ASSISTANT COMMISSIONER OF INCOME TAX -7(1)(1), MUMBAI V. HORIZON PACKS PVT. LTD., MUMBAI

ITA 5950/MUM/2024

AI Insights

The case involves two appeals by the Assistant Commissioner of Income Tax against Horizon Packs Pvt. Ltd., concerning the assessment years 2018-19 and 2020-21. The primary issues were the disallowance of depreciation on goodwill and the treatment of CSR expenses as donations under section 80G of the Income Tax Act. The Tribunal examined the CIT(A)'s decisions, which had allowed the depreciation on goodwill and the deductibility of CSR expenses, and found them to be in accordance with legal precedents and the provisions of the Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 780339 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: misc
• Appeal Filed On: 18-11-2024
• Other Referred Cases: CIT v. Smifs Securities Ltd. (2012) 348 ITR 302, DIT (IT) vs. HSBC Asset Management (I)(P) Ltd. [2014] 47 taxmann.com 286 (Bombay), Motilal Oswal Securities Ltd. (ITA No. 1795/Mum/2023, order dated 18.08.2023), Allegis Services India Pvt. Ltd. (ITA No. 1693/Bang/2019), IMS Mining Put. Ltd. [130 taxmann.com 118 (Kolkata Trib.)], Elan Pharma (India) Pot. Ltd. vs. PCIT in ITA No. 2419/Mum/2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RITESH MISHRA; DR
• Assessee Lawyers: NITESH JOSHI; AR
• Keywords: Business income; Depreciation; Scheme of amalgamation
• Section: 143(3); 142(1); 32; 37; 37(1); 80G

Judgement Text

" | आयकर अपीलीय अिधकरण ा यपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, HON’BLE VICE PRESIDENT & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER I.T.A. No. 5950 & 6096/Mum/2024 Assessment Year: 2018-19 & 2020-21 Assistant Commissioner of Income Tax – 7(1)(1), Mumbai Vs Horizon Packs Pvt. Ltd. 801, A Wing 8th Floor, Naman Midtown Senapati Bapat Marg Elphiston Road West Maharashtra - 400013 [PAN: AABCH1561K] अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Shri Nitesh Joshi, A/R Revenue by : Shri Ritesh Mishra, CIT D/R सुनवाई की तारीख/Date of Hearing : 29/09/2025 घोषणा की तारीख /Date of Pronouncement: 06/10/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: I.T.A. No. 5950 & 6096/Mum/2024 are two separate appeals by the revenue against two separate orders dated 21/09/2024 pertaining to AY 2018-19 and 2020-21 by NFAC, Delhi [hereinafter ‘the ld. CIT(A)’]. 2. Since common grievance is involved in both the appeals, they were heard together and are disposed off by this common order for the sake of convenience and brevity. 3. The sum and substance of the grievance of the revenue is that the ld. CIT(A) erred in deleting the addition made by the AO on account of disallowance of claim of depreciation on good-will u/s 32 of the Act and in doing so, without appreciating the facts that such good-will was created by way of merger/amalgamation transactions between the Printed from counselvise.com I.T.A. No. 5950 & 6096/Mum/2024 2 group company and when such creation of good-will itself was not justified. 4. Briefly stated the facts of the case are that during the year under consideration, three companies, namely, Pyramid Packaging Private Limited, Monad Technologies Pvt. Ltd and Sigma Corru Box Private Limited, were merged with the assessee w.e.f. 01/04/2016. The scheme was approved by the NCLT, Mumbai Bench vide its order dated 22/03/2017, with the appointed date of the said merger as 01/04/2016 effective from 01/05/2017. The assessee had paid total purchase consideration of Rs. 3,38,95,66,300/- for acquiring the above referred three companies whose net asset value as on appointed date was Rs. 1,75,00,70,889/-. The difference of Rs. 1,63,94,95,411/- has been accounted as Goodwill in the books of accounts of the assessee on which the depreciation was claimed which is under dispute. 5. It would be pertinent to refer to the assessment history for AY 2017-18 which year, the depreciation was first claimed by the assessee. The return for AY 2017-18 was selected for scrutiny assessment for the following reasons as per the notice u/s 143(2) of the Act, which reads as under:- ***This space is left blank intentionally; PTO*** Printed from counselvise.com I.T.A. No. 5950 & 6096/Mum/2024 3 Printed from counselvise.com I.T.A. No. 5950 & 6096/Mum/2024 4 6. The notice u/s 142(1) of the Act, raised the following queries:- ***This space is left blank intentionally; PTO*** Printed from counselvise.com I.T.A. No. 5950 & 6096/Mum/2024 5 Printed from counselvise.com I.T.A. No. 5950 & 6096/Mum/2024 6 7. The assessee filed a detailed reply which reads as under:- ***This space is left blank intentionally; PTO*** Printed from counselvise.com I.T.A. No. 5950 & 6096/Mum/2024 7 Printed from counselvise.com I.T.A. No. 5950 & 6096/Mum/2024 8 8. Complete scheme of amalgamation and further on Note on Amalgamation & Investment in Intangible Assets, explained as under:- “During AY 2017-18, Pyramid Packaging Private Limited (\"Pyramid\"), Monad Technologies Private Limited (\"Monad\") and Sigma Corru Box Private Limited (\"Sigma\") (hereinafter collectively known as \"the Transferor Companies\") were merged with the assessee with effect from 1 April 2016. The scheme was heard and approved by the National Company Law Tribunal (Mumbai Bench) vide its order dated March 22, 2017. A copy of the scheme is enclosed as Annexure 3. The appointed date for the said merger is 1 April 2016 and the effective date is 1 May 2017. By way of merger, in consideration of the assets acquired by the assessee on merger, shares of the assessee have been allotted in the following manner: - 587 fully paid up equity shares of IN 10 each of the assessee Company for every 10 fully paid up equity shares of IN 100 each held in Pyramid - 810 fully paid up equity shares of IN 10 each of the assessee Company for every 10 fully paid up equity shares of IN 10 each held in Monad 86 fully paid up equity shares of IN 10 each of the assessee Company for every 10 fully paid up equity shares of IN 10 each held in Sigma The said merger has been accounted for under the \"Purchase\" method as prescribed by Accounting Standard 14 (AS 14) \"Accounting for Amalgamations\" notified under section 133 of the Companies Act, 2013 read together with paragraph 7 of the Companies (Accounts) Rules 2014. Accordingly, the assets, liabilities and other reserves of the Transferor Companies as at April 1, 2016 have been taken over at their fair values. Further, the difference between the assets and liabilities taken over and Printed from counselvise.com I.T.A. No. 5950 & 6096/Mum/2024 9 the additional share capital issued in accordance with this scheme is accounted as Goodwill in the books of the assessee. Various courts, including the Supreme Court in the case of CIT v. Smifs Securities Ltd. (2012) 348 ITR 302, have held that Goodwill, being the difference between the purchase price and the value of the assets received, is a depreciable asset under Explanation 3(b) to section 32(1) of the Act. Accordingly, the assessee has considered Goodwill arising on account of the merger as an intangible depreciable asset.” 9. With this factual background, the AO framed the assessment order dated 19/12/2019 and allowed the claim of depreciation on good- will. 9.1. This means that during the year under consideration, the assessee has claimed depreciation on good-will on the written down value brought forward from earlier year. The Hon’ble Bombay High Court in the case of DIT (IT) vs. HSBC Asset Management (I)(P) Ltd. [2014] 47 taxmann.com 286 (Bombay), had the occasion to consider a similar situation where the depreciation was allowed in earlier assessment years and denied in subsequent assessment year. The Hon’ble High Court held as under:- “9. Having perused this Appeal Memo including the impugned orders, we are of the opinion that the Delhi High Court judgment has been delivered on 5th November 2012 and the impugned order was passed on 15th June 2011. The Tribunal has essentially based its conclusion on the consistent stand of the Assessee and that of the Assessing Officer. In dealing with the shift in stand for the subject assessment year, the Tribunal found that this claim of depreciation was raised in the assessment year 2003-2004. The Assessee claimed that it is allowable as per the provisions of Income Tax Act on block of assets under the head \"intangible assets\". The Assessing Officer allowed the claim for that assessment year by an order under Section 143(3) dated 28.03.2006. The Tribunal then, proceeds to hold that when the Assessing Officer had to allow depreciation on the written down value of the block of assets, then, it cannot in the present assessment year dispute the opening written down value of the block of assets nor can he examine the correctness or otherwise of the opening written down value brought forward from the earlier year. The order under Section 143(3) for the assessment year 2003-2004 continues to operate and no proceedings under the Act were initiated to disturb the same.” Printed from counselvise.com I.T.A. No. 5950 & 6096/Mum/2024 10 10. We find that the ld. CIT(A) at para 5.5.8 of his order categorically mentioned that depreciation was first claimed in AY 2017-18 and the same was accepted without any adverse inference. Respectfully following the decision of the Hon’ble Jurisdictional High Court (supra), we do not find any error or infirmity in the findings of the ld. CIT(A). This common ground in both the appeals are dismissed. 11. In ITA No. 6096/Mum/2024; AY 2020-21, the revenue has raised one more ground which relates to the allowability of CSR expenses as donation u/s 80G of the Act. 12. While scrutinizing the return of income, the AO noticed that certain payments were made towards CSR expenses which were subsequently claimed as donation deductible u/s 80G of the Act. The AO disallowed the same holding that the CSR expenditure are not voluntary but mandatory in nature hence not allowable u/s 80G of the Act. When the disallowance was agitated before the ld. CIT(A), the ld. CIT(A) was of the opinion that Section 80G of the Act falls in Chapter VIA which comes into action only after the gross total income has been computed by applying the computation provisions under various heads of income and there is no co-relation between Section 37 r.w. Explanation 2 and Section 80G. The ld. CIT(A) further observed that deduction u/s 80G of the Act is available for all heads of income in contrast to Section 37, which is applicable for computing income under the head ‘business income’ only. Accordingly, the ld. CIT(A) held that the scope of Section 37(1) of the Act is limited so far as the applicability of Section 80G is concerned. 13. We find that the Co-ordinate Benches have taken a consistent view that CSR expenditure can be claimed as a deduction u/s 80G of the Act Printed from counselvise.com I.T.A. No. 5950 & 6096/Mum/2024 11 in the following cases:- Motilal Oswal Securities Ltd. (ITA No. 1795/Mum/2023, order dated 18.08.2023), Allegis Services India Pvt. Ltd. (ITA No. 1693/Bang/2019), IMS Mining Put. Ltd. [130 taxmann.com 118 (Kolkata Trib.)] and Elan Pharma (India) Pot. Ltd. vs. PCIT in ITA No. 2419/Mum/2025. 14. Respectfully following the same, we do not find any reason to interfere with the findings of the ld. CIT(A). This Ground is accordingly dismissed. 15. In the result, appeals by the revenue are dismissed. Order pronounced in the Court on 6th October, 2025 at Mumbai. Sd/- Sd/- (SAKTIJIT DEY) (NARENDRA KUMAR BILLAIYA) VICE PRESIDENT ACCOUNTANT MEMBER Mumbai, Dated 06/10/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs आदेश की \u0015ितिलिप अ\u001aेिषत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. \u0015 थ / The Respondent 3. संबंिधत आयकर आयु\" / Concerned Pr. CIT 4. आयकर आयु\" ) अपील ( / The CIT(A)- 5. िवभागीय \u0015ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड& फाई/ Guard file. आदेशानुसार/ BY ORDER TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai Printed from counselvise.com "