S C JHONSON PRODUCTS PVT LTD,GURGAON vs. ACIT CIRCLE-22(2), NEW DELHI

ITA 1470/DEL/2020Status: DisposedITAT Delhi28 August 2025AY 2007-08107 pages
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What did the Tribunal hold?

The Tribunal held that the reassessment proceedings initiated under Section 147 were not pressed by the assessee for AY 2008-09 and were thus dismissed for that year. For AY 2006-07, the Tribunal allowed grounds of appeal related to the adjustment of amortization of goodwill in book profits under Section 115JB. The Tribunal reasoned that the scheme of amalgamation was approved by the Hon'ble Delhi High Court, and the assessee followed the 'Purchase' method as per Accounting Standard-14. It noted that whether the 'Purchase' method or 'Pooling of Interest' method was followed, there would be no material difference in the financial statements. Citing the Bombay Tribunal's decision in Toyo Engineering India Ltd., the Tribunal directed the AO to delete the adjustments made in the book profits concerning goodwill amortization. Consequently, grounds related to reassessment proceedings for AY 2008-09 were dismissed, and grounds concerning book profit adjustments for AYs 2006-07 and 2008-09 were allowed. Interest under Sections 234B, 234C, 234D, and 244A were directed to be charged on the finally computed income. The appeals for AYs 2007-08 and 2008-09 were decided based on the similarity of facts to AY 2006-07.

What were the facts?

The assessee, S.C. Johnson Pvt. Ltd., engaged in manufacturing and trading insect control and air care products, filed appeals against orders of the CIT(A) for Assessment Years (AYs) 2006-07, 2007-08, and 2008-09. The appeals challenged reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961, and subsequent additions. For AY 2006-07, the original assessment was under Section 143(3), followed by reassessment proceedings initiated by notices under Section 148. The reassessment order dated March 30, 2014, computed the income at NIL but assessed book profit at INR 69,62,80,147/- against a declared book loss. The CIT(A) upheld the AO's actions. The issues for all AYs were common and interlinked.

What were the issues?

1. Whether the reassessment proceedings under Section 147 of the Income Tax Act, 1961, were validly initiated and jurisdiction was correctly assumed by the Assessing Officer (AO) for the assessment years under appeal, considering the original assessments were concluded under Section 143(3) of the Act? Assessee's Contention: The reassessment was initiated on a misconception of facts and law, with no escapement of income. It was barred by limitation as there was no failure to disclose material facts. The reasons to believe were vague, based on a change of opinion, and the satisfaction of the CIT under Section 151(2) was not proper. The assessee relied on principles of natural justice and the proviso to Section 147. Revenue's Contention: Not recorded in the judgment. 2. Whether the disallowance of salary expenditure of expatriates amounting to Rs. 3,45,62,000/- for AY 2006-07 was justified, despite debit notes being received in the subsequent financial year, under the mercantile system of accounting? Assessee's Contention: The expenditure should be claimed in the year it pertained, adhering to the mercantile system and matching concept, irrespective of the debit note's receipt date. Revenue's Contention: Not recorded in the judgment. 3. Whether the adjustment of Rs. 85,21,54,503/- in book profits under Section 115JB of the Act for AY 2006-07, relating to amortization of goodwill, was permissible, considering the scheme of amalgamation approved by the High Court and Accounting Standard-14? Assessee's Contention: The adjustment did not fall under Explanation 1 to Section 115JB. The scheme of amalgamation, approved by the High Court, used the 'Purchase' method as per AS-14, and goodwill amortization should be allowed. The AO cannot tinker with a High Court-approved scheme. The 'Purchase' method is permissible for wholly owned subsidiaries under AS-14. Revenue's Contention: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(3),Section 148,Section 139(1),Section 151(2),Section 80IB,Section 80IC,Section 115JB,Section 234B,Section 234C,Section 234D,Section 244A,Section 250

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Income Tax Appellate Tribunal, DELHI “G” BENCH: NEW DELHI

Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL

For Appellant: Shri K. M. Gupta, Adv. &, Ms. Shruti Khimta, AR
For Respondent: Shri Mahesh Kumar, CIT DR
Hearing: 02.06.2025Pronounced: 28.08.2025

Heard together (3 matters)

ITA No.1850/Del/2019
ITA No.1470/Del/2020
ITA No.1122/Del/2020

Read from the judgment's own cause title. This page is filed under one of them.

PER MANISH AGARWAL, AM :

The captioned appeals are filed by assessee against the different orders of Ld. CIT(A) u/s 250 of the Income Tax Act, 1961

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The order continues below.

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