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2016 (12) TMI 459 - AT - Income TaxDepreciation on goodwill - Held that - Considering the provisions of Explanation 3 to Section 32(1) of the Act found that the word any other business or commercial rights of similar nature in clause (b) of Explanation 3 indicates that goodwill will fall under the expression any other business or commercial rights of similar nature . In view of the above judgment of Apex Court in SMIFS Securities Ltd. 2012 (8) TMI 713 - SUPREME COURT , we are unable to uphold the orders of the lower authorities. Accordingly, we set aside the orders of the lower authorities. The Assessing Officer is directed to allow depreciation at the applicable rate on the payment relatable to goodwill - Decided in favour of assessee MAT credit - Carry forward of MAT credit of erstwhile company by amalgamated company - Held that - As decided in assessee s own case when the assessee company is now being assessed in place of erstwhile company and the TDS credit pertaining to the erstwhile company is being given credit to the assessee company, there is no reason why a different treatment should be given to the MAT credit available pertaining to the erstwhile company. We do not agree with the learned Commissioner of Income Tax (Appeals) that there is need for specific mention in this regard in Section 115JAA as the Carry forward of MAT credit of erstwhile company by amalgamated company is in-built in the scheme of amalgamation as well as the scheme of MAT credit. Hence, we set aside the order of learned Commissioner of Income Tax (Appeals) in this regard and decide the issue in favour of the assessee. Apportionment of expenses - assessee has claimed the entire expenses from Chennai Unit which is not eligible for deduction u/s 80IC - Held that - During appeal, the ld. AR did not bring any evidence to prove that the expenditure was completely relatable to Chennai Unit. It appears from the nature of expenses listed in the assessment order that he expenditure was common expenditure incurred for the purpose of carrying on the business by the assessee of both the units. The expenditure cannot be identified item wise with the particular unit. Therefore, we hold that the CIT(A) has rightly confirmed the addition made by the Assessing Officer. We, therefore, uphold the same dismiss the ground raised by the assessee. Exclusion of income from sale of DEPB and focus market scheme for computation of deduction u/s 80IC - Held that - The issue is not relating to the subsidies received from Government in the Meghalaya State a backward state towards the reimbursement of expenses ,which has a direct nexus to the manufacturing activity but it is related to the issue of DEPB entitlement and reimbursement of focus market scheme which are in the form of grants from the Government. The immediate source of income was from the Government and not the business of the assessee. This being the case we are of considered opinion that the amounts received on account of DEPB entitlements and the export incentives in the form of Focus marketing are not qualified for the deduction u/s 80 IC of the Act Hon ble supreme court judgment in the case of CIT.v. Sterling Foods Ltd (1999 (4) TMI 1 - SUPREME Court ) and Liberty India v CIT 2009 (8) TMI 63 - SUPREME COURT are squarely applicable in the assessee s case. Therefore, we hold that the CIT(A) has rightly confirmed the addition made by the Assessing Officer and the same is confirmed.
Issues Involved:
1. Depreciation on goodwill. 2. MAT credit for amalgamated companies. 3. Disallowance under Section 14A read with Rule 8D. 4. Apportionment of expenses. 5. Exclusion of income from sale of DEPB and focus market scheme for computation of deduction under Section 80IC. Issue-wise Detailed Analysis: 1. Depreciation on Goodwill: The assessee claimed depreciation on goodwill resulting from the amalgamation of M/s May India Laboratories Ltd. The Assessing Officer (AO) rejected this claim, citing that it was not made in the original or revised return, relying on the Supreme Court judgment in Goetze India vs CIT. However, the Commissioner of Income-tax (Appeals) [CIT(A)] admitted the claim based on the Supreme Court judgment in Jute Corporation of India Ltd vs CIT, which allows fresh claims during appellate proceedings. The CIT(A) allowed the claim, referencing judgments from the Kerala High Court and Delhi High Court, which support depreciation on goodwill. The Tribunal upheld the CIT(A)’s decision, noting that the facts were identical to a previous Tribunal decision (Hinduja Foundries Ltd vs ACIT), where depreciation on goodwill was allowed. 2. MAT Credit for Amalgamated Companies: The AO denied the assessee’s claim for MAT credit of the amalgamated company, asserting that Sections 115JA and 115JB do not provide for such credit. The CIT(A) allowed the claim, relying on a previous Tribunal decision (M/s Ranganathan Industries Pvt. Ltd vs Addl. CIT), which held that MAT credit of the amalgamating company should be allowed to the amalgamated company. The Tribunal upheld the CIT(A)’s decision, referencing its earlier ruling in the assessee’s own case for the assessment year 2009-10, affirming that the amalgamated company is entitled to MAT credit. 3. Disallowance under Section 14A read with Rule 8D: The AO made a disallowance of ?36,255 under Section 14A read with Rule 8D, which the CIT(A) confirmed. During the appeal, the assessee did not press this ground, leading the Tribunal to dismiss it as not pressed. 4. Apportionment of Expenses: The AO disallowed ?16,30,182 as proportionate expenses, arguing that the expenses claimed by the Chennai Unit (not eligible for deduction under Section 80IC) should be apportioned between the Chennai and Baddi Units. The CIT(A) confirmed this disallowance, stating that the apportionment was logical and the assessee failed to prove the expenses were solely related to the Chennai Unit. The Tribunal upheld the CIT(A)’s decision, noting that the expenses appeared to be common to both units and the assessee did not provide evidence to the contrary. 5. Exclusion of Income from Sale of DEPB and Focus Market Scheme for Computation of Deduction under Section 80IC: The AO excluded income from DEPB and focus market scheme from the computation of deduction under Section 80IC, arguing that these incomes were not derived from the industrial undertaking but were incidental to export activities. The CIT(A) upheld this exclusion, referencing Supreme Court judgments (Sterling Foods Ltd and Liberty India) that such incomes do not qualify for Section 80IC deduction. The Tribunal agreed, distinguishing the case from the Supreme Court judgment in Meghalaya Steels Ltd, which involved subsidies directly linked to manufacturing activities. The Tribunal concluded that DEPB entitlements and focus market scheme benefits are related to export activities, not manufacturing, and thus do not qualify for Section 80IC deduction. Conclusion: Both the appeals of the Revenue and the assessee were dismissed. The Tribunal upheld the CIT(A)’s decisions on all issues, affirming the disallowances and exclusions made by the AO. The order was pronounced on 25th November 2016, at Chennai.
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