DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(1)(1), VADODARA, AAYKAR BHAWAN vs. GUJARAT NARMADA VALLEY FERTILIZER & CHEMICALS LIMITED, NARMADANAGAR
IN THE INCOME TAX APPELLATE TRIBUNAL
“D” BENCH, AHMEDABAD
BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER
AND SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A. No. 970/Ahd/2025
(िनधा[रण वष[ / Assessment Year : 2015-16)
Deputy Commissioner of Income Tax
Circle-2(1)(1), Vadodara
बनाम/
Vs.
.
Gujarat Narmada Valley
Fertilizer & Chemicals
Limited
P.O. Narmadanagar,
Narmadanagar, Bharuch,
Bharuch, Gujarat 392015
Öथायीलेखासं./जीआइआरसं./PAN/GIR No. : AAACG8372Q
(Appellant)
..
(Respondent)
अपीलाथȸ ओर से /Appellant by :
Shri Sher Singh, CIT.DR
Ĥ×यथȸ कȧ ओर से/Respondent by :
Shri Vishal Kalra. AR
Date of Hearing
26/08/2025
Date of Pronouncement
03/09/2025
(आदेश)/ORDER
PER ANNAPURNA GUPTA, AM:
The present appeal has been filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals),
Ahmedabad-13 (hereinafter referred to as “CIT(A)”), dated
25.02.2025 passed under Section 250 of the Income Tax Act, 1961
(hereinafter referred to as the “Act”) and relates to Assessment
Year (A.Y.) 2015-16. ITA No. 970/Ahd/2025 [DCIT vs. Gujarat Narmada
Valley Fertilizer & Chemicals Limited ] A.Y. 2015-16 - 2 –
Grounds raised by the Revenue are as under:
“1. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the disallowance of Rs.42,27,233/ on account of depreciation on goodwill when in fact no goodwill was created on account of merger of Narmada Chematur Petrochemicals Limited (NCPL) particularly when assessee itself was the promoter of NCPL
2(i)
The Ld. CIT(A) erred in deleting the addition of Rs. 52,00,09,678/- by accepting the assessee's benchmarking for inter unit sale of electricity instead of adopting the ALP of Rs. 4.04/kWh.
2(ii)
On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in rejecting the comparable adopted by TPO without appreciating that the same is identical transaction with the transaction entered by the assessee in view of the FAR(Functions performed, Assets used & Risks undertaken) analysis as per the provision laid down under Rule 10B(2)(b) of the 1.T.
Rules, 1962. 2(iii) On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in allowing the comparable adopted by assessee without appreciating that the same has different FAR(Functions performed, Assets used & Risks undertaken) analysis as per the provision laid down under Rule 10B(2)(b) of the I.T. Rules, 1962 and hence the same is not a comparable transaction under CUP method.
2(iv)
On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in accepting the ALP of the assessee determined by ignoring the guidelines laid down under the I.T. Act and Rules and thereby violating the ratio laid down by the Hon'ble Supreme Court in the case of Sap Labs India Pvt. Ltd.
vs. ITO?
The appellant craves leaves to add, modify, amend or alter any grounds of appeal at the time of, or before, the hearing of appeal.”
At the outset itself, Ld. Counsel for the assessee pointed out that the Revenue in the present appeal has raised two grounds on issues which are legacy issues on which addition has been made from year-to-year to the income of the assessee in the past and has been consistently deleted/allowed by the ITAT and even the Hon’ble High Court in the preceding years. That following the ITA No. 970/Ahd/2025 [DCIT vs. Gujarat Narmada Valley Fertilizer & Chemicals Limited ] A.Y. 2015-16 - 3 –
orders of the higher judicial authorities in the case of the assessee itself, Ld.Counsel for the assessee pointed out, the Ld. CIT(A) had deleted the additions made on these issues in the case of the assessee noting no distinction on facts in the present year.
Ld. Counsel for the assessee pointed out that the two issues arising in the case of the assessee pertained to: i. Claim of depreciation on goodwill; & ii. Determination of Arms’ Length Price for deduction u/s.80IA of the Act.
With respect to the issue of claim of depreciation on goodwill, Ld. Counsel for the assessee pointed out that the assessee had acquired through merger, the going concern of Narmada Chematur Petrochemicals Limited (Amalgamated Company / ‘NCPL’) under the scheme approved by the Hon’ble Gujarat High Court. The amalgamated company was engaged in the business of manufacturing and sale of industrial chemicals since last 14 years. The tangible assets of the going concern were taken over at book value and against the net value assets as per books of Rs.6160.27 Lakhs, a consideration of 7849.26 Lakhs was paid in the form of fully paid equity share of the assessee company. The difference was in the nature of goodwill and the said calculation was also approved under the scheme of amalgamation by the Hon’ble Gujarat High Court filed its order dated 9th June, 2007. Ld. Counsel for the assessee further pointed
ITA No. 970/Ahd/2025 [DCIT vs. Gujarat Narmada
Valley Fertilizer & Chemicals Limited ] A.Y. 2015-16 - 4 –
out that in the appellant’s own case for A.Y. 2009-10 to 2014-15, the Ld. CIT(A) had allowed the claim of depreciation on goodwill arising on merger of NCPL with the assessee. Further, he pointed out from the order of the Ld. CIT(A) at para 8.2 that the Ld.
CIT(A) noted the allowance of claim of depreciation on goodwill to be settled in favour of the assessee in earlier years, which was approved by the Hon’ble High Court also for A.Y. 2007-08. The extract of the order of the Hon’ble High Court for A.Y. 2007-08, he pointed out, is reproduced in the order of the Ld. CIT(A). He also pointed out that the Ld. CIT(A) noted the identical claim to have been allowed to the assessee by the Tribunal in A.Ys. 2013-
14 & 2014-15. 6. With respect to the issue of claim of deduction u/s.80IA of the Act, Ld. Counsel for the assessee pointed out that the facts of the case was that the assessee had calculated deduction u/s.80-
IA(4)(iv)(a) of the Act of Rs.52,11,90,721/- consisting of Rs.18,95,05,821/- for Wind Mills Project and Rs.33,16,84,900/- for Co-generation Power and Steam Unit (‘CPSU’). The TPO, however, observed that the deduction had been claimed on Arms’
Length Price (‘ALP’), which was determined by the assessee on the basis of the yearly average per unit electricity rate charged by DGVCL to the non-eligible unit. As per the analysis in the TP
Report filed by the assessee, the transaction was benchmarked using an internal CUP with the manufacturing units as the tested party. The Captive Power Plant (‘CPP’) of the assessee was taken
ITA No. 970/Ahd/2025 [DCIT vs. Gujarat Narmada
Valley Fertilizer & Chemicals Limited ] A.Y. 2015-16 - 5 –
to be the tested party and relevant CUP for the same was applied to get the ALP. Noting the sale of electricity to be a regulated activity, therefore, as per law, the TPO noted that the CPP could only sell electricity to a distribution licensee (through a transmission utility). The benchmarking of sale by CPP at the rate at which non-eligible unit bought electricity from the grid was, therefore, to be held incorrect. The TPO, thereafter, used external
CUPs to determine the ALP of inter-unit transfer of electricity and revised the transaction of sale by Rs.52,00,09,678/-. In case of Wind Mill, the TPO accepted the claim of the assessee company of deduction u/s.80IA of the Act. The Ld. CIT(A), however, noted that the impugned issue had been decided by the Tribunal in assessee’s own case for A.Ys. 2013-14 & 2014-15 and held that the profits & gains from infrastructure undertakings deduction u/s.
80IA(4) of the Act was allowable for generation of power for captive consumption and the same was to be computed considering the rate of power on which Electricity Board supplied power to its consumer and steam produced by the assessee could be termed as power and would qualify for the benefit of deduction u/s.80IA(4) of the Act. Ld. CIT(A) further noted that the department’s appeal against the order of the Tribunal was not admitted by the High
Court.
Ld. DR was unable to controvert the findings of the Ld. CIT(A) as above. He was unable to point out any distinguishable fact in the present case from that in the preceding year in the case
ITA No. 970/Ahd/2025 [DCIT vs. Gujarat Narmada
Valley Fertilizer & Chemicals Limited ] A.Y. 2015-16 - 6 –
of the assessee and he fairly conceded that both the issues stood covered in favour of the assessee by the decision of the ITAT and also the Hon’ble High Court in the preceding years.
In view of the same, we see no reason to interfere in the order of the Ld. CIT(A) who has admittedly allowed both the issues of claim of depreciation on goodwill and claim of deduction u/s.80IA of the Act on profits earned by power supplied to captive power units, following the decision of the ITAT in the case of the assessee itself in the preceding years which stood confirmed by the Hon’ble High Court also. In the light of the same, all grounds raised by the Revenue are dismissed.
In the result, appeal filed by the Revenue is dismissed.
This Order pronounced on 03/09/2025 (SANJAY GARG)
ACCOUNTANT MEMBER
Ahmedabad; Dated 03/09/2025
S. K. SINHAआदेश कȧ Ĥितिलǒप अĒेǒषत/Copy of the Order forwarded to :
अपीलाथȸ / The Appellant 2. Ĥ×यथȸ / The Respondent. 3. संबंिधत आयकर आयुƠ / Concerned CIT 4. आयकर आयुƠ(अपील) / The CIT(A)- 5. ǒवभागीय Ĥितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड[ फाईल / Guard file.
आदेशानुसार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt.