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TMI Blog2022 (8) TMI 1021X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of Section 32 of the Act and depreciation on goodwill is allowable. We find that Hon'ble Delhi High Court in the case of Triune Energy Services (P.) Ltd. [ 2015 (11) TMI 1218 - DELHI HIGH COURT ] wherein it was held that goodwill is an intangible asset providing a competitive advantage to an entity, this includes a strong brand, reputation, a cohesive human resources, dealer network, customer base etc. So far as objection of ld CIT-DR for the revenue that due to the amendment in section 32, the goodwill is no more depreciable asset, we are of the view that the amendment brought in the Act by way of Finance Act 2021 will be applicable prospectively and not in the year under consideration. In view of the aforesaid factual and legal discussion, we do not find any legality in finding of Ld. CIT(A), which we affirm. In the result, the grounds of appeal raised by the revenue are rejected. - Decided in favour of assessee. Nature of expenditure - expenditure on account of replacement of certain parts of the machineries - AO held that on replacement of such parts the assessee will get long term benefit which is enduring in nature and the expenses are not in the nature of cur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bha, Bhoomi Pooja, concurrent monitoring evaluation, inauguration event, etc., for the said project. To get wider acceptability, the assessee also installs inaugural stone, boards, banners, etc. wherever and whenever applicable and said project implemented by assessee helps to build a good rapport among the villagers and the agrarian masses. The assessee relied on the judgment of Hon'ble jurisdictional High Court in assessees own case for assessment years 1996-97 to 1997-98 [ 2013 (5) TMI 759 - GUJARAT HIGH COURT ], wherein the Hon'ble jurisdictional High Court relied on the judgment of Hon'ble Supreme Court in the case of Sri Venkata Satyanarayana Rice Mill Contractors Co. vs. CIT [ 1996 (10) TMI 2 - SUPREME COURT ] and allowed the contribution given to NGO as deduction. CIT(A) after considering the submissions of the assessee accepted the claim and held that Explanation-2 inserted to section 37 (1) is prospective in nature as the same has been brought in the Act with reference to section 135 of Companies Act. We find that similar disallowance was made in AY 2009-10 and on appeal before Tribunal the disallowance was deleted and on further appeal by revenue before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ITA No.1416/AHD/2010 and the issue of additional evidence was restored back to the file of Ld. CIT(A) in order dated 05.08.2014. Aggrieved by the order of Tribunal against admission of additional ground of appeal, the Revenue filed appeal before Hon'ble jurisdictional High Court vide Tax Appeal No. 115 of 2015, wherein the Hon'ble jurisdictional High Court affirmed the order passed by Tribunal on 05.08.2014 in ITA No.1416/AHD/2010. However, with the consent of both the parties, the issue / additional ground related with the depreciation of goodwill was restored to the file of Assessing Officer, instead of Ld. CIT(A), by modifying the order of Tribunal. 4. The Assessing Officer in restoration proceeding, in order giving effect to the order of Hon'ble jurisdictional High Court in Tax Appeal No. 115 of 2015 dated 02.11.2015, issued notice to the assessee to substantiate its claim. The assessee filed its reply dated 16.05.2015, the contents of reply of assessee is extracted in para-5 at pages 3 to 11 of assessment order. In the reply, the assessee in sum substance, submitted that assessee-company has acquired through merger a going concern i.e., Narmada Chematur Petr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th greater choices and larger pool of combined resources; operation synergies in terms of integrated produce mix and production planning decisions based on end-to-end contribution and profitability; seamless integration and coordinated operations at lower costs; an access to a combined pool of marketing setup, research development and products development, seamless and unhindered leveraging of common financial and managerial resources in pursuit of a unified strategy; the corporate governance, assurance and risk management aspects addressed jointly more effectively and the mutual complementary strengths of the merged entities would result into unlocking the true potential of both the companies. On the basis of aforesaid submission, submitted that on amalgamation in the form of merger that assets and liability of transferee company has become ascertaining liability of transferee company and thus the assessee is eligible for depreciation. The assessee further stated that this claim of goodwill could not be made earlier due to lack of clarity and legal position of its allowability. The assessee submitted that similar claim of depreciation on goodwill was made by the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5266 lakhs. 7. Aggrieved by the disallowance of depreciation on goodwill, assessee filed appeal before Ld. CIT(A). Before Ld. CIT(A) the assessee made similar submission, as made before Assessing Officer, in addition to the assessee submitted once the scheme of amalgamation approved by the High Court, it effect was given in the books of account of assessee in accordance with the direction of Hon'ble jurisdictional High Court. The treatment of cancellation of shares held by amalgamated company in the assessee was approved by Hon'ble jurisdictional High Court. The assessee also relied upon the decision of Hon'ble Supreme Court in the case of CIT vs. Smifs Securities Ltd. (2012) 348 ITR 302 (SC), wherein it was held that pursuant to an amalgamation of another company with the assessee, the difference between the consideration paid and the net value of assets of the amalgamating company was treated as goodwill and depreciation was allowed. The assessee also stated that on identical fact, similar depreciation was claimed in assessment years 2009-10, 2010-11 and 2011- 12 respectively and it was allowed to the assessee by ld CIT(A). 8. The Ld. CIT(A) after considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011-12 and there is no change in the facts during the year under consideration. The Ld. CIT(A) also followed the ratio of decision in Addl. CIT vs. Nestle India Ltd. (2005) 94 TTJ 53 (ITAT-Delhi) and allowed the relief to the assessee on depreciation of goodwill. Aggrieved by the order of Ld. CIT(A) the Revenue has filed present appeal before the Tribunal. 9. We have heard both the submission of Ld. Commissioner of Income-tax-Departmental Representative (CIT-DR) for the Revenue and Ld. Authorized Representative (AR) for the assessee and have gone through the orders of lower authorities carefully. The Ld. CIT-DR of the Revenue submits that he supports the order of Assessing Officer. The Ld. CITDR of the Revenue submits that by way of Finance Act, 2021, the Legislature has made clear that depreciation on goodwill will not be allowed. The Ld. CIT-DR of the Revenue submits that order of Assessing Officer is in accordance with legislative intent. The ld CIT-DR for the revenue submits that so far as observation of ld CIT(A) that similar depreciation is allowed to the assessee on part of goodwill in subsequent year is concerned, the revenue has already filed appeal before Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l submission of both the parties and perused the order of authorities below carefully. We have also seen the order of Hon ble High Court of Gujarat in Company Petition No. 148 of 2006 dated 09.01.2007 in approving the scheme of amalgamation of Narmada Chematur Petrochemical Limited (NCPL) with assessee. We find that Assessing Officer made the disallowance of depreciation of goodwill by taking view that that claim of depreciation of goodwill was not made in the return of income, it was made by way of additional ground of appeal for the first time before the Tribunal. The assessee has made entry of 6,955 lakhs for investment cancelled in its books of accounts. The assessee was a promoter of amalgamated company and investment of Rs. 6955 lakhs share of amalgamated company during the merger was reduced as investment extinguished. The assessing officer held that on examination of calculation, it was seen that assets were shown at Rs.50,625.86 lakhs and liabilities were shown at Rs.52,314.86 lakhs and difference of Rs.1699.99 lakhs were treated as goodwill. The goodwill has arisen because of cancellation of investment made in the merged company is not an asset on which depreciation is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l get cancelled and no new shares shall be issued by the transferee company against such shares . 14. The Ld. CIT(A) further held that the issue of depreciation on goodwill no more res integra after the decision of Hon'ble Supreme Court in the case of Smifs Securities Ltd. (supra), wherein it has been held that goodwill is an asset within the meaning of Section 32 of the Act and depreciation on goodwill is allowable. We find that Hon'ble Delhi High Court in the case of Triune Energy Services (P.) Ltd. vs. DCIT [2016] taxmann.com 288 (Del), wherein it was held that goodwill is an intangible asset providing a competitive advantage to an entity, this includes a strong brand, reputation, a cohesive human resources, dealer network, customer base etc. the Hon ble Gujarat High Court in PCIT Vs Zydus Wellness Ltd (supra) also held that the assessee company is entitled to claim depreciation on goodwill expanded at the time of amalgamation of companies. The order of High Court in Zydus wellness Ltd (supra) was upheld by Hon ble Apex Court by following the decision in CIT Vs Smifs Securities Limited (supra). Similar view was taken by Ahmedabad Tribunal in Urmin Marketing (P) Limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in assessees own case for earlier year or subsequent years. The ld CIT(A) granted relief to the assessee by following such decisions. Ground No.1 relates to deleting addition of Rs. 3.588 crore by treating it as revenue expenditure instead of capital expenditure. The ld. AR for the assessee submits that during the financial year under consideration, the assessee replaced certain parts of plant and machinery. No new asset has come into existence nor the capacity of the plant was increased. Entire expenditure falls in the category of current repair. Similar disallowance was made in AY 2001-02 2002-03, the matter travelled up to Tribunal and the issue was restored back to the file of assessing officer to decide the issue in the light of Supreme Court decision in case Saravana Spinning Mills (293 ITR 201 SC). The assessing officer after examination of the issue granted relief to the assessee. Further similar relief was allowed by Tribunal to the assessee in AY 2003-04 to 2005-06, 2008-09 to 2011-12. The revenue filed appeal before High Court against the order of Tribunal in AY 2003-04 to 2005-06, 2008-09 to 2011-12, which has been dismissed and no further appeal is filed before Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee submits that this ground of appeal is also covered in favour of the assessee. The ld. AR for the assessee submits that during the year under consideration, the assessee has given discount to its dealers. Such discount is not commission but incentive for getting payment in time. The discount given by the assessee is not commission and is not liable for TDS under section 194H. The transaction with dealers is on principal to principal. Similar disallowances were made in AY 2009- 10,2010-11 2011-12, however, it was allowed by ld CIT(A) and further appeal by revenue before Tribunal as well as by High Court was dismissed. The ld AR submits that the copy of the orders of the Tribunal and High Court is paced on record. 21. On the other hand, the ld CIT-DR for the revenue supported the order of assessing officer. 22. We have considered the submissions of both the parties and have gone through the orders of the lower authority. We have also seen the orders of the Tribunal and High Court in various years and recorded above. We find that during the assessment the assessing officer noted that no TDS is made on the discount of Rs. 4.697 crore made to dealers. The assessing officer hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust, and local bodies, the assessing officer disallowed the same, however, on appeal before Tribunal it was allowed to the assessee and further appeal by revenue before High Court was dismissed in Tax Appeal No. 146 of 2019. In AY 2001-02 the assessee contributed to the families t the Kargil War Martyrs and in AY 2009-10 to flood affected people in Bihar and all such contribution was allowed as deduction. The ld AR for the assessee further submits that amendment in section 37 is prospective in nature and is applicable from AY 2015-16 onwards. To support his various contention, the ld AR for the assessee also relied on the following decisions, CIT Vs Chandulal Keshavlal Co (38 ITR 601), CIT Vs Madras Refineries (266 ITR 170), CIT Vs Chetan Transport Corporation (219 ITR 203), Maharashtra State Finance Corporation Limited Vs DCIT (12 SOT 446), Hindustan Petroleum Corporation Limited Vs DCIT (92 TTJ 168), Honda Motorcycle and Scooter India P Limited Vs DCIT ( 124 taxmann.com 81 Delhi-Trib), Asstt.CIT Vs Jindal Power Limited (70 taxmann.com 389 Raipur-Trib) and National Small Industries Corporation Limited Vs DCIT (103 taxmann.com 288 Delhi-Trib). 26. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess to produce, upgradation of farm skills; and socio-economic development of Bharuch Town in particular and district in general. The CSR is a concept whereby assessee-company integrate social and environmental concerns in their business operations and in their inter-action with their stakeholders on a voluntary basis. The emphasis is that business have to endeavour to become responsible actors in society so that their every action leads to sustainable growth and economic development. The CSR is no longer charity or philanthropy instead it should be imbibed in the corporate culture that leads to responsible business. The assessee stated that the CSR contribution has helped in building brand image of the company and publicity among the agrarian community. The activities implemented in the rural areas are publicized on account of large scale so message reaches to the masses. To ensure that the assessee-company gets better publicity, representatives from its team participates in every event like designing the programme, discussion with sarpanch gram Sabha, Bhoomi Pooja, concurrent monitoring evaluation, inauguration event, etc., for the said project. To get wider acceptability, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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