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Income Tax Appellate Tribunal, I Bench, Mumbai
Before: Shri Jason P. Boaz & Shri Sanjay Garg
This appeal by Revenue is directed against the order of the CIT(A)-8, Mumbai dated 27.03.2015 for A.Y. 2009-10.
The facts of the case, briefly stated, are as under: - 2.1 The assessee, a company engaged in the business of manufacturing and trading in household insecticides and pesticides, filed its return of income for A.Y. 2009-10 on 30.09.2009 declaring loss of `1,53,42,442/-. ‘Book Losses’ under section 115JB of the Income Tax Act, 1961 (in short 'the Act') was computed at `7,68,06,987/-. The return was processed under section 143(1) of the Act and the case was subsequently taken up for scrutiny. The assessment was completed under section 143(3) of the Act vide order dated 22.04.2013 wherein the total income of the assessee as per normal provisions of the Act was determined at `1,92,65,840/- in view of the following additions/disallowances: - (i) T.P. adjustment under section 92CA(3) ` 2,80,96,447/- (ii) Disallowance of deduction under section 35D ` 10,77,727/- M/s. Sumitomo Chemical P. Ltd. ` (iii) Disallowance of excess claim of depreciation 54,34,110/- 2.2 Aggrieved by the order of assessment dated 22.04.2013 for A.Y. 2009- 10, the assessee preferred an appeal before the CIT(A)-8, Mumbai. The learned CIT(A) disposed off the appeal vide the impugned order dated 27.03.2015, allowing the assessee partial relief. 3. Revenue, being aggrieved by the order of the CIT(A)-8, Mumbai, has preferred this appeal raising the following grounds: - “
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance of excess claim of depreciation of Rs.54,34,110/- without appreciating the fact that the issue is clearly found to be covered under Explanation 4A of section 43(1) of the Income Tax Act and even the Tax Auditors, in their report in Form No. 3D, have also noted that the provisions of Explanation 4A to section 43(1) are applicable.
2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in allowing the claim of depreciation on goodwill without appreciating the fact that the decision is not apt in terms of proviso to Rule 11 of the Income Tax Rules, 1963 and the issue involved of depreciation on goodwill as revenue expenditure has never been examined?”
4. Ground No. 1 – Disallowance on account of Depreciation – `54,34,110/- 4.1 In this ground (supra), Revenue assails the impugned order of the learned CIT(A) as being erroneous in deleting the disallowance made on account of excess claim of depreciation amounting to `54,34,110/- without appreciating the fact that the tax auditors in report in Form No. 3CD have also noted that the provisions of Explanation 4A to section 43(1) of the Act are applicable. The learned D.R. was heard in support of this ground and placed strong reliance on the decision of the Assessing Officer (AO) on this issue. 4.2 Per contra, the learned A.R. of the assessee at the very outset drew the attention of the Bench to the orders of the Coordinate Bench of the Tribunal in the assessee’s own case in dated 25.03.2015 for A.Y. 2007-08 and submitted that an identical issue was considered and decided in favour of the assessee by the Coordinate Bench, following the order of another Coordinate Bench in the assessee’s own case for A.Y. 2006-07 in ITA No. 3078/Mum/2012 dated 28.03.2014.
M/s. Sumitomo Chemical P. Ltd. 4.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements referred to and relied upon (supra). We find that the Coordinate Bench of this Tribunal has decided the identical issue in favour of the assessee in its order in dated 25.03.2015 in the assessee’s own case for A.Y. 2007-08, wherein it has followed an earlier Tribunal order in the assessee’s own case for A.Y. 2006-07 (supra), holding as under a paras 5 and 6 thereof: “5. Ground no.2 relates to the disallowance of depreciation of Rs. 88,49,218/- claimed as incidental expenditure incurred on acquiring of assets from Bilag. In this regard, at the very outset, Ld Counsel for the assessee brought our attention to the order of the Tribunal for the AY 2006-07 (supra) and mentioned that an identical issue was decided by the Tribunal vide ground no.3 of the said order of the Tribunal dated 28.3.2014. Paras 21 to 33 of the said Tribunal’s order are relevant in this regard. After hearing both the parties and on perusal of the said order of the Tribunal (supra), we find the Tribunal has decided the identical issue in favour of the assessee. For the sake of completeness of this order, the relevant paras 31 to 33 of the said Tribunal’s order are extracted which read as under: “31. We have heard the arguments and have perused the details as appended in the APB. The acquisition of the machinery from Bilag is not disputed, it is also not disputed that the machinery is a capital asset and whatever expense is incurred on such outlay, it shall bear the character of capital and added to the cost. Since this is a fact, then applying the ratio laid down by Hon’ble Bombay High Court in the case of Ciba of India Ltd. vs CIT, reported in 70 Taxman 505 (Bom), wherein it has been held “… this being so, … this amount would form part of the cost of the assessment for the purpose of depreciation…”
In such a case, the additional depreciation, claimed by the assessee on Bilag machinery is to be allowed. We also accept that the action of the assessee did not suffer from any infirmity.
We, therefore, set aside the order of the CIT(A) and direct the AO to allow the depreciation on the machinery that had been acquired from Bilag, and also include incidental expenses incurred on acquisition of assets, as laid down by the Hon’ble Bombay High Court in Ciba (supra). This would also include legal and professional expenses of Rs. 53,88,637/- as incidental expenses, raised as an additional GOA.”
Considering the above as well as respectfully following the decision of the coordinate Bench, the claim of the assessee is allowed. Accordingly, ground no.2 is allowed.”
M/s. Sumitomo Chemical P. Ltd. 4.3.2 Respectfully following the decisions of the Coordinate Bench of this Tribunal in the assessee’s own case for A.Y. 2006-07 (supra) and 2007-08 (supra), we uphold the order of the learned CIT(A) deleting the disallowance on account of excess claim of depreciation amounting to `54,34,110/-. Consequently, ground No. 1 of Revenue’s appeal is dismissed.
Ground No. 2 – Depreciation on Goodwill 5.1 In this ground, Revenue assails the order of the learned CIT(A) in allowing the claim of depreciation on Goodwill. The learned D.R. was heard in support of the grounds raised
. 5.2 Per contra, the learned A.R. of the assessee supported the impugned order of the learned CIT(A) in allowing the assessee’s claim of depreciation on Goodwill. The learned A.R. drew the attention of the Bench to the orders of the Coordinate Bench of this Tribunal in the assessee’s own case in dated 25.03.2005 for A.Y. 2007-08 and submitted that an identical issue was considered and decided in favour of the assessee by the Coordinate Bench, following the order of the assessee’s won case for A.Y. 2006-07 in ITA No., 3078/Mum/2012 dated 28.03.2014. 5.3.1 We have heard the rival contentions and perused and carefully considered the material on record, including the judicial pronouncements cited and placed reliance upon (supra). We find that the Coordinate Bench of this Tribunal in its order in ITA No. 3077/Mum/2012 dated 25.03.2015 in the assessee’s own case for A.Y. 2007-08 has decided the identical issue in favour of the assessee wherein, following the decision of the Hon'ble Apex Court in the case of Smifs Securities Ltd. (348 ITR 302) and of assessee’s own case for A.Y. 2006-07 (supra), it has held as under at paras 7 and 8 thereof: -
7. Before us, assessee raised an additional ground relating to the granting of depreciation of goodwill acquired in AY 2006-2007. The assessee made a formal request vide his letter dated 5.5.2014 informing that acquiring goodwill from Bilag Industries Private limited in the AY 2006-2007. The goodwill was originally not claimed in the return. However, the same was claimed by way of raising additional ground in the appeal for the AY 2006-2007 and the same was admitted and adjudicated in favour of the assessee. In this regard, Ld Counsel brought our attention to the order of the Tribunal in the