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2024 Supreme(Online)(GUJ) 9099
HIGH COURT OF GUJARAT
MR. JUSTICE BHARGAV D. KARIA, MR. JUSTICE NIRAL R. MEHTA, JJ
THE PRINCIPAL COMMISSIONER OF INCOME TAX 1 VADODARA – Appellant
Versus
M/S GUJARAT NARMADA VALLEY FERTILIZERS AND CHEMICALS LTD. – Respondent
R/TAX APPEAL NO. 414 of 2023 With R/TAX APPEAL NO. 424 of 2023
MR NIKUNT K RAVAL(5558) for the Appellant(s) No. 1, MR MANISH J SHAH(1320) for the Opponent(s) No. 1
Goodwill is an asset eligible for depreciation under Section 32 of the Income Tax Act, and CSR expenses can be considered allowable business expenditures under Section 37(1).
Headnote:(A) Income Tax Act, 1961 - Sections 32, 37(1), 80A, 80IA - Tax appeals challenging the Tribunal's order on disallowance of depreciation on goodwill and CSR expenses - Tribunal affirmed CIT(A)'s decision allowing depreciation on goodwill as per Supreme Court precedent - CSR expenses deemed allowable as business expenditure - Revenue's appeals dismissed. (Paras 1-26)
(B) Tax Appeal - Jurisdiction of appellate authorities - Appellate authorities can entertain new claims not raised in original returns if facts are on record - Principle of consistency applied in tax matters. (Paras 1-26)
Facts of the case:
The Revenue filed tax appeals against the Tribunal's order allowing depreciation on goodwill and CSR expenses for AY 2013-2014 and AY 2014-2015, asserting that no goodwill was created during the merger and CSR expenses were not for business purposes. The Tribunal upheld the CIT(A)'s findings based on previous rulings.
Findings of Court:
The Tribunal found that goodwill is an asset eligible for depreciation under Section 32, and CSR expenses were incurred for business purposes, thus allowable under Section 37(1).
Issues: The main issues were whether the Tribunal erred in allowing depreciation on goodwill and CSR expenses, and the jurisdiction of appellate authorities to entertain new claims.
Ratio Decidendi: The court ruled that goodwill qualifies for depreciation under Section 32, and CSR expenses can be considered business expenditures, affirming the Tribunal's decision based on established precedents.
Result: Tax appeals dismissed.
| Table of Content |
|---|
| 1. tax appeals filed by revenue (Para 3) |
| 2. revenue's claims against tribunal's order (Para 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15) |
| 3. tribunal's findings on goodwill (Para 16) |
| 4. goodwill and csr expenses ruling (Para 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34) |
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned advocate Mr. Nikunt K.
Raval for the appellant and learned advocate Mr. Manish J. Shah for the caveator.
2. Since the issues involved in these tax appeals are similar, they have been heard together and would be disposed of by this common order.
3. Tax Appeal No. 414 of 2023 is filed by the Revenue under Section 260A of the Income Tax Act, 1961 (for short ‘the Act, 1961’) challenging the order dated 31.10.2022 passed by the Income Tax Appellate Tribunal, Surat Bench, Surat(for short “the Tribunal”) in ITA no.720/SRT/2018 for A.Y. 2013-2014 proposing the following questions of law:
“(1) Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal has erred in deleting the disallowance of Rs.75,15,081/- on account of depreciation on goodwill, when in fact, no goodwill was created on account of merger of Narmada Chematur Petrochemicals Limited (NPCL) particularly when assessee itself was the promoter of NPCL?
(2) Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal has erred in deleting the disallowance of Rs.17,13,60,400/- u/s.37(1) of the Act in respect of Corporate Social Responsibility expenses being contribution/donation educational/rural development societies? to
(3) Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal was justified in dismissing the appeal of the revenue in relation to downward adjustment amounting to Rs.86,28,49,633/- without appreciating the approach adopted by TPO?
(4) Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal was justified in taking non-eligible unit as tested party and taking rate charged by distribution company as market rate which is not in accordance with the Explanation (iii) of section 80A(6), Explanation (ii) of section 801A(8), 92F(ii) and Rule 10B of the Income Tax Rules?
(5) Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal has erred in holding that the assessee-company is eligible for deduction of profits from transfer of steam u/s 801A though the assessee-company neither made the claim of deduction u/s 801A on profits from steam generation and used for captive consumption in manufacturing?”
4. Tax Appeal No.424 of 2023 is filed by the Revenue under Section 260A of the Income Tax Act, 1961 (for short ‘the Act, 1961’) challenging the order dated 31.10.2022 passed by the Income Tax Appellate Tribunal, Surat Bench, Surat(for short “the Tribunal”) in ITA no.721/SRT/2018 for A.Y. 2014-2015 proposing the following questions of law:
“A) Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal has erred in deleting the disallowance of Rs.56,36,311/- on account of depreciation on goodwill, when in fact, no goodwill was created on account of merger of Narmada Chematur Petrochemicals Limited (NPCL) particularly when assessee itself was the promoter of NPCL?
(B) Whether on the facts and circumstances of the case and in law, the Appellate Tribunal has erred in deleting the disallowance of Rs.1,26,56,804/- u/s.37(1) of the Act in respect of Corporate Social Responsibility expenses being contribution/donation to educational/rural development societies?
(C) Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was justified in dismissing the appeal of the revenue in relation to downward adjustment amounting to Rs.74,05,10,625/- without appreciating the approach adopted by TPO?
(D) Whether on the facts and circumstances of the case and in law, th
