TMI Blog2022 (11) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... le Supreme Court in the case of Smifs Securities Ltd. [ 2012 (8) TMI 713 - SUPREME COURT] wherein it has been held that goodwill is an asset within the meaning of Section 32 of the Act and depreciation on goodwill is allowablethe amendment brought in the Act by way of Finance Act 2021 will be applicable prospectively and not in the year under consideration.- Decided in favour of assessee. Disallowance u/s 37(1) - expenditure incurred by assessee towards fulfilment of corporate social responsibility - AO disallowed the expenses by taking view that payments was not made for the purpose of business - CIT(A) allowed relief to the assessee by taking view that such contribution was not for doing any charity but for sound business consideration and in building brand image of assessee - HELD THAT:- We find that nature of expenses is not in dispute. Further it is not in dispute that the assessee was setup by State Government and incurring similar expenses in earlier years. We find that similar issue has been decided by this combination in assessees own case for the A.Y. 2012-13 [ 2022 (8) TMI 1021 - ITAT SURAT] held that CSR is a concept whereby assessee-company integrate social and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d during assessment - HELD THAT:- We find that the ld CIT(A) by following the decision of Jurisdictional High Court in Mitesh Impex [ 2014 (4) TMI 484 - GUJARAT HIGH COURT] admitted the revised/ additional claim and directed the assessing officer to examine the claim and allow the same. We find that on similar issue the Jurisdictional High Court in Jay Chemical Limited [ 2020 (3) TMI 231 - GUJARAT HIGH COURT] held that steam produced by the assessee can be termed as power and would be qualified for the benefit of deduction under section 80IA(4). Thus, keeping in view the afforesaid factual and legal position, we do not find any infirmity in the order of ld CIT(A), which we affirmed. Consequently, the corresponding ground of appeal is dismissed. SDT on transfer of power from captive power plant to manufacturing unit - CIT(A) after considering the submissions of the assessee and following the decision of Gujarat Alkalies and Chemical Limited [ 2016 (10) TMI 1111 - GUJARAT HIGH COURT] while following decisions in Shah Alloys Limited [ 2011 (11) TMI 780 - GUJARAT HIGH COURT] and in Pragati Glass Works Limited [ 2012 (1) TMI 309 - GUJARAT HIGH COURT] held that Profits and gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29,026/- treated as capital expenditure by the A.O. without appreciating the finding recorded in the assessment order. 2.On the facts and circumstances of the case and in law, the Ld. C.I.T.(A) erred in deleting addition on account of disallowance of depreciation on goodwill of Rs.75,15,081/- without appreciating the factual finding recorded in the assessment order. 3.On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the disallowance u/s 37(1) of the Act in respect of expenditure of Rs.17,13,60,400/- incurred by the assessee towards fulfilment of corporate social responsibility by way of contribution to State Govt. projects by holding that such consideration was made by the appellant not for doing charity but with sound business consideration which has helped in building brand image, without appreciating that the said expenditure incurred by the assessee had nothing to do with the business activities carried on by the ae and the assessee was neither in the business of providing finance to the State Govt. nor in the business of developing the State Government s various projects. 4.On the facts and circumstances of the case and in law, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A), whereas in the instant case, the assessee neither made the claim of deduction u/s 80IA of the Act on profits from steam generation and used for captive consumption in manufacturing and the AO erred in rejecting revised claim filed by the appellant with regard to profit from transfer of electricity and steam by CPSU. 8. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that there is no difference between power generated by the captive power plant and power supplied by the State Electricity Board (SEB). Therefore, the open market rate of INR 6.32 i.e. yearly weighted average per 6.92 i.e. yearly weighted average per unit rate of electricity at which SEB supplied electricity for commercial use during A.Y 2012-13, as considered by the appellant is a fit Comparable Uncontrolable Price to benchmark the transaction of transfer of electricity from captive power plant to the manufacturing unit without appreciating that there is material difference between captive power plant as a seller and distribution / transmission entity. The difference are both in terms of functions performed as well as assets used. In the case of distribution and transmiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility (though 50% was allowed under section 80G). Rs. 17,13,60,400/- 4 Disallowance under section 40(i)(ia) by treating the discount to dealers as commission payment. Rs. 5,52,29,537/- 5 Transfer pricing adjustment/ Disallowance under section 80IA(4) on account of profit for transfer of electricity by CPSU to manufacturing unit as not at Arm s Length and not allowed deduction under section 80IA on profit from steam generation used for captive consumption. (para 8.10) 3. Before assessing officer the assessee raised additional claim of deduction of profit on transfer of steam under section 80IA(4). The assessing officer not admitted the claim of the assessee, on the ground as it was not claimed at the time of filing return of income. 4. Aggrieved by various addition/ disallowances in the assessment order, the assessee filed appeal before learned CIT(A). Before ld. CIT(A) the assessee filed detailed written submission on each and every disallowances as well as on additional claim raised before assessing officer for claiming deduction on profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal in assessees own case for the A.Y. 2012-13 in ITA No. 432/Srt/2018 order dated 22/08/2022, copy of which is filed. 10. We have considered the submissions of the parties. We find that the assessing officer treated the expenses incurred on replacement on spares and parts of machinery as capital expenses being enduring in nature. The ld CIT(A) granted relief to the assessee by taking view that replacement of part of machinery have not enhanced the capacity of existing facility. The ld. CIT(A) also held that in assessee s own case for A.Y. 2003-04 to 2005-06 and again in A.Y. 2007-08 to 2011-12, similar replacement expenses were allowed as revenue expenditure. Before us, the AR of the assessee vehemently relied on the decision of Tribunal in A.Y. 2012-13 in ITA No. 432/Srt/2018 dated 22/08/2022, wherein this combination has passed the following order: 19. 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 assessment the assessing officer noted that the assessee has claimed expenses of Rs. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have considered the submissions of both the parties and find that on similar issue, by this combination in assessees own case for the A.Y. 2007-08 and 2012-13 in ITA No. 431 432/Srt/2018 order dated 22/08/2022, we have the following: 12. We have considered the rival 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 asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the direction of Hon'ble jurisdictional High Court. We also find that Hon'ble jurisdictional High Court in para-9(vii) of its order approving the scheme made observation; Upon sanction of the scheme, the shares held by the transferee company in the transferor company shall 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g officer held that such payment was made to approved institution and allowed 50% of the amount under section 80G. The ld CIT(A) allowed relief to the assessee by taking view that such contribution was not for doing any charity but for sound business consideration and in building brand image of assessee. We find that nature of expenses is not in dispute. Further it is not in dispute that the assessee was setup by State Government and incurring similar expenses in earlier years. We find that similar issue has been decided by this combination in assessees own case for the A.Y. 2012-13 in ITA No. 432/Srt/2018 order dated 22/08/2022 wherein following order has been passed: 27. We have considered the submissions of both the parties and have gone through the orders of the lower authority. We have also deliberated on the various case laws relied by the ld AR for the assessee. We find that during the course of assessment proceedings the assessing officer noted that the assessee-company has incurred expenditure of Rs.35,68,134/- in fulfilment of social corporate responsibility and claimed the same as deduction under section 37(1) of the Act. The assessing officer issued show cause noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 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, 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 in Appeal No.78 of 2008, 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) 223 ITR 101 (SC) and allowed the contribution given to NGO as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 held that dealers are acting as agent of the assessee and like commission agent. The so-called dealers have rendered services in the course of buying and selling of goods and such services falls within the definition of commissions or brokerage and was liable to deduction under section 194H. We find that before ld CIT(A) the assessee filed detailed written submissions and relied on various case laws. The ld CIT(A) after considering the submissions of the assessee held that the issue is covered by the decision of his predecessor for AY 2009-10, 2010-11 2011-12 and following the same the assessee was allowed relief. We find that order of ld CIT(A) in earlier years has been affirmed by Tribunal and further appeal before High Court has already been dismissed. Hence, we do not find any infirmity in the order of ld CIT(A), which we affirm. In view of the aforesaid legal position, we do not find any merit in the ground raised by the revenue. 23. Considering the decision of Tribunal in assessees own case for A.Y. 2012-13, wherein we have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Limited 284 ITR 323 (SC), by taking view that additional claim was raised by way of letter (application) and the same was not claimed in return of income. The Assessing Officer referred the order of TPO dated 26.10.2016 wherein the claim of deduction under section 80IA of CPSU of Rs.69.86 crores was reduced to nil and profit from Wind Mill of Rs.21.55 crores was allowed. 26. Aggrieved by the additions / adjustments the assessee filed before the Ld. CIT(A). Before Ld. CIT(A) the assessee filed various detailed written submissions dated 26.03.2018, 18.07.2018 and 22.-08.2018. The submission of assessee is extracted by Ld. CIT(A) in para-8.5 of his order. 27. On the market rate of Arm s Length Price for transfer of power from Power Plant CPSU to its manufacturing units, the assessee is stated that they adopted CUP as most appropriate method. The assessee considered open market rate at Rs.6.92 yearly waited for average units price of electricity for AY 2013- 14, at which rate State Electricity Board (SEB) supplied electricity for commercial use to the manufacturing units. The market rate can be considered as Arm s Length price because market rate is a price agree between two un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble jurisdictional High Court in the case of Mitesh Impex (TA No.2562 of 2009) (supra). The assessee also relied in the case of CIT vs. Shah Alloys Ltd. In TA No. 2093 of 2010 and Pragati Glass Private Limited in Tax Appeal No.1646 of 2010. 28. The Ld. CIT(A) after considering the submission of assessee in referring and relying upon decision of Hon ble jurisdictional High Court in the case of Mitesh Impex (supra) held that claim can be made even at the appellate stage and admitted the additional claim raised before the Assessing Officer vide application dated 25.10.2016 and directed to examine the same on merits. 29. On the issue of Arm s Length price that market rate can be considered as Arm s Length price on the basis of price agreed between two unrelated parties dealing as independent buyer and seller without any influence of any relationship. The Ld. CIT(A) held that the ratio of decisions of Hon ble jurisdictional High Court in the case of Gujarat Alkalies Chemicals Ltd.(supra) is squarely applicable on the issue of section 80IA(8) wherein it was held that rate charged by SEB supplied to its consumers at the same rate. Therefore, the market rate of electricity suppli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Apex Court in the case of CIT vs. Tanfac Industries Ltd. SLP (C) No.18537 of 2009, DCIT vs. Vishal Fabrics Ltd. (2022) 139 taxmann.com 30 (AHD-Tribunal.) Star Paper Mills vs. DCIT (2022) 134 taxmann.com 177 (Kol-Trib.) Hon ble Bombay High Court in the case of CIT vs. Reliance Industries (2019)102 taxmnn.com 372 (Bom). 33. We have considered the rival submissions of both the parties and have gone the orders of lower authorities carefully and the case laws cited by the parties. During the assessment the assesse raised additional claim that the steam generated by CPSU in also eligible for deduction under section 80IA. The claim of the assessee was not accepted/ considered by assessing officer by taking view that no such claim is made in the return of income and in absence of any claim in return of income such additional claim cannot be raised during assessment. To support his view, the assessing officer relied on the decision of Apex Court in Goetze (India) Limited (supra). We find that before ld CIT(A) the assessee claimed that no new claim was raised before assessing officer rather they only modified its claim during the assessment proceedings. Technically it is not addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et up a captive power generating unit and provided electricity to its another unit and claimed deduction under section 80-IA in respect of profits arising out of such activity, valuation of electricity provided to another unit should be at rate at which electricity distribution companies were allowed to supply electricity to consumers. Thus, in view of the afforesaid factual and legal position, we do not find any infirmity in the order passed by ld CIT(A), which we affirm. Resultantly, the corresponding grounds of appeal raised by revenue are dismissed. 35. In the result, the appeal of the Revenue is dismissed. ITA No. 721/Srt/2018 by revenue for AY 2014-15. 36. The revenue has raised following grounds of appeal, 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting addition on account of disallowance of expenses on consumption and replacement of stores and spares of Rs.2,51,56,553/- treated as capital expenditure by the A.O. without appreciating the finding recorded in the assessment order. 2. On the facts and circumstances of the case and in law, the Ld. C.I.T.(A) erred in deleting addition on account of disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same cannot be allowed in view of ratio laid down by Hon'ble Supreme Court in the case of Goetze India Ltd. vs. CIT (284 ITR 323). 7. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the appellant is eligible for deduction of profits from transfer of steam under section 80IA and directing the AO to allow claim of deduction u/s 80IA in respect of profit from transfer of steam/power from C.P.S.U. after verification of calculation by relying on the decision of Hon'ble Gujarat High Court in the case of Mitesh Impex (Tax Appeal No.2562 of 2009), without appreciating that the decision of Hon'ble Gujarat High Court in the case of Mitesh Impex (supra) is distinguishable from the facts of the instant case, inasmuch in the case of Mitesh Impex (supra), the assessee, dropped the claim of deduction u/s 80IB and 8HHC of the Act in the revised return of income for the first time before C.I.T.(A), whereas in the instant case, the assessee neither made the claim of deduction u/s 80IA of the Act on profits from steam generation and used for captive consumption in manufacturing and the AO erred in rejecting revised claim filed by the appell ..... 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