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TMI Blog2018 (10) TMI 1036X X X X Extracts X X X X X X X X Extracts X X X X ..... gation to deduct tax at source on such payment do not arise and consequently, provisions of Section 40(a)(ia) of the Act do not come into play in view of the decision in the case of CIT vs. Gujarat Narmada Valley Fertilizers Co. Ltd. [2014 (4) TMI 235 - GUJARAT HIGH COURT]. The law that a mere reimbursement does not require to deduction [2014 (4) TMI 235 - GUJARAT HIGH COURT] - decided against revenue Addition towards amortization of lease hold land - claim of the assessee was not accepted by the AO on the ground that there is no provision of claim of the amount written off/amortized against the lease hold land in the Income Tax Act - Held that:- Amortization is an accounting term that refers to the process of allocating the cost of an asset over a period of time and hence it is nothing else than depreciation. The allowability of costs towards amortization of lease hold land is in question. Having heard the rival submissions on the issue, we find that the CIT(A) has rightly appreciated the facts in perspective and concluding the issue in favour of the assessee in the light of decision of Hon’ble Gujarat High Court in the case of DCIT vs. Sun Pharmaceuticals Industries Ltd. [200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me court in the case of Goetze (India) Ltd. vs. CIT [2006 (3) TMI 75 - SUPREME COURT] & NTPC vs. CIT [1996 (12) TMI 7 - SUPREME COURT]. - Decided in favour of assessee. Disallowance in respect of employees’ contribution to Provident Fund - Held that:- In view of the decision of in the case of CIT vs. GSRTC [2014 (1) TMI 502 - GUJARAT HIGH COURT], the issue is decided against the assessee. Addition u/s 14A - Held that:- We find that the CIT(A) has deleted the disallowance of interest expenditure after taking account the interest free capital available at the disposal of the assessee by way of own funds as well as set off available on account of interest income available at the disposal of the assessee. We find that the action of the CIT(A) is on sound footing in tune with binding judicial precedents including the decision in Nirma Credit Capital Pvt. Ltd. (2017 (9) TMI 485 - GUJARAT HIGH COURT). Thus, the action of the CIT(A) cannot be assailed on this score. The CIT(A) on the other hand upheld the disallowance of administrative expenditure as quantified in terms of rule 8D(2)(iii) of the Rules. The assessee has failed to provide any justification for interference with the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of ₹ 39.77 lacs being disallowance of amortization of lease hold land despite the fact that there is no provision in the Income Tax Act under which such deduction can be claimed. 5. When the matter was called for hearing, the learned AR for the assessee in Revenue s appeal submitted at the outset that controversy as per the ground no.1 of the Revenue s appeal revolves around applicability of Section 145A of the Act towards alleged under valuation of closing stock. The learned AR submitted that the assessee has followed exclusive method of accounting and therefore, the closing stock has not been loaded with the taxes and dues as contemplated under s.145A of the Act. The learned AR submitted that in view of the exclusive method of accounting consistently followed, the action of the assessee is revenue neutral. The learned AR submitted that the exclusive method of accounting postulates exclusion of tax, dues etc. embedded in purchases of raw material as well as in corresponding sale. Such taxes are accounted for separately for the purposes of discharging liabilities. The effect of such accounting does not ultimately have any impact on the ultimate profitability when fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akhs under s. 40(a)(ia) of the Act on account of non deduction of TDS. As pointed out on behalf of the assessee, the aforesaid payment made to Adani Power Ltd. was on account of re-imbursement of actual expenses, the details of which are provided at page no.226 of the paper book. In the absence of any income element in the payment made, the obligation to deduct tax at source on such payment do not arise and consequently, provisions of Section 40(a)(ia) of the Act do not come into play in view of the decision of the Hon ble Gujarat High Court in the case of CIT vs. Gujarat Narmada Valley Fertilizers Co. Ltd. [2013] 35 taxmann.com 638 (Guj). The law that a mere reimbursement does not require to deduction was also followed in CIT vs. ITD Cem India JV (2018) 405 ITR 533 (Bom) in respect of reimbursement of administrative expenses to a joint venture partner. Therefore, we do not find any error in the order of the CIT(A) and consequently decline to interfere. 10. In the result, Ground no.2 is dismissed. 11. Ground no.3 of Revenue s appeal concerns addition of ₹ 39.77 Lakhs towards amortization of lease hold land. In the scrutiny assessment, it was observed by the AO that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore him challenging initiation of penalty proceedings u/s. 271(1)(c) on the ground that no appeal lay against initiation of penalty proceedings. He ought to have appreciated, inter alia, that in the peculiar facts and circumstances of the Respondent's case, there being absolutely no warrant/justification for initiating the penalty proceedings, he ought to have ordered for their being dropped, thereby saving both the respondent and the Department from long drawn unnecessary litigation. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the disallowance of preliminary expenses amounting to ₹ 10,28,028/- claimed u/s.35D of the Income Tax Act, 1961, made by the Assessing Officer. Additional Ground 1. On the facts and in the circumstances of the respondent s case, and in view of Ld. Assessing Officer s own contention while passing assessment order u/s 143(3) for A.Y. 2012-13, that depreciation on goodwill arising on demerger ought to have been claimed by respondent from appointed date 01.01.2007 i.e. A.Y. 2007-08 as against effective date i.e. A.Y. 2010-11 (year in which respondent has claimed depreciation), and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2241 2516/Ahd/2011 order dated 18.01.2016 was referred. In view of the issue being covered in favour of the assessee by the order of the co-ordinate bench for earlier year, we find merit in the claim of the aforesaid amount under s.35D of the Act. The assessment order is thus directed to be modified in respect of the aforesaid issue. 20. Ground No.3 of the assessee s Cross Objection is allowed. 21. We shall now advert to the additional ground raised by assessee as adjunct to its Cross Objection. The learned AR submitted that the additional ground raised by the assessee in its cross objection concerns eligibility of depreciation of goodwill arising on demerger. The learned AR submitted that additional ground concerning the issue does not require any fresh investigation of facts and therefore urged for admission of the same in the light of the decision of Hon ble Supreme Court in the case of National Thermal Power Company Ltd. vs. CIT (1998) 229 ITR 383 (SC): CIT vs. Sinhgad Technical Education Society [2017] 84 taxmann.com 290 (SC). Elaborating further, the learned AR referred para 7 of page no.33 to the assessment order passed under s. 143(3) of the Act concerning AY 2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 486,335 74,351,086 55,763,315 41,822,486 31,366,865 23,525,148 Closing WDV 297,404,345 223,053,259 167,289,944 125,467,458 94,100,594 70,575,445 21.1 As stated on behalf of the assessee, the assessee company was formed as a resultant company out of the demerger of Adani Energy Ltd. The order under s.394 of the Companies Act, 1956 was passed by the hon ble Gujarat High Court on December 9, 2009 while the appointed date was fixed at 01.01.2007 as per the draft scheme of demerger. As a result of demerger, the assessee company has paid certain excess consideration to the demerged company over and above the assets acquired. Such excess consideration amounting to ₹ 33,98,90,680/- was treated in the nature of goodwill by the assessee as a capital right. The assessee claimed depreciation thereon for the first time in AY 2010-11 being the year in which the order of the Hon ble Gujarat High Court was received. Consequently, the 775/Ahd/14 9 Ors. [Adani Gas Ltd.] A.Y. 2009-10 to 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that depreciation is eligible from the appointed date as sanctioned by the Hon ble Gujarat High Court. Thus, on account of such re-working, the assessee has presented a new claim towards depreciation on goodwill in the impugned AY 2009-10 on the ground that all the relevant facts are available on record which are duly admitted by the Revenue. Therefore, the assessee cannot be deprived of the eligible depreciation as computed by the AO himself concerning AY 2009-10. 21.4 A legal issue also cropped up in the course of hearing as to whether additional ground could be raised in a cross objection filed by the assessee under s.253(4) of the Act. On being enquired on this aspect of the matter, it was submitted on behalf of the assessee that there is no perceptible distinction between the position of law qua cross objection in the matter of filing additional ground. It was submitted that a cross objection has all the trappings of a regular appeal more so in the light of language employed under s.253(4) of the Act. 21.5 We find ourselves in agreement with the propositions made on behalf of the assessee that in a cross objection, there is no bar to raise legal issues for the first ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of the appellant's case, the Ld. CIT(A) has grossly erred in rejecting additional claim made by the appellant for claiming depreciation on goodwill arising on demerger of Adani Energy Ltd from Adani Gas Ltd. to the tune of ₹ 4,24,86,335/- on the ground that same was not claimed through revised return of income but claimed during the course of assessment proceedings. 2. In law and on facts and circumstances of the appellant s case, the Ld. CIT(A) has grossly erred by rejecting the additional claim of depreciation on goodwill contending that the said claim is not duly supported by Tax Auditor s report but has failed to appreciate the fact that such claim is duly covered by decision of Hon ble Supreme Court in case of CIT V/s Smifs Securities Limited (2012) 24 taxman.com222 and identical claim is already allowed by Assessing Officer while passing the assessment order. 1.2 In law and in facts and circumstances of the appellant's case, the Ld. CIT(A) has grossly erred in denying additional claim of depreciation by contending that the appellant ought to have claimed depreciation on goodwill from appointed date i.e. 01.01.2007 as against e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal issue arose in AY 2009-10 and adjudicated in favour of the assessee as per para no.19 of this order. In consonance thereof, the assessee would be entitled to benefit under s.35D of the Act for the aforesaid amount. 775/Ahd/14 9 Ors. [Adani Gas Ltd.] A.Y. 2009-10 to 2013-14 - 16 - 30. In the result, Ground No.2 of the assessee s appeal is allowed. 31. In the result, appeal of the assessee for AY 2010-11 is allowed. ITA No. 2346/Ahd/2015-AY 2010-11-Revenue s appeal 32. Now, we advert to the Revenue s appeal concerning AY 2010-11. 33. The grounds of appeal raised by the Revenue in the captioned appeal concerning AY 2010-11 reads as under:- 1. The CIT(A) has erred in law and on facts in deleting the addition made of ₹ 2,66,56,242/- on account of unutilized CENVAT credit u/s.145A of the Act. 2. The CIT(A) has erred in law and on facts in deleting the disallowance of ₹ 38,30,834/- being amortization of lease charges. 34. Ground No.1 concerns addition of ₹ 2,66,56,242/- on account of unutilized CENVAT credit under s.145A of the Act. There being no change in the facts pointed out on behalf of the Revenue, the addition made under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeal of the Revenue is dismissed. Assessee s Cross Objection No. 202/Ahd/2015-AY 2011-12 43. The grounds of appeal raised by the assessee in the captioned cross objection concerning AY 2011-12 reads as under:- 1. In law and in the facts and circumstances of the respondent's case, the learned CIT(A) has grossly erred in not adjudicating upon Ground No. 1 of the respondent's appeal challenging the validity of the assessment order impugned before him, on the ground that it was general in nature. 2. In law and in the facts and circumstances of the respondent's case, the learned CIT(A) has grossly erred in upholding the disallowance of the respondent's claim for deduction for preliminary expenses of ₹ 5,02,818 u/s. 35D after following his predecessors upholding similar disallowances in earlier assessment years. He ought to have appreciated, inter alia, that the decisions of the Supreme Court in Brooke Bond India Limited (225 ITR 798 and of the Gujarat High Court in Vareli Textiles Limited (284 ITR 238) holding that share issue expenses were capital in nature and, therefore, not deductible as revenue expenses as claimed by the assesses i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of the appellant s case, the Ld. CIT(A) has grossly erred in upholding disallowance of ₹ 3,22,38,166/- on account of depreciation on goodwill arising on demerger of Adani Energy Ltd from appellant on the ground that since as per order of Hon ble Gujarat High Court dated 09.12.2009, appointed date of demerger is 01.01.2007, depreciation on goodwill ought to have been claimed from appointed date i.e. A.Y. 2007-08 and not from effective date i.e. 2010-11. The Ld. Assessing Officer may be directed to allow full depreciation on goodwill amounting to ₹ 5,57,63,315/- as claimed in return of income. 3.1 In law and in facts and circumstances of the appellant s case, the Ld. CIT(A) has grossly erred in upholding the disallowance of depreciation on goodwill without appreciating the fact that Appellant Company is being assessed at maximum marginal rate and even if it is held that appellant is entitled for depreciation from A.Y. 2007-08 and not A.Y. 2010-11, entire exercise of disallowance of depreciation on goodwill is tax neutral and hence, uncalled for. 50. Ground No.1 concerns disallowance of preliminary expenses under s.35D of the Act. The issue is squarely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee in the preceding assessment years as per para nos.11-13 of this order. Therefore, we find no infirmity in the order of the CIT(A). In consonance therewith Ground No.1 of the Revenue s appeal is dismissed. 59. Ground No.2 concerns addition of ₹ 1,55,814/- made under s.41(1) of the Act towards cessation of liability. In the absence of onus discharged by the Revenue towards cessation of liability, we find no infirmity in the order of the CIT(A) on this score. Ground No.2 of the Revenue s appeal is thus dismissed. 60. Ground No.3 concerns enhancement of closing stock under s.145A of the Act towards unutilized CENVAT credit and consequent increase in the assessed income to this extent. The issue has been deliberated in length in ITA No.775/Ahd/2014 relevant to AY 2009-10 as per para nos. 4-8 of this order. Thus, we are of the view that CIT(A) has appreciated the facts in perspective and deleted the addition made under s.145A of the Act in the facts and circumstances of the case. Thus, we decline to interfere with the order of the CIT(A). 61. Thus, Ground No.3 of the Revenue s appeal is dismissed. 62. In the result, Revenue s appeal for AY 2012-13 is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 66. Ground No.2 concerns disallowance of employees contribution to ESI. The issue is covered against the assessee by the decision of the Hon ble Jurisdictional High Court in the case of CIT vs. GSRTC (supra) as discussed in para 47 of this order. 67. In the result, Ground No.2 of the assessee s appeal is dismissed. 68. Ground No.3 being consequential having regard to the decision in the earlier years is rendered infructuous owing to relief granted in the earlier years as claimed. Accordingly, Ground No.3 of the assessee s appeal is dismissed. 69. Ground No.4 concerns disallowance made under s. 14A r.w.r. 8D for ₹ 70,125/-. The assessee has earned exempt income by way of dividend income amounting to ₹ 91,04,212/- on investment to the tune of ₹ 10,00,50,000/-. The AO invoked Section 14A of the Act and computed disallowance as per statutory formula provided in the Rule 8D whereby disallowance of ₹ 16,75,809/- was computed by the AO. After taking into account, the suo motu disallowance of ₹ 1,80,000/- on this count, the AO disallowed the remaining amount of ₹ 14,95,809/- and added to the total income of the assessee. 70. In the first app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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