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TMI Blog2021 (9) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 and the total income was determined at Rs. 79,13,26,782/- and book profit u/s 155JB of the Act at Rs. 85,40,55,343/-. Aggrieved by the order of AO, assessee carried the matter before the CIT(A) who vide order dated 31.08.2018 (Appeal No.322/17-18/CIT(A)-22, New Delhi) granted partial relief to the assessee. Aggrieved by the order of CIT(A), assessee is now in appeal before us and has raised the following grounds: 1. "That on the facts and circumstances of the case and in law, the Assessing Officer ["AO"] erred in assessing income of the appellant at Rs. 79,13,26,782 as against returned income of Rs. 71,70,53,304 and the Commissioner of Income Tax (Appeals) ["CIT(A)"] erred in confirming the said action of the AO. 2. That on the facts and circumstances of the case and in law the CIT(A) has erred in disallowing depreciation on goodwill amounting to Rs. 7,10,40,132, merely following the appellate order for the assessment year 2013-14 and further erred in not following the order of the Hon'ble Income Tax Appellate Tribunal ["Hon'ble ITAT"j for A.Y. 2010-11, especially when there was no change in facts. 2.1 That on the facts and circumstances of the case and in law the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Assessee has made a request for admission of additional grounds of appeal under Rule 11 of the I.T. Rules and the same reads as under: "That on the facts and circumstances of the case and in law, the assessing officer education cess paid by the appellant should be directed to be allowed as deduction, in terms of the law clarified by the Hon'ble Bombay High Court in the case of Sesa Goa Ltd. vs. JCIT: 117 taxmann.com 96 and other decisions." 5. Before us, at the outset, Learned AR submitted that Ground No.1 is general in nature and therefore requires no adjudication and the Ground No.4 is with respect to penalty which is premature and requires no adjudication at present. In view of the submissions, the aforesaid grounds are dismissed. 6. He thereafter submitted that Ground No.2 and the sub grounds relates to the issue of disallowance of depreciation on Goodwill and the Ground No.3 and its sub grounds relates to disallowance u/s 14A r.w.r 8D of the Act. 7. We first take up Ground No.2 and sub grounds relating to disallowance of deprecation on Goodwill. 8. During the course of assessment proceedings, AO noticed that assessee had claimed depreciation of Rs. 7,10,40,132/- on Goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will was disallowed by the AO in the draft assessment order for A.Y. 2010- 11 but when the matter was carried before the DRP, the same was deleted. He further submitted that the Hon'ble Tribunal in assessee's own case for A.Y. 2010-11 in ITA No. 302/Del/2015 and after relying on the decision of the Hon'ble Supreme Court in the case of CIT vs. Smifs Securities Ltd. (2012) 348 ITR 302 and Hon'ble Delhi High Court in the case of Areva T & D India Ltd. vs. DCIT (2012) 345 ITR 421 held that depreciation was admissible on 'goodwill' and thereby dismissed the Revenue's appeal. He submitted that the aforesaid order of Tribunal was followed in subsequent year i.e. A.Y. 2012-13, 2013-14 and 2015-16 by the Co-ordinate Bench of Tribunal. He pointed to the copies of the relevant order placed in the paper book. He thereafter submitted that CIT(A) had confirmed the addition made by the AO by following the order of his predecessor for A.Y. 2012-13 & 2013- 14. He submitted that since in A.Y. 2012-13, the issue has already been decided in favour of the assessee by the Co-ordinate Bench of Tribunal, the allowance of depreciation cannot be disputed by the AO in subsequent years. He further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of depreciation. In our considered opinion, unless the claim is disturbed in the initial year of claim, subsequent years cannot be disturbed. 17. Most importantly, in earlier A.Ys, claim of depreciation has been allowed by the Tribunal in ITA Nos. 1482/DEL/2016 and 1708/DEL/2016. The relevant findings of the co-ordinate bench read as under: " 38. Ground number 2 of the appeal of the AO is against the disallowance of depreciation on goodwill amounting to 168,391,424 which resulted into on account of an asset purchase agreement dated 4/11/2009 and its subsequent amendment with American Express India private limited to acquire the global travel service centre as a going concern for a lump sum consideration. The fact shows that during the assessment year 2000 - 11 the assessee entered into an asset purchase agreement with American Express India private limited to acquire the global travel service centre as a going concern for a lump sum consideration of 1 350 million. The aforesaid consideration was allocated to an identifiable asset and liability based on the book value, and the difference between the purchase price and the net asset value of acquired asset was recognized as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve considered the submissions of both the parties and perused the material available on the record. In the present case, it is noticed that the ld. DRP directed the AO to allow the depreciation on the goodwill by following the decision of the ITAT wherein the judgment of the Hon'ble Apex Court in the case of CIT Vs Smifs Securities Ltd. reported at 348 ITR 302 and the decision of the Hon'ble Jurisdictional High Court in the case of Areva T&D India Ltd. Vs DCIT reported at 345 ITR 421 has been followed. We, therefore, by considering the totality of the facts, do not see any valid ground to interfere with the findings given by the ld. DRP on this issue. As such do not see any merit in this appeal of the department on this issue." 19. Coming to the facts which have been considered by the Assessing Officer/ld. CIT(A), we find that in the balance sheet as on 31.03.2010, goodwill has been shown at Rs. 769 millions and under Schedule IX under the head "Other Current Assets" Rs. 476 million has been shown as asset held for sale at net book value or estimated net realisable value whichever is lower and in Notes to Account, the following has been mentioned: "4. During the year, the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidend income of Rs. 6,02,33,907/- which was claimed as exempt income. The assessee was asked to explain as to why the disallowance u/s 14A r.w.r 8D of the Act should not be made to which assessee inter alia submitted that it had made investment in the mutual funds, namely ICICI Prudential Plan and Birla Sunlife Mutual Fund and had earned dividend on daily basis from such investment. It was further submitted that since the daily dividend was reinvested in the same mutual funds on a daily basis automatically, it did not incur any direct expenses for making and maintaining the investments and earning exempt dividend income. It was further submitted that no indirect expenses have been incurred by the assessee for earning the exempt income. Assessee further submitted that it had not incurred any expenditure by way of interest for the purpose of earning exempt income. The submissions of the assessee was not found acceptable to AO. AO was of the view that it was unbelievable that for earning an income of Rs. 6,02,33,907/-, no expenditure was incurred by the assessee. He also noted that assessee had not maintained separate books of account for such investment and expenses related to the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s 14A r.w.r 8D of the Act. AO while disallowing the expenses had noted that it was not believable that for earning exempt income of Rs. 6 crore, no expenditure was incurred by the assessee. We find that identical issue of disallowance u/s 14A of the Act arose in assessee's own case in A.Y. 2012-13 & 2013-14 (ITA Nos. 5435/Del/2017 and others) and the Co-ordinate Bench of Tribunal vide order dated 08.03.2021 has noted as under: "21. Second common grievance relates to disallowance made u/s 14A r.w.r 8D of the Rules. 22. We are taking the facts for A.Y 2012-13 in which year the assessee earned dividend income of Rs. 3,70,22,149/- from investments held in mutual funds which was claimed to be exempt u/s 19(34) of the Act. The investments are in mutual funds namely, ICICI Prudential Plan, Birla Sunlife Cash Plus Institutional Plans and HDFC Mutual Fund and earned dividend on daily basis on such investment. 23. The Assessing Officer straightaway applied Rule 8D of the Rules invoking provisions of section 14A of the Act mechanically and made the impugned disallowance. 24. The ld. CIT(A) upheld the findings of the Assessing Officer following the order of the DRP for A.Y 2010-11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned such dividend income on mutual funds of liquid plan, cash plus plan and other mutual funds. The learned assessing officer noted that it is unbelievable that no expenditure was incurred by the appellant in earning such income and made disallowance of 1,252,630 being 0.5% of the average value of investment related to the tax free income in terms of Section 14 A of the act by invoking the provisions of rule 8D (iii) Of the income tax rules. The learned dispute resolution panel on objection before it followed its own order for assessment year 2010 - 11 and upheld the findings of the learned assessing officer. 23. The learned authorized representative challenged the above addition on the fact that no satisfaction was recorded by the assessing officer having regard to the accounts of the assessee, which is mandatory. He relied upon the several judicial precedents for the proposition. He further submitted that appellant has earned dividend from investment in mutual fund only and mutual funds are required to pay dividend distribution tax on dividends distributed and only the net income has been received as dividends by the appellant. He further stated that mutual funds are covered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber 7.2 held that it is unbelievable that for earning an income of 1.86 crores no expenditure was made by the assessee. He noted that it is pertinent that the assessee has not provided the details of such expenses as are directly attributable to and which are necessarily required for making / maintaining investment in shares and mutual funds and earning there from. Therefore, he held that he is not satisfied with the correctness of the claim of the assessee that no expenditure has been incurred in respect of such expenditure in relation to income, which does not form part of the total income under this act. Thereafter he proceeded to compute the disallowance applying the provisions of rule 8D and computed such disallowance at 1,252,630. On careful consideration of the reasons given by the learned assessing officer we do not find any satisfaction with respect to the books of accounts maintained by the assessee that assessee has incurred any expenditure with respect to the earning of exempt income. In view of this, according to us, the learned assessing officer has failed to record any satisfaction with regard to the correctness of the claim of the assessee that it has not incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Chambal Fertilisers and Chemicals Ltd. vs. JCIT D.B ITA No.52/2018, vide order dated 31.07.2018 has held that education cess is an allowable deduction while computing the income under the head "profits and gains from business or profession" as it does not fall within section 40(a)(ii) of the Act. He further submitted that identical issue arose in assessee's own case for A.Y. 2012-13, 2013-14 and 2015-16 in ITA Nos. 8452/Del/2019, 5435 & 5436/Del/2017 wherein the Co-ordinate Bench of Tribunal allowed the additional ground raised in this regard and directed the AO to allow claim of deductibility of cess as deductible business expenditure. He pointed to the copy of relevant order placed at Page No.49. He therefore submitted that by following the order of Tribunal on identical facts in assessee's own case in earlier years, the grounds be allowed. 21. Learned DR on the other hand did not controvert the submissions made by the Learned AR. 22. We have heard the rival submissions and perused the materials available on record. The issue in the present additional ground is with respect to claim of deduction of Rs. 70,98,828/- on account of payment of education cess. We find that identica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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