NIRMA LIMITED,,AHMEDABAD vs. THE DCTI , CIRCLE-3(1)(1),, AHMEDABAD

ITA 1413/AHD/2019Status: DisposedITAT Ahmedabad28 August 2025AY 2016-1733 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the assessee is entitled to depreciation on goodwill arising from the amalgamation of Saurashtra Chemicals Ltd. for AY 2015-16 and AY 2016-17. The reasoning is based on the principle that the amendments made by the Finance Act, 2021, which exclude goodwill from the ambit of intangible assets for depreciation, are prospective and applicable from AY 2021-22. Therefore, for the assessment years under consideration, the assessee's claim for depreciation on goodwill is allowable. The Tribunal also noted that depreciation is a statutory allowance linked to the block of assets, and the WDV must be carried forward year after year as per Section 43(6). The AO cannot artificially alter the WDV by re-examining the allowability of depreciation accepted in earlier years. Consequently, the disallowances made by the AO and sustained by the CIT(A) amounting to Rs. 9,71,72,064/- for AY 2015-16 and Rs. 7,28,79,048/- for AY 2016-17 are directed to be deleted. The assessee's grounds on this issue are allowed. Other grounds raised by the assessee in their appeals and cross-objections, except for the exclusion of sales tax subsidy in book profits, were dismissed as not pressed.

What were the facts?

The assessee, Nirma Limited, is a public limited company engaged in manufacturing and marketing various products. The appeals concern Assessment Years 2015-16 and 2016-17. For AY 2015-16, the assessee filed a revised return declaring a total income of Rs. 46,72,792/-. The Assessing Officer (AO) completed the assessment under section 143(3) on 30.03.2017, determining total income at Rs. 103,21,96,073/-, making several additions including treating sales-tax subsidy as revenue, disallowing excess depreciation on intangible assets, disallowance under section 14A, product registration expenses, delayed ESIC/PF payments, depreciation on goodwill, and deduction under section 80IA. For AY 2016-17, the AO completed the assessment on 14.03.2018 at Rs. 550,48,81,113/-, making additions for excess depreciation on intangible assets, disallowance under section 14A, depreciation on goodwill, adjustment of income relatable to a subsequent year, and disallowance of deduction under section 80IA. The Commissioner of Income Tax (Appeals) [CIT(A)] partly allowed the appeals for both years.

What were the issues?

1. Whether the CIT(A) erred in confirming the disallowance of depreciation on goodwill arising from the amalgamation of Saurashtra Chemicals Ltd. (SCL) for AY 2015-16 and AY 2016-17, as per Section 32(1)(ii) and Explanation 3(b) of Section 32(1) of the Income Tax Act, 1961. Assessee's Contention: The assessee argued that depreciation on goodwill should be allowed, relying on the jurisdictional High Court in the case of Aculife Healthcare Pvt Ltd. and the Supreme Court in Smifs Securities Ltd. They also contended that once depreciation is granted in earlier years, the resultant Written Down Value (WDV) becomes final and cannot be altered by the AO. Revenue's Contention: The revenue's grounds of appeal are not explicitly detailed in the provided text, but the confirmation of disallowance by the CIT(A) implies their stance against allowing depreciation on goodwill. The judgment notes that the amendments made by the Finance Act, 2021, which exclude goodwill from intangible assets for depreciation purposes, are applicable prospectively from AY 2021-22.

Which sections of the Income-tax Act were involved?

Section 32(1)(ii),Section 32(1),Section 43(6),Section 143(3),Section 115JB,Section 80IA,Section 14A

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Cases cited in this judgment(11)Show list

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आयकर अपीलीय अधिकरण, अहमदाबाद न्यायपीठ “ A", अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “ A " BENCH, AHMEDABAD BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं/ITA Nos.1412 & 1413/Ahd/2019 निर्धारण वर्ष / Assessment Years: (2015-2016 & 2016-17)

Nirma Limited, Nirma House, Ashram Road, Ahmedabad-380009. (Gujarat) बनाम / v/s.

The Deputy Commissioner of Income Tax, Circle 3(1)(1), Ahmedabad. स्थायी लेखा सं./PAN : AAACN5350K निर्धारण वर्ष / Assessment Years : (2015-16 & 2016-17)

The Assistant Commissioner of Income Tax, Circle 3(1)(1), Ahmedabad.

Nirma Limited, बनाम / v/s.

Nirma House, Ashram Road, Ahmedabad-380009. (Gujarat) स्थायी लेखा सं./ PAN: AAACN5350K AND C.O Nos.11-12/Ahd/2020 In निर्धारण वर्ष / Assessment Years : (2015-16 & 2016-17)

Nirma Limited, Nirma House, Ashram Road, Ahmedabad-380009. (Gujarat)

The Deputy Commissioner of बनाम/ v/s.

Income Tax/The Assistant Commissioner of Income Tax, Circle 3(1)(1), Ahmedabad. स्थायी लेखा सं./ PAN: AAACN5350K अपीलार्थी/ (Appellant) प्रत्यर्थी / (Respondent) ITA Nos.1412-1413/Ahd/2019 with others Nirma

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