 1784/Hyd/2017) wherein it has been held that CCDs cannot he categorized as a loon and LIBOR cannot be considered for determining the ALP of the international transaction of interest on CCD and the Hon'ble DRP has further erred in upholding the action of Ld. TPO/AO.
2. That on the facts and in the circumstances of the case and in law, the Ld. TPO LA AO erred in making TP
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ITA.No.111/Hyd./2022
adjustment/addition amounting to INR 3,49,915 by imputing interest, at a rate charged by SBI on short term fiend deposits, on outstanding receivables exceeding 30
days relating to sale of services to Al's as on March 31st
2017 and the Hon'ble DRP has further erred in upholding the action of Ld. TPO/AO.
2.1 That on the facts and in the circumstances of the case and in law, the Ld. TPO/Ld. AO erred in not appreciating the fact that receivables are not a separate international transaction and under the Transaction
Net
Margin method
(TNMM) for determination of ALP of the services, the impact of outstanding, receivables on the working capital adjustments is already taken into account and that there is no requirement to impute interest on outstanding receivables separately and the Hon'ble
DRP has further erred in upholding the action of Ld.
TPO/AO.
2.2 Without prejudice to Ground No 2 and 2.1 above, that on the facts and in the circumstances of the case and in law, while computing the interest on the outstanding receivables which was in foreign currency, the Ld. TPO/AO erred in :
(i)
Applying SBI Term deposit rates instead of the rates prevalent in the international market for foreign currency loans. (i.e., at U LIBOR plus);
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ITA.No.111/Hyd./2022
(ii)
Considering the arm’s length credit period as 30
days without any basis; and (iii)
Computing interest on invoice-to-invoice basis without computing weighted average receivable in days for all the invoices raised during the year under consideration and after considering receivables received in advance and the Hon'ble
DRP further erred in upholding the said action of the Ld. TPO/AO
3. That on the facts and in the circumstances of the case and in law, the Ld. AO erred and the Hon'ble DRP further erred in upholding the action of the Ld. AO in disallowing depreciation of INR 35,30,75,403 under section 32 of the Act in respect of goodwill arising on amalgamation and recognized in the books as per the Hon'ble NCLT order sanctioning the amalgamation.
4. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in disallowing INR
42.97.430 under section 14A of the Act and the Ilon'ble
DRP further erred in upholding the said action of the Ld.
AO.
4.1. That on the facts and in the circumstances of the case and in law, the Ld. AD erred in invoking Rule 8D for determining the disallowance under section 14A without analyzing the correctness of the disallowance offered by the Appellant in its return of income and the Hon'ble
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ITA.No.111/Hyd./2022
DRP further erred in upholding the said action of the Ld.
AO.
Without prejudice to Grounds 4 & 5 above, that on the facts and in the circumstances of the case and in law, the Ld. AO erred and the Hon'ble DRP further erred in not allowing consequential deduction under section 10AA of the Act on the "Profits and Gains from Business or Profession" derived by the SEZ unit based on the assessed income. 6. Without prejudice to Grounds 4 && above, that on the facts and in the circumstances of the case and in law, the Ld. AD erred and the Hon'ble DRP further erred in not allowing consequential deduction under section 80G of the Act in respect of eligible donations/ payments made by Appellant for the year under consideration based on the assessed Gross Total Income. 6.1. Without prejudice to Grounds 4 & 5 above, that on the facts and in the circumstances of the case and in law, Hon'ble DRP erred in holding that the donations/payments made by Appellant were part of CSR expenditure. 7. Without prejudice to grounds 4 & 5 above, that on the facts and in the circumstances of the case and in law, the Ld. AD erred in not granting consequential foreign tax credit under section 90 of the Act despite the specific
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ITA.No.111/Hyd./2022
direction of the Hon'ble DRP to grant the same to the Appellant.
8. That on the facts and in the circumstances of the case and law, the Ld. AO erred in not granting appropriate
Minimum Alternate Tax (MAT) credit at the time of determining the amount of tax payable by the Appellant.
9. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in not granting TDS credit and advance tax credit of the amalgamating entity to the Appellant (i.e. amalgamated company) of the AY
2017-18 at the time of determining the amount of tax payable by the Appellant.
10. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in levying interest under section 2348 and 234D of the Act.
The aforesaid grounds are independent and without prejudice to each other.
The Appellant craves leave to add, alter, amend, modify or withdraw all or any of the Grounds of Appeal contained herein as may be considered necessary either before or during the hearing of the appeals.
The Appellant prays that directions be given to grant all such relief arising from the Grounds of Appeal mentioned supra and all consequential relief thereto.”
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Briefly stated facts of the case are that, the appellant-company viz., Invesco (India) Private Limited is part of Invesco India Group Companies, a leading independent global investment management company. The Company undertakes the business of providing I T Enabled Services [in short “ITES”], along with disaster recovery solutions, real-time data protection, and business continuity planning and offsite data storage solutions to it’s group companies. The appellant-company filed it’s return of income for the assessment year 2017-2018 on 30.11.2018 declaring Rs.NIL income and current year loss was claimed at Rs.5,31,39,096/-. The appellant-company has filed Form- 3CEB report along with return of income and reported international transactions entered into with it’s Associated Enterprises [in short “AEs”] which included ITES, issue of Compulsory Convertible Debentures [in short “CCDs”], on which, interest was paid by the appellant-company. The case was selected for scrutiny. During the course of assessment proceedings, a Reference u/sec.92CA(3) of the Income Tax Act, 1961 [in short “the Act”] was made to the 9 ITA.No.111/Hyd./2022
Transfer Pricing Officer [in short “TPO”] to determine the Arm’s
Length
Price
[in short
ALP]
of international transactions of the appellant-company with it’s AEs. The TPO has passed order u/sec.92CA(3) of the Act on 30.01.2021
and proposed
TP adjustment of Rs.9,06,85,341/- towards interest paid on CCDs by the appellant-company to it’s AE. The TPO had also made an addition of Rs.3,49,950/- towards interest on receivables from AE. In pursuance to the order passed by the TPO u/sec.92CA(3) of the Act, dated 30.01.2021, the Assessing
Officer has passed Draft Assessment Order u/sec.144C of the Act, on 08.04.2021 and determined the total income of the appellant-company at Rs.95,18,58,880/- by making TP adjustment as suggested by the TP in terms of order u/sec.92CA(3) of the Act, addition towards disallowance of depreciation claimed on goodwill; addition towards disallowance u/sec.14A read with Rule 8D of I.T. Rules,
1962. 4. The appellant-company filed it’s objections against the Draft Assessment Order passed by the 10
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Assessing Officer before the DRP-1, Bengaluru and challenged the various additions made by the Assessing
Officer including TP adjustment as suggested by the TPO.
The DRP vide it’s Directions dated 10.01.2022 passed u/sec.144C(5) of the Act disposed of the objections filed by the appellant-company. Thereafter, in pursuance to the directions of the DRP, the Assessing Officer passed Final
Assessment Order u/sec.143(3) r.w.s.144C(13) r.w.s.144B of the Act, dated 15.02.2022 and determined the total income of the appellant-company at Rs.39,52,68,990/-.
Aggrieved by the Final Assessment Order passed by the Assessing Officer, the appellant-company is now in appeal before the Tribunal.
The first issue that came-up for consideration through ground nos.1.1 to 1.4 of the assessee’s appeal is addition towards interest on CCDs of Rs.9,06,85,341/-.
The facts with regard to the impugned dispute are that, the assessee has issued CCDs on 08.07.2016 at a face value of Rs.5000/- each with a right to convert them into 11 ITA.No.111/Hyd./2022
equity shares within 20 years from the date of subscription at the coupon rate of 10% interest. The assessee has paid interest of Rs.13,16,12,903/- on said CCDs for the year under consideration. The assessee has benchmarked interest paid on CCDs under “Other Method” and claimed that, coupon rate interest paid by the assessee on CCDs is less than the SBI-PLR rate applicable for the assessment year in question and, therefore, the transactions with its AE is at ALP. The TPO benchmarked the interest paid on CCDs by applying LIBOR plus 200 basis points and has worked-out interest ALP of Rs.4,09,27,562/-. Since, the assessee has paid interest of Rs.13,16,12,903/-, the excess interest over and above the interest ALP of Rs.9,06,85,341/- has been treated as excess interest paid on CCDs and made adjustment under section 92CA of the Act. The learned
DRP, in it’s Directions dated 10.01.2022 has upheld the TP adjustment made by the TPO for benchmarking of interest paid on CCDs.
CA Shri Sriram Seshadri, Learned Counsel for the Assessee submitted that, this issue is squarely covered in 12 ITA.No.111/Hyd./2022
favour of the assessee by the decision of Special Bench of ITAT, Hyderabad in appellant’s own case, where the Tribunal after considering relevant facts held that, the compulsory CCDs issued and denominated in Indian currency should be benchmarked by applying SBI PLR rate as against the LIBOR + 200 basis points adopted by the TPO. Therefore, he submitted that, the issue is squarely covered in favour of the assessee. Therefore, the addition made by the TPO and sustained by the DRP should be deleted.
Shri B. Bala Krishna, learned CIT-DR, on the other hand supporting the order of the DRP submitted that, although, the issue is covered by the decision of Special Bench of ITAT, Hyderabad in assessees own case, but, the fact remains that, the CCDs are like external commercial borrowings and, therefore, interest payable on such CCDs should be benchmarked by considering the international interest rate of interest which is LIBOR plus appropriate basis points depending upon the risk and other parameters and, therefore, the TPO has rightly benchmarked interest
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payable on CCDs by applying LIBOR plus 200 basis points.
Therefore, the order of the TPO/DRP should be upheld.
We have heard both the parties, perused the material on record and gone through the orders of the authorities below. We find that, this issue is decided in favour of the assessee in assessee’s own case for assessment year 2018 2019 by the Special Bench of ITAT, Hyderabad in ITA-TP.No.111/Hyd./2022 and 506/Hyd./ 2022 for the assessment years 2015-2016 and 2018-2019 order dated 29.01.2025, where the Tribunal after considering relevant facts has held that, interest paid/payable on FCCDs/NCDs/other debentures, which are denominated in Indian currency to be benchmarked by applying PLR rates. In the present case, there is no dispute with regard to the fact that, CCDs issued by the assessee are denominated in Indian currency and, therefore, in our considered view, while benchmarking interest payable on such CCDs, it is SBI-PLR is appropriate rate of interest, but, not LIBOR plus 200 basis points as considered by the TPO. Therefore, the TPO without appreciating the relevant facts
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ITA.No.111/Hyd./2022
benchmarked interest by LIBOR plus 200 basis points. The DRP simply sustained the addition made by the Assessing
Officer. Therefore, we set-aside the Final Assessment Order passed by the Assessing Officer on this issue and direct the Assessing Officer/TPO to delete the addition made towards interest paid on CCDs.
The next issue that came-up for our consideration from ground nos.2 to 2.2 of Assessee’s appeal is addition towards notional interest on overdue trade receivables from AE.
The TPO has imputed interest on overdue receivable from AE after allowing 30 days credit period by applying SBI short term deposit rate for the relevant financial year. It is the argument of the Counsel for the Assessee CA Sriram Seshadri that, receivables is denominated in foreign currency and the appropriate rate of interest for benchmarking the said receivable is LIBOR plus appropriate basis points. In this regard, he has relied upon the decision of Hon’ble Bombay High Court in the case of 15 ITA.No.111/Hyd./2022
PCIT-13, Mumbai vs., Tecnimont (P.) Ltd., [2018] 96
taxmsnn.com 223 [Bombay] and also decision of ITAT,
Chennai Bench in the case of M/s. Serviont Global
Solutions Ltd., vs., The ACIT, Corporate Circle-6(1), Chennai
2021 (1) TMI 124- ITAT, Chennai. Learned Counsel for the Assessee further submitted that, the TPO has benchmarked interest on invoice by invoice, even-though, the appropriate method for working-out the credit period is weighted average credit period. If the average credit period is computed, then, the actual credit period works out to 29
days which is less than the credit period allowed by the TPO and, therefore, the question of imputation of interest does not arise.
Shri B Bala Krishna, learned CIT-DR on the other hand supporting the order of the TPO/DRP submitted that, interest on delayed receivables from AE is an international transaction and same needs to be benchmarked by applying appropriate rate of interest. Since, it is an international transaction and receivable in India, the appropriate rate of interest is short term deposit rate as per Indian banks. The 16 ITA.No.111/Hyd./2022
TPO/DRP after considering the relevant facts, has rightly applied SBI short term deposit rate while benchmarking the interest on receivable from AE and, therefore, the order of the TPO/DRP should be upheld.
We have heard both the parties, perused the material on record and gone through the orders of the authorities below. The TPO has benchmarked interest receivable on trade receivables from AE by applying SBI short term deposit rate on the ground that, if the assessee had received the amount from the AE which would have reduced cost of borrowings in India which is always at Indian prime lending rate or short term deposit rate of Indian banks. It was the argument of the Counsel for the Assessee CA Sriram Seshadri, that, the assessee has allowed credit to it’s AE which is a non-resident. Therefore, the benefits that the assessee derives from enjoying long credit period for payment of interest in respect of services has to be measured in terms of the interest that would have been incurred by the AE in the country of residence. Since the receivable from AE is in foreign currency from outside
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India, in our considered view, the internationally recognised rate of interest is appropriate for benchmarking interest receivable from AE. This legal position is supported by the decision of Hon’ble Bombay High Court in the case of PCIT-
13, Mumbai vs., Tecnimont (P.) Ltd., (supra). Similar view has been taken by the ITAT Chennai Bench in the case of M/s. Serviont Global Solutions Ltd., vs., The ACIT,
Corporate Circle-6(1), Chennai (supra). Therefore, we are of the considered view that, the Assessing Officer and TPO has erred in benchmarking the interest receivable on trade receivables from AE by applying SBI short term deposit rate.
The DRP without appreciating the relevant facts, simply sustained the addition made by the Assessing Officer. Thus, we set aside the order of the Assessing Officer and direct the Assessing Officer/TPO to compute interest receivable on outstanding receivables from AE by applying LIBOR plus
200 basis points after allowing credit period of 30 days. In so far as the argument of the Learned Counsel for the Assessee on the issue of weighted average credit period, in our view, when the TPO is able to compute the exact
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number of days credit period, then, aggregating the invoices for the purpose of computing credit period is contrary to the procedure provided u/sec.92CA of the Income Tax Act,
1961. Thus, we reject the arguments of Counsel for the Assessee on the issue of computing the weighted average credit period.
The next issue that came-up for consideration through ground no.3 of assessee’s appeal is, addition towards disallowance of depreciation on goodwill arising on amalgamation of Rs.35,30,75,402/-.
During the financial year relevant to assessment year 2017-2018, the assessee has introduced goodwill of Rs.141,23,01,606/- and claimed depreciation of Rs.35,30,75,402/-. The Assessing Officer called upon the assessee to explain the nature of goodwill and depreciation claimed on such goodwill. In response, the assessee submitted that, the wholly owned subsidiary of assessee company is M/s. Invesco Hyderabad Private Limited is amalgamated with the assessee-company under the scheme
19
ITA.No.111/Hyd./2022
of amalgamation which was approved by the NCLT vide order dated
15.05.2017
and appointed date for amalgamation was 01.04.2016. The assessee further submitted that, the assessee company had invested a sum of Rs.244,09,03,945/- in the shares of subsidiary M/s.
Invesco Hyderabad Private Limited and the fair value of tangible net assets of subsidiary as on 01.04.2016 was at Rs.102,86,02,339/- and that the excess cost of investment over the value of net tangible asset was determined as value of ‘goodwill’ on account of amalgamation. In this regard, the assessee has relied upon the decision of Hon’ble Supreme
Court in the case of CIT vs., Smifs Securities Limited [2012]
348 ITR 302 (SC). The assessee further submitted that, it has made investment of Rs.244,09,03,945/- in 12,600
equity shares of the face value at Rs.10/- each on 01.08.2016 and that, on amalgamation investment was cancelled and the net value of assets of the amalgamating company was recorded in the books of the assessee company.
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1. The Assessing Officer, however, was not convinced with the explanation of assessee and according to the Assessing Officer, the amalgamation of subsidiary company, M/s. Invesco Hyderabad Private Limited with appellant-company is not on commercial or business exigencies, but, it is a business combination in the intra group so as to create an ordinary intangible asset in the form of huge goodwill and, thereby, claiming depreciation on it to lower the tax liability of the assessee-company. The creation of an artificial intangible asset by the assessee company in the intra-group companies without proper justification is, in the nature of employing a device of avoidance of tax. Therefore, the Assessing Officer rejected the explanation of assessee and disallowed depreciation claimed on ‘goodwill’ of Rs.141,23,01,606/- and made addition of Rs.35,30,75,402/-.
The assessee has filed objections before the DRP and challenged the addition made by the Assessing Officer towards disallowance of depreciation on goodwill arising on account of amalgamation. The assessee has also challenged
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the reasons given by the Assessing Officer to disregard the recognition of goodwill in the books of accounts of the assessee for cancellation or extinguishment of investment in shares of subsidiary company by virtue of amalgamation it becomes Zero or NIL and thereby, the value of investments in excess of net asset value of the amalgamating company becomes goodwill in the books of accounts of the assessee company and on which, the assessee has rightly claimed depreciation in terms of section 32(1)(ii) of the Act. In this regard, the assessee relied upon various judicial precedents including the decision of Hon’ble Supreme court in the case of CIT vs., Smifs Securities Limited (supra).
1. The DRP after considering the relevant submissions of the assessee and also taken note of various judicial precedents, upheld the reasons given by the Assessing Officer to disallow the depreciation claimed on goodwill arising on account of amalgamation on the ground that, as per 6th proviso to section 32(1) and Explanation-7 to section 43(1) of the Act, the depreciation to the amalgamated company is allowable only to the extent, as if 22 ITA.No.111/Hyd./2022
such succession or amalgamation has not taken place. The DRP has discussed the issue at length in light of provisions of section 32(1), 43(1) and 43(6)(c) of the Act and held that, as per 6th provision to section 32(1) of the Act, the aggregate deduction in respect of depreciation on tangible and intangible assets allowable to the predecessor and the successor, in the case of succession or to the amalgamating company and the amalgamated company in the case of amalgamation as the case maybe, shall not exceed in any previous year the deduction calculated at the prescribed rates as if so succession or the amalgamation as the case may be, had not taken place and such depreciation shall be apportioned between the predecessor and the successor in the ratio of the number of days, for which, the assets were used by them. The DRP had also discussed the argument of the assessee in light of the method of the accounting followed for giving treatment to amalgamation in terms of Accounting Standards prescribed by the ICAI by following the decision of Hon’ble Supreme Court in the case of CIT vs., UP State Industrial Development Corporation [1997]
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225 ITR 703 (SC) held that, for the purpose of ascertaining profits and gains, the ordinary principles of commercial accounting should be applied, so long as they do not contradict with express provision of the relevant Statute. In other words, it can be said that, accounting treatment of any transaction is relevant only to the extent they are not in contradiction with the express provision of the Income Tax
Act. In the case of amortization and acquisition, the Income
Tax Act expressly requires recording of capital asset at the price appearing in the books of amalgamating company.
Accordingly, the recognition of goodwill in accordance with Accounting Standard-14 and amortization of the same in accordance with Accounting Standard-26 may not be of any help in claiming depreciation under the Income Tax Act, in view of the express provisions provided therein. Therefore rejected the explanation of the assessee and sustained the addition made by the Assessing Officer.
CA, Sriram Seshadri, Learned Counsel for the Assessee, referring the dates and events submitted that, the assessee has made investments in shares of subsidiary
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ITA.No.111/Hyd./2022
M/s. Invesco Hyderabad Private Limited and the said shares has been acquired on 01.08.2016 from IVZ Mauritius
Services Private Limited and the said investment was made, out of amounts raised on issue of CCDs issued to it’s holding company. Further, the appellant company has acquired 12,600 equity shares with a face value of Rs.10/-
@ Rs.1,93,723/- per share and the same has been valued on the basis of valuation report dated 16.06.2016 prepared on the basis of Discounted Cash Flow Method [in short
“DCF”] and fair value of the share of the amalgamating company as on 31.03.2016. Further, the appellant-company amalgamated with the subsidiary by an order of National
Company Law Tribunal [in short “NCLT”] dated 15.05.2017
with appointed date for amalgamation on 01.04.2016 and as per the valuation report dated 11.03.2017, the net assets value of the amalgamated company as on 01.04.2016 was at Rs.102,86,02,342/-. Since the value of investment in the shares of subsidiary was at Rs.244,09,03,945/-, the excess of net value of tangible assets was determined as value of goodwill on account of amalgamation, on which, the 25
ITA.No.111/Hyd./2022
assessee has claimed depreciation in terms of section 32(1)(ii) of the Act. Learned Counsel for the Assessee further referring to the decision of Hon’ble Supreme Court in the case of CIT vs., Smifs Securities Limited (supra), submitted that, depreciation on goodwill on account of amalgamation is allowable in terms of section 32(1)(ii) of the Act and the same has been upheld by the Hon'ble Supreme Court.
Further, in the case before the Hon'ble Supreme Court, the assessee claimed depreciation on goodwill arising on account of amalgamation. Learned Counsel for the Assessee further, referring to the decision of Hon’ble Supreme Court in the case of Pr. CIT-4 vs., Zydus Wellness Ltd., [2020] 113
taxmann.com 154 (SC) submitted that, the Hon’ble
Supreme Court by following the decision of CIT, Kolkata vs.,
Smifs Securities Limited [2012] 13 SCC 488 (SC), has dismissed the SLP filed by the assessee and upheld the order of Hon’ble High Court of Gujarat wherein it has been clearly held that, assessee-company entitled to claim depreciation on goodwill expended at the time of amalgamation of companies. He further referred to the 26
ITA.No.111/Hyd./2022
decision of Hon’ble High Court of Calcutta in the case of CIT, Kolkata-IV vs., M/s. Smifs Securities Ltd., ITA.No.116
of 2010 which is placed at page-89 of the paper book and submitted that, Revenue has conceded the issue before the Hon’ble High Court and claimed that, this issue is covered in favour of the assessee by the decision of Hon’ble Supreme
Court by following the decision of CIT, Kolkata vs., Smifs
Securities Limited [2012] 348 ITR 302 (SC). Further, various
Benches of the Tribunal including ITAT Ahmedabad in the case of Urmin Marketing (P.) Limited vs., DCIT, Circle-
4(1)(1),
Ahmedabad
[2020]
122
taxmann.com
40
(Ahmedabad-Tribu.) has very clearly held that, excess payment over net book value of assets and liabilities acquired on account of amalgamation is treated as goodwill and since in view of decision of Hon’ble Supreme Court by following the decision of CIT, Kolkata vs., Smifs Securities
Limited (supra), ‘goodwill’ is part and parcel of intangible asset and eligible for depreciation. Learned Counsel for the Assessee further referring to decision of ITAT, Hyderabad
Bench in the case of DCIT, Circle-8(1) vs. East India
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ITA.No.111/Hyd./2022
Petroleum Ltd., [2025] 171 taxment.com 692 (Hyderabad-
Tribu.) submitted that, a similar view has been taken by the Coordinate Bench and held that, excess consideration paid over and above the net asset value of the company, is treated as ‘goodwill’ and eligible for depreciation under section 32(1)(ii) of the Act. In this regard he relied upon decision of ITAT, Hyderabad Bench in the case of S & P
Capital IQ (India) (P.) Ltd., vs., ACIT [2024] 205 ITD 217
(Hyderabad-Trib.) and decision of ITAT, Mumbai Bench,
Mumbai in the case of Disney Broadcasting (India) (P.) Ltd., vs., PCIT [2024] 163 taxment.com 40 (Mumbai-Trib.).
1. Learned Counsel for the Assessee, further referring to the observation of the Assessing Officer with regard to valuation report submitted for acquiring shares of subsidiary company from another related party on 01.08.2016 and subsequent valuation report dated 11.03.2017 for the purpose of amalgamation submitted that, although, there are two different valuation reports determined different values, but the fact remains that, when it comes to acquiring shares, it is always the valuation, on 28 ITA.No.111/Hyd./2022
the basis of Discounted Cash Flow [in short “DCF”] method.
However, when it comes to accounting treatment for amalgamation of two companies, it is Net Asset Value [in short “NAV”] method. Therefore, the observation of the Assessing Officer in light of valuation reports that, the assessee has designed tax evasion plan with the creation of an artificial intangible asset, is only on the basis of surmises and conjectures and not backed by any evidences.
Learned Counsel for the Assessee further referring to TP report submitted by the assessee and various provisions of Companies Act, 2013 and RBI Circular submitted that, the appellant-company has reported purchase of shares from related party in the TP study report and it was subjected to TP analysis carried-out by the TPO. Further, the appellant company has acquired shares from Mauritius based company through prior approval from the NCLT and the RBI which have not raised any objections. Further, the amalgamation was approved by the NCLT by an Order dated
15.05.2017 and the Department was subjected to notice of amalgamation before the NCLT passes it's Order. The 29
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Department has not raised objection. Further, the Assessing
Officer has not rejected the valuation report submitted by the assessee. However, made observation contrary to the fats and, therefore, the allegation of the Assessing Officer that, the assessee has created an artificial intangible asset through layered transactions between intra-group companies is devoid of merits and should be rejected.
Therefore, he submitted that, addition made by the Assessing Officer towards disallowance on depreciation on ‘goodwill’ should be deleted.
Shri B Bala Krishna, learned CIT-DR for the Revenue, on the other hand, supporting the order of the learned DRP/ Assessing Officer submitted that, going by the facts brought on record by the Assessing Officer, it is abundantly clear that, the assessee has designed a tax evasion plan through layered transactions between the intra-group companies which is evident from shares purchased by the appellant- company from IVZ Mauritius Services Private Limited, a fellow subsidiary parent company of the assessee and subsequent amalgamation of Invesco Hyderabad Private
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ITA.No.111/Hyd./2022
Limited, a 100% subsidiary of appellant-company w.e.f.
01.04.2016. The assessee has considered two different values for an enterprise on very same day which is evident from amount paid by the appellant-company for acquiring shares from Mauritius based company and the amount recorded in terms of amalgamation approved by the NCLT w.e.f. 01.04.2016. Admittedly, the appellant-company has acquired 12000 equity shares of Invesco Hyderabad Private
Limited @ Rs.1,93,723/- per share on 18.02.2016 even though the fair market value of the share was at Rs.81,635/- as on the date of acquisition. Although, the assessee claims that it has followed DCF method for purchase of shares and NAV method for recording asset and liabilities for the purpose of amalgamation, but, there cannot be two enterprise value for any entity on the very same day. Therefore, the Assessing Officer and DRP after considering relevant facts, has rightly treated the accounting on ‘goodwill’ arising on account of amalgamation is not genuine and created only for the purpose of reducing the profit is backed by evidences. Therefore, he submitted
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ITA.No.111/Hyd./2022
that, there is no merit in the arguments of the Learned
Counsel for the Assessee and the same needs to be rejected.
We have heard both the parties, perused the material on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that, Invesco Hyderabad Private Limited is a wholly owned subsidiary of the assessee-company. It is also an undisputed fact that, IVZ Mauritius Services Private Limited from whom shares were acquired by the assessee-company, is also a fellow subsidiary of the assessee-company. Therefore, it is necessary for us to examine the issue of ‘goodwill’ on account of amalgamation of assessee-company and subsidiary, in light of intra group transactions. Admittedly, Invesco Hyderabad Private Limited amalgamated with the assessee-company under the Scheme of Amalgamation approved by the NCLT vide order dated 15.05.2017 and the appointed date for amalgamation was w.e.f. 01.04.2016. As per the Scheme of Amalgamation approved by the NCLT, the net asset value of amalgamating company as on 01.04.2016, which has been worked-out at 32 ITA.No.111/Hyd./2022
Rs.102,86,02,342/- and the same has been supported by the valuation report dated 11.03.2017 submitted by an Independent Valuer. Further, the assessee-company had acquired 12,600 equity shares of Invesco Hyderabad Private
Limited, a wholly owned subsidiary of the assessee- company from IVZ Mauritius Private Limited which is a fellow subsidiary of the parent company of the assessee on 01.08.2016 @ Rs.1,93,723/- per share. The assessee claimed that, purchase of shares on 01.08.2016 is on the basis of valuation report dated 16.06.2016 prepared on the basis of Discounted Cash Flow method and as per the said valuation report, fair value of share of the amalgamating company as on 31.03.2016
has been valued at Rs.1,93,723/- per share. It is important to note the period of valuation for the purpose of acquiring shares from IVZ
Mauritius
Private
Limited and for the purpose of amalgamation of company w.e.f. 01.04.2016. In fact, for the purpose of acquiring shares from IVZ Mauritius Private
Limited, the valuation of equity shares of Invesco Hyderabad
Private limited has been valued as on 31.03.2016 and for 33
ITA.No.111/Hyd./2022
the purpose of amalgamation of Invesco Hyderabad Private
Limited with appellant-company, the net asset value has been determined as on 01.04.2016. In fact, both valuation reports considered the intrinsic value of shares of Invesco
Hyderabad Private Limited on same day. Therefore, it is necessary to understand the reasons given by the Assessing officer to disallow the depreciation claimed on goodwill arising an account of amalgamation in light of all these facts and also transaction between intra-group companies.
1. The assessee has paid Rs.1,93,723/- per share on this date i.e., on 01.04.2016 and the same has been determined by adopting DCF method. At the same time, the assessee has determined the net assets value of the amalgamated company as on 01.04.2016 at Rs.102,86,02,342/- and the intrinsic value of each share works-out at Rs.81,635/- per share. Thus, for showing investment in shares, the assessee has adopted DCF method of valuation of shares and in order to record ‘goodwill’, the assessee has adopted fair market value of assets, both on the same date. The Assessing Officer has 34 ITA.No.111/Hyd./2022
brought-out various defects in DCF method followed by the assessee to arrive the intrinsic value of shares as on 31.03.2016. As per the Assessing Officer, the Valuer has considered DCF method for the financial year 2016-2017 to financial year 2020-2021, even though, it was fully aware the fact that Company had already been amalgamated w.e.f.
01.04.2016 and, therefore, in our considered view, the method adopted for arriving at fair market value of shares as on 31.03.2016 under DCF method last it’s sanctity and it is not acceptable. Another important factor to be considered at this juncture is that, the assessee-company has made investment of Rs.244,09,03,345/- on 01.08.2016 and the Board of Directors adopted resolution for acquisition of these subsidiary company on 02.08.2016. This fact clearly shows that, affairs of amalgamation were created with a view to create goodwill by adopting different valuation methods for investment and recording the value of assets for amalgamation. Further, the amalgamating company was fully owned subsidiary of the assessee-company and IVZ
Mauritius Private Limited from whom shares were acquired,
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ITA.No.111/Hyd./2022
is also a subsidiary of parent company of the assessee.
These are intra-group transactions. Although, the assessee claims to have reported related party transaction in TP study report and it was subjected to analysis by the TPO and further, the purchase of shares from IVZ Mauritius
Private Limited is also subjected to approvals from NCLT and RBI, in our considered view, the said facts does not alter the position that, the assessee has inflated enterprise value of the subsidiary, while purchasing the shares from it’s related party and at the same time, while recording goodwill in terms of amalgamation, has considered real value of the company which resulted in an artificial excess consideration in the nature of goodwill. Therefore, in our considered view, the arguments of the assessee that, it has always recognized two methods for the purpose of valuation of enterprise value, i.e., one for the purpose of acquiring shares which is DCF method and the another for the purpose of recording ‘goodwill’ which is NAV method, is a self-serving statement and cannot be accepted.
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ITA.No.111/Hyd./2022
2. We further note that, an analysis of the closed transactions between the parties, it is abundantly clear that, the assessee company in association with it’s related parties has designed a transaction so as to create an artificial intangible asset in the form of ‘goodwill’ and thereby, claim the depreciation on it, to lower the tax liability of the assessee-company. This creation of artificial intangible asset by assessee-company in the intra-group companies, without proper justification is, in the nature of an implied device to evade taxes. Although, the assessee claims that, agreement between the assessee-company and it’s wholly owned subsidiary-company i.e., Invesco Hyderabad Private Limited is approved by the NCLT and the Department is also party to the said transaction, in our considered view, merely because this Scheme of amalgamation has been approved by the NCLT, it does not take away the right of the Assessing Officer to examine the transactions in light of relevant provisions of the Income Tax Act. Therefore, we reject the arguments of the Counsel for the Assessee on this aspect. Further, the assessee even now
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ITA.No.111/Hyd./2022
could not able to explain as to how an enterprise can be valued on two different enterprise values on the same date i.e., one for the purpose of acquiring shares from another related party which is based in Mauritius and one for the purpose of amalgamation into the assessee-company at a different enterprise value. Going by the transactions between the parties and the location of the selected entity situated at Mauritius, in our considered view, the Mauritius based entity is not liable to pay capital gains tax in India on account of DTAA benefit and, therefore, the assessee has designed a plan to transfer the funds to the parent company through the structured transactions via Mauritius based company. Since the appellant-company is unable to explain as to how a company can be valued on very same day for different purposes, in our considered view, the argument of the assessee that, DCF method is the recognised method for the purpose of valuation of shares and the assessee has acquired shares as per DCF method is devoid of merits and cannot be accepted. In our considered view, whether assessee follows DCF method or NAV method, an enterprise
38
ITA.No.111/Hyd./2022
value of any entity cannot be so much difference as explained by the assessee, which is evident from the fact that, although, the enterprise value of amalgamated company was at Rs.102,86,02,342/-, but, the assessee has paid an amount of Rs.244,09,03,945/- for acquiring 12,600
equity shares at Rs.1,93,725/- per share, even though, it was fully aware that, the fair market value of the share as on 31.03.2016 was at Rs.81,635/- per share.
3. Therefore, we reject the arguments of the Counsel for the Assessee. Further, amalgamation between two companies is, for the furtherance of their business or consolidation of business for smooth operation for business. In the present case, going by the reasons given by the assessee for amalgamation of companies, in our considered view, it is only a self-serving document, but, in reality, there is no furtherance of business between the two companies and because of amalgamation, the assessee failed to prove the benefit derived by the assessee-company by creating goodwill in the books of accounts on account of amalgamation. Further, in our considered view, when the 39 ITA.No.111/Hyd./2022
assessee-company was aware of the enterprise value of the subsidiary company as on 31.03.2016 which was at Rs.102,86,02,342/- and the assessee has paid
Rs.244,09,03,945/-, then, the assessee should have accounted the value of goodwill in the books of the subsidiary company. However, the assessee conveniently ignored the transactions and has entered into separate transactions of amalgamation to create an artificial intangible asset in the form of goodwill and thereby, claimed depreciation on it, to lower the tax liability of the assessee company. Further, it is also an admitted fact that, no goodwill was existed in the books of accounts of the amalgamating company and that, it has not been acquired any know-how, patent, copyright, trademark or franchise of amalgamation. The very fact that, such a goodwill is not valued and is not shown in the assets side of the amalgamating company shows that, the assessee has not capitalised any value of the goodwill and hence, the value of such goodwill in the form of intangible, should be taken as NIL. Therefore, we are the considered view that, there is no 40
ITA.No.111/Hyd./2022
merit in the arguments of the Counsel for the Assessee that,
‘goodwill’ accounted in the books of accounts on account of amalgamation is backed by evidences and thus, we reject the arguments of the Counsel for the Assessee.
4. Coming back to the legal proposition canvassed by the learned Counsel for the Assessee. Learned Counsel for the Assessee has argued at length in light of decisions of Hon’ble Supreme Court in the case of CIT vs., Smifs Securities Limited (supra) and also in light of Zydus Wellness Limited (supra). In our considered view, although, the Hon’ble Supreme Court has decided the issue of goodwill as an intangible asset and eligible for depreciation under section 32 (1)(ii) of the Act, in light of accounting of ‘goodwill’ on account of amalgamation of two companies, but, in our considered view, the proposition canvased by the assessee becomes infructuous, in view of the fact that, the ‘goodwill’ created by the assessee on account of amalgation as held to be not genuine and assessee is not entitled for claiming depreciation on the said goodwill. Further, although, the assessee has relied upon decision of 41 ITA.No.111/Hyd./2022
Coordinate Benches of ITAT, Hyderabad in the cases of DCIT, Circle-8(1) vs., East India Petroleum Ltd., (supra); S &
P Capital IQ (India) (P.) Ltd., ACIT (supra), decision of ITAT,
Mumbai in the case of Disney Broadcasting (India) (P.) Ltd., vs., PCIT (supra) and ITAT, Ahmedabad Bench decision in the case of Urmin Marketing (P.) Ltd., vs., DCIT, Circle-
4(1)(1), Ahmedabad (supra), in our considered view, in all the cases the Co-ordinate Benches of the Tribunal has considered the issue of ‘goodwill’ in light of decision of Hon’ble Supreme Court in the case of CIT, Kolkata vs.,
Smifs Securities Ltd., (supra) and held that, ‘goodwill’
arising on account of amalgamation is an intangible asset and eligible for depreciation under section 32(1)(ii) of the Act. In our considered view, since in the present case, we held that, ‘goodwill’ created by the assessee, is not a real one or genuine one, the question of considering the ratio laid down by the Hon’ble Supreme Court and various
Benches of the Tribunal for the purpose of allowing depreciation does not arise and thus, we reject the various
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case laws relied upon by the Learned Counsel for the Assessee.
5. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that, the assessee is not entitled for depreciation on ‘goodwill’ accounted on account of amalgamation. The Assessing Officer and DRP after considering the relevant facts, has rightly rejected the claim of the assessee. Thus, we are inclined to uphold the Directions of the DRP / Order of Assessing Officer and reject the grounds raised by the assessee on this issue.
The next issue that came-up for consideration from ground no.4 of assessee’s appeal is disallowance of expenditure relatable to exemption income under section 14A read with Rule 8D of I.T. Rules, 1962. 22. The assessee has claimed an amount of Rs.1,98,96,436/- as exempt income on account of dividend income received on investments in units of mutual funds. The assessee has made a suo motu disallowance of 43 ITA.No.111/Hyd./2022
expenditure relatable to exempt income of Rs.11,59,197/- u/sec.14Aof the Act. The Assessing Officer computed disallowance contemplated u/sec.14A by applying Rule 8D of I.T. Rules, 1962 and has determined the total disallowance of Rs.42,97,430/- which includes 1% of the annual average of the opening and closing balance of value of investment, income from which, does not form part of total income.
CA, Sriram Seshadri, Learned Counsel for the Assessee submitted that, the assessee has computed disallowance of expenditure relatable to exempt income by considering the time spent by an employee to manage the investment in mutual funds. Further, the assessee had also considered reasonable amount of indirect expenses for disallowance of expenditure relatable to exempt income u/sec.14A of the Act at Rs.11,59,197/-. The Assessing Officer without appreciating the relevant facts, has simply computed 1% on average of the opening and closing balance of value of such investment which does not form part of total income. Therefore, he submitted that, addition made
44
ITA.No.111/Hyd./2022
by the Assessing
Officer towards disallowance of expenditure u/sec.14A should be deleted.
Shri B Bala Krishna, learned CIT-DR, on the other hand supporting the Final Assessment Order of the Assessing Officer submitted that, assessee has made an adhoc disallowance of expenditure relatable to exempt income, even though, it has not maintained separate books of accounts for business activity and investment activity. In absence of relevant details, the Assessing Officer has rightly computed disallowance u/sec.14A by applying Rule 8D of I.T. Rules, 1962 and, therefore, addition made by the Assessing Officer should be upheld.
We have heard both the parties, perused the material on record and gone through the orders of the authorities below. Learned Counsel for the Assessee contested the disallowance made by the Assessing Officer u/sec.14A of the Act in light of satisfaction as required to be recorded in terms of sec.14A(2) of the Act. We find that, the Assessing Officer has recorded satisfaction in light of disallowance computed by the assessee towards expenses
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ITA.No.111/Hyd./2022
relatable to exempt income and after considering the relevant facts has clearly arrived at satisfaction that, disallowance computed by the assessee is not in accordance with the provisions of sec.14A(2) of the Act. Therefore, in our considered view, the argument of the Counsel for the Assessee on the issue of satisfaction fails and thus, rejected.
1. Having said so, let us come back to the disallowance computed by the Assessing Officer. The assessee has computed adhoc disallowance of Rs.11,59,197/- towards expenditure relatable to exempt income and claimed that, it has computed such expenditure on the basis of time spent by the employee to manage the investments’. Although, the assessee claimed that, it has computed expenditure on the basis of time spent by the employee, but, in absence of relevant details as to how the assessee has fixed the cost of an employee, in our considered view, the method followed by the assessee to arrive on direct expenses cannot be accepted. Further, the assessee has considered adhoc indirect expenditure to arrive on total disallowance u/sec.14A of the act. The 46 ITA.No.111/Hyd./2022
assessee has not justified the method followed for computing suo motu disallowance. Therefore, in our considered view, the disallowance computed by the assessee cannot be accepted.
2. Coming back to the ‘method’ followed by the Assessing Officer. The Assessing Officer has followed the amended Rule 8D w.e.f. 01.04.2016, as per which, an amount equal to 1% of the annual average of the monthly average of opening and closing balance of the value of such investment, income from which does not form part of the total income has to be disallowed. In the present case, there is no dispute with regard to the fact that, the Assessing Officer has computed 1% of the average of the monthly average of opening and closing balance of the value of such investment income from which does not form part of the total income to arrive at a total disallowance of Rs.42,97,430/-. Further, the Assessing Officer has made addition of Rs.42,97,430/-, which includes the expenditure directly relating to income which does not form part of total income. In our considered view, making addition towards
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ITA.No.111/Hyd./2022
suo motu disallowance made by the assessee is incorrect.
Since the total disallowance computed by the Assessing
Officer was at Rs.42,97,430/-, in our considered view, out of said disallowance, the expenditure already disallowed by the assessee was at Rs.11,59,197/- should be deducted.
Therefore, we direct the Assessing Officer to allow deduction of suo motu disallowance of expenditure of Rs.11,59,197/- made by the assessee out of total disallowance computed in terms of Rule 8D of I.T. Rules, 1962 and make balance addition of Rs.31,38,233/- u/sec.14A read with Rule 8D of I.T. Rules, 1962. Accordingly, ground no.4 of assessee’s appeal is partly allowed.
The next issue that came-up for consideration through ground no.5 of assessee’s appeal is deduction u/sec.10AA of the Income Tax Act, 1961. 27. CA, Sriram Seshadri, Learned Counsel for the Assessee submitted that, the assessee has made an alternative claim that in case the disallowance towards depreciation is upheld, then, the enhanced profit should be considered for the purpose of deduction u/sec.10AA of the 48 ITA.No.111/Hyd./2022
Act because, the assessee is an eligible assessee for claiming deduction u/sec.10AA of the Act.
Shri B. Bala Krishna, learned CIT-DR on the other hand, submitted that, the alternate claim of assessee is of consequential in nature which would arise on the total income computed by the Assessing Officer. He, therefore, submitted that, appropriate direction may be given to the Assessing Officer.
We have heard both the parties. In our considered view, the alternate claim made by the assessee is consequential in nature on the total income computed by the assessee after giving effect to the order passed by the Tribunal on the issue of depreciation on goodwill, which we have rejected. Once, depreciation on ‘goodwill’ is disallowed, it increases the profit of the assessee. Since the assessee is eligible for deduction u/sec.10AA, in our considered view, enhanced profit is eligible for deduction. Therefore, we direct the Assessing Officer to consider the enhanced profit for the 49 ITA.No.111/Hyd./2022
purpose of allowing deduction u/sec.10AA of the Act, if conditions for claiming such deduction are satisfied.
The next issue that came-up for consideration from ground no.6 of assessee’s appeal is deduction u/sec.80G of the Income Tax Act, 1961. 31. CA, Sriram Seshadri, Learned Counsel for the Assessee submitted that, in case the disallowance made by the Assessing Officer towards depreciation on goodwill on the amalgamation is upheld, then, the alternate claim of the assessee towards deduction u/sec.80G of the Act for donations should be considered. Learned Counsel for the Assessee further submitted that, although, the DRP stated that donations by the assessee is out of CSR expenditure, but, the fact remains that, the said donation is a normal donation, but, not out of CSR. Therefore, once the assessee has paid donation to an eligible assessee, the same should be considered in terms of sec.80G of the Act. He, therefore, submitted that, the matter may be remitted back to the file
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of Assessing Officer to verify the facts and allow deduction as per law.
Shri B. Bala Krishna, learned CIT-DR, on the other hand, supporting the order of the DRP submitted that, the assessee has paid donation out of CSR expenditure as provided u/sec.135 of the Companies Act, 2013. In order to claim deduction u/sec.80G of the Act, the donation should be voluntary as per the provisions of the Income Tax Act, 1961. Further, in the present case, the element of donation which is voluntary is absent. Therefore, the DRP has rightly rejected the claim of the assessee. The Learned DR accordingly pleaded that the order of the DRP should be upheld.
We have heard both the parties, perused the material on record and gone through the orders of the authorities below. The issue of disallowance of deduction claimed u/sec.80G is not made by the Assessing Officer in the assessment order. Further, the assessee has made claim for the first time before the DRP as an alternative claim. The 51 ITA.No.111/Hyd./2022
DRP rejected the claim of the assessee on the ground that, donation paid by the assessee is out of CSR expenditure. It was the argument of the assessee that, donations paid to an eligible assessee is not out of CSR fund, but, it is a normal donations eligible for deduction u/sec.80G of the Act. In our considered view, if the donations claimed by the assessee for the purpose of deduction u/sec.80G of the Act is out of CSR expenditure, then, the assessee is not entitled for deduction because CSR expenditure is as per the mandate of sec.135
of the Companies Act, 2013 and it is not a voluntary donation. Further, donations paid out of CSR fund, is not eligible for deduction u/sec.80G of the Act. Therefore, we are of the considered view that, if the assessee claimed deduction u/sec.80G of the Act towards donations paid out of CSR fund, then, the assessee is not entitled. Further, the claim of the assessee is that, donation paid is out of normal fund and not, out of CSR fund. The facts are not clear either in the assessment order or DRP Directions. Further, the assessee has not furnished relevant evidences. Therefore, in our considered view, the matter needs to re-examine by the 52
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Assessing Officer. Thus, we set-aside the issue to the file of Assessing Officer and direct the Assessing Officer to re- consider the issue in light of claim of assessee and in case, the assessee is able to prove his claim with relevant evidences, the Assessing Officer is directed to consider the claim of deduction in light of provisions of sec.80G of the Act. Ground no.6 of assessee’s appeal is allowed for statistical purposes.
The next issue that came-up for consideration through ground no.7 of assessee’s appeal is denial of credit for Foreign Tax Credit [in short “FTC”].
CA, Sriram Seshadri, Learned Counsel for the Assessee submitted that, the learned Assessing Officer has not granted FTC u/sec.90 of the Act in the Final Assessment Order despite the specific directions of the DRP to grant the same to the appellant.
Shri B. Bala Krishna, learned CIT-DR on the other hand, fully agreed with the submissions of the assessee and that, a direction may be given to the Assessing
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ITA.No.111/Hyd./2022
Officer to allow credit in case the assessee satisfies the conditions for claiming such FTC.
We have heard both the parties and considering the relevant arguments of the Learned Counsel for the Assessee and the learned DR, we find that, assessee claims FTC by filing relevant evidences including relevant Form-67. Therefore, the Assessing Officer is directed to verify the claim of assessee and allow credit for FTC in accordance with law.
CA, Sriram Seshadri, Learned Counsel for the Assessee at the time of hearing submitted that, assessee does not wish to press ground nos.8 and 9 and thus, ground nos.8 and 9 of assessee’s appeal are dismissed as not pressed.
The next issue that came-up for consideration through ground no.10 of assessee’s appeal is levy of interest u/sec.234B and 234D of the Income Tax Act, 1961. 40. In our considered view, charging of interest u/sec.234B and 234D of the Act are consequential in 54 ITA.No.111/Hyd./2022
nature and depends upon the total income computed by the Assessing Officer. Therefore, we direct the Assessing Officer to re-compute the interest u/sec.234B and 234D of the Act on the total income computed in accordance with law.
In the result, appeal of the Assessee is partly allowed for statistical purposes.
Order pronounced in the open Court on 30.06.2025 [VIJAY PAL RAO]
[MANJUNATHA G]
VICE PRESIDENT
ACCOUNTANT MEMBER
Hyderabad, Dated 30th June, 2025
VBP
Copy to 1. Invesco (India) Private Limited, 15th Floor, Block-6,
North
Tower,
Divyasree
Orion
SEZ,
Raidurgam,
Serilingampally, Hyderabad – 500 032. Telangana.
The DCIT, Circle-2(1), Signature Towers, Kondapur, Hyderabad – 500 -084. Telangana.
The Disputes Resolution Panel-1, Kendriya Sadan, 4th Floor, C-Wing, BENGALURU – 560 034. Karnataka State 4. The Pr. CIT-2, Hyderabad 5. The DR ITAT “A” Bench, Hyderabad. 6. Guard File.
//By Order//
////