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

ITA 1436/AHD/2019Status: DisposedITAT Ahmedabad28 August 2025AY 2015-1633 pages
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What did the Tribunal hold?

The Tribunal held that the disallowance of depreciation on goodwill arising from the amalgamation of Saurashtra Chemicals Ltd. (SCL) for AY 2015-16 and AY 2016-17 was not justified. The Tribunal followed the binding decision of a Coordinate Bench in the assessee's own case, which in turn relied on the jurisdictional High Court's judgment in Aculife Healthcare Pvt Ltd. and the Supreme Court's judgment in Smifs Securities Ltd. The Tribunal reasoned that depreciation on goodwill is allowable based on these precedents. Furthermore, it was held that once depreciation has been granted in earlier years, the resultant Written Down Value (WDV) becomes final for subsequent assessments and cannot be altered by the Assessing Officer. Depreciation is a statutory allowance linked to the block of assets, and its WDV must be carried forward as per Section 43(6). Therefore, the disallowances made by the AO and sustained by the CIT(A) were directed to be deleted. The grounds raised by the assessee on this issue were allowed. The assessee's ground regarding the disallowance of delayed ESIC/PF payment for both assessment years, along with grounds in cross-objections and additional grounds (except for sales tax subsidy in book profit computation), were dismissed as not pressed. The general grounds were also not adjudicated as they were argumentative. The appeals of the assessee and the Revenue were partly allowed, and the cross-objections were dismissed.

What were the facts?

The assessee, Nirma Limited, is a public limited company engaged in manufacturing and marketing various products. The appeals by the Revenue and the assessee, along with cross-objections, challenge the orders of the CIT(A) for Assessment Years 2015-16 and 2016-17. The Assessing Officer (AO) completed assessments under Section 143(3), making several additions and disallowances. For AY 2015-16, the AO's additions included 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 from SCL amalgamation, and deduction under Section 80IA. For AY 2016-17, additions included excess depreciation on intangible assets, disallowance under Section 14A, depreciation on goodwill, adjustment of income, and disallowance under Section 80IA. The CIT(A) partly allowed the appeals for both years.

What were the issues?

1. Whether the disallowance of depreciation on goodwill arising from the amalgamation of Saurashtra Chemicals Ltd. (SCL) is justified for AY 2015-16 and AY 2016-17, and if so, to what extent? Assessee's Contention: The assessee argued that depreciation on goodwill is allowable. It relied on the jurisdictional High Court's decision in its own case (Aculife Healthcare Pvt Ltd.) and the Supreme Court's decision in Smifs Securities Ltd. The assessee also contended that once depreciation is granted in earlier years, the Written Down Value (WDV) becomes final and cannot be re-examined by the AO. Revenue's Contention: The revenue's grounds of appeal are not explicitly detailed in the provided text, but the AO's disallowance of depreciation on goodwill suggests a disagreement with its allowability. The judgment mentions the Finance Act, 2021 amendments which prospectively excluded goodwill from intangible assets for depreciation, implying the revenue likely argued for disallowance based on existing provisions or interpretations prior to these amendments. 2. Whether the disallowance of delayed ESIC/PF payment is justified for AY 2015-16 and AY 2016-17? Assessee's Contention: The assessee stated that this ground, along with others in cross-objections and additional grounds (except for sales tax subsidy in book profit computation), was not pressed. Revenue's Contention: No specific argument recorded for the revenue on this issue as the assessee did not press it.

Which sections of the Income-tax Act were involved?

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

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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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