The DCIT, Circle-1, Bharuch V. M/s. Gujarat Narmada Valley Fertilizers & Chemicals Ltd., Bharuch

ITA 432/SRT/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1752 (ITAT-SURAT)
• Duration Of Justice: 4 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-07-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 31-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: YOGESH G SHAH
• Keywords: Depreciation; Business expenditure; Additional evidence; Non-deduction of tax; Scheme of amalgamation; Commercial expediency; Revenue expenditure; Capital expenditure; TDS; Set aside
• Section: 32; 37; 2; 143(3); 40(a)(ia); 37(1); 201; 113

Judgement Text

आयकर अपीलȣय अͬधकरण, स ु रत Ûयायपीठ, स ु रत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND Dr ARJUN LAL SAINI, ACCOUNTANT MEMBER आ.अ.सं./ITA No.431/SRT/2018 (AY 2007-08) & (Hearing in Virtual Court) Deputy Commissioner of Income-tax, Circle-1 Bharuch, Above Bank of Baroda, Station Road, Bharuch- 320001 Vs Gujarat Narmada Valley Fertilizers & Chemicals Ltd. P.O. Narmada Nagar, Dist. Bharuch-392015 PAN : AAACG 8372 Q अपीलाथȸ/Appellant Ĥ×यथȸ /Respondent आ.अ.सं./ITA No.432/SRT/2018 & ÿÂया±ेप/C.O. No.12/SRT/2021 [a/o ITA No.432/SRT/2018] (AY 2012-13) Deputy Commissioner of Income-tax, Circle-1 Bharuch, Above Bank of Baroda, Station Road, Bharuch-320001 Vs Gujarat Narmada Valley Fertilizers & Chemicals Ltd. P.O. Narmada Nagar, Dist. Bharuch-392015 PAN : AAACG 8372 Q अपीलाथȸ/Appellant Ĥ×यथȸ /Respondent/Co- objector Ǔनधा[ǐरती कȧ ओर से /Assessee by Shri Yogesh G Shah, A.R राजèव कȧ ओर से /Revenue by Shri H.P.Meena CIT-DR सुनवाई की तारीख/Date of hearing 18.07.2022 उɮघोषणा कȧ तारȣख/Date of pronouncement 22.08.2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. These two appeals by Revenue and Cross Objection (CO) in ITA No. 432/Srt/2021 by assessee are directed against the ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 2 separate order of ld. Commissioner of Income-Tax (Appeals)-3, Vadodara [for short to as “Ld. CIT(A)”] all dated 26.03.2018, which in turn arises out assessment orders passed by Assessing Officer (hereinafter referred to as ‘the Act’) dated 28.12.2016 and 27.02.2015 for assessment years (AYs) 2007- 07 and 2012-13 respectively. 2. First, we are taking Revenue’s appeal ITA No.431/SRT/2018 for assessment year 2007-08. The Revenue has raised the following grounds of appeal: - “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) erred by deleting the disallowance of Rs.4,22,24,655/- on account of depreciation on goodwill when in fact no goodwill was created on account of merger of Narmada Chematur Petrochemicals Limited (NCPL) particularly when assessee itself was the promoter of NCPL.” 3. Brief facts of the case are that assessee is a company engaged in business of manufacturing, sale and trading of chemical fertilizers and chemical industrial products. The assessee was setup by Government of Gujarat. The assessee filed its return of income for assessment year 2007-08 on 25.10.2007. Initially the assessment was completed under section 143(3) of ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 3 the Act on 31.03.2009 by making disallowance of depreciation of certain fixed assets. The matter was carried before the Tribunal. Before Tribunal, the assessee filed its additional ground of appeal for claiming depreciation of Rs.4.222 crore on goodwill. The additional ground of depreciation of goodwill was raised for the first time before the Tribunal. The application for additional evidence was admitted by Tribunal in 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. ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 4 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 Petrochemicals Limited (NCPL) by way of scheme of approval, approved by Hon'ble jurisdictional High Court (merger of amalgamated chemical company). The merged company was mainly engaged in the business of manufacturing and selling of industrial chemical since last 14 years. NCPL was promoted by the assessee company. The merger was based on consideration of certain factor, that consists of higher efficiency in the production capacity, leadership position in market, quality management system and certain contacts, rights etc., owned by the that company. The assessee furnished the calculation of goodwill by contending that tangible assets of merger company were ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 5 aggregating value of Rs. 27828.89 lakhs, against the net value of assets as per books of Rs.6,160.27 lakhs, considering of Rs.7,849.26 lakhs were paid in the form of fully paid equity shares of the assessee-company. The difference represents the value of above noted benefit in the nature of goodwill. Particulars (Rs. In lacs) Book value of total assets of the NCPL as on 1,.4.2005 27,828.89 Book value of total liability of the NCPL as on 1.4.2005 21,668.62 Net value of the assets as per books of account 6,160.27 Amount of consideration given 7,849.26 Excess of amount of consideration over the value of the assets of NCPL i.e. Goodwill 1,688.89 5. The assessee further contended that the working /calculation of goodwill was approved by Hon'ble jurisdictional High Court in the scheme itself. Copy of order of Hon'ble jurisdictional High Court was filed. The assessee also contended that the goodwill of assessees case is in substance to similar tangible assets includes technology for production of Aniline and TDI plants received from the Technical Collaborator Chematur Engineering AB of Sweden; a combined base of higher profitability and assets through developed existing market, ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 6 efficient production capacity and various researches carried out etc.; full benefit of vertical integration and diversification; strategic clarity and more coherent strategy for growth rather than independent and suboptimal investment decisions; opportunity to plan for future growth avenues with 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 ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 7 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 AY 2009-10, 2010-11 & in 2011-12, though, it was disallowed by Assessing Officer, however, on appeal before Ld. CIT(A) the similar relief was allowed in all assessment years. On the basis of aforesaid factual position, the assessee claimed the depreciation of goodwill being 25% of total amount of goodwill of Rs.16.889 crores i.e., Rs.4.22 crore (25%) is claimed in the year under consideration and remaining 75%, i.e. 25% in each subsequent year. 6. The Assessing Officer after considering the submission of assessee held 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 Assessing Officer on examination of details and liability, noted that assessee has made entry of 6,955 lakhs for investment cancelled. The assessee explained that assessee- ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 8 company 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 in para-9 of his order recorded the reasons for non-acceptance of claim of assessee. The assessing officer noted that the assessee has furnished calculation of goodwill as on 13.12.2016. And 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 allowable. The assessee should have been allotted shares of itself, in proportion of shares holding in merged entity, in proportion of shareholding in merged company as has been done for other shareholders of merged company. These shares so allotted could have been kept by the assessee as treasury stock which could have been sold off in proportion by the assessee whenever deemed fit. Thus, while selling the shares the assessee would have paid capital gains tax or claimed ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 9 capital loss as the case may be. But the assessee has reduced the value of investment in merged company just to create goodwill and claim depreciation thereon. On the aforesaid reasons, Assessing Officer took his view that no goodwill has been created on account of merger of amalgamated company rather it is resulted in amalgamation result of Rs.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 ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 10 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 the submissions of assessee held that the depreciation of goodwill is allowable under said section. The assessee relied by decision of 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 ld CIT(A) held that expression “goodwill” subsumes within it a variety of intangible benefit that are acquired when a person acquires a business of another as a going concern. The Ld. CIT(A) further held that assessee has paid a consideration of Rs.7849.25 lakhs consisting of Rs.6,955 lakhs against shares of its own and remaining amount of Rs.894.25 against the share of other ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 11 shareholders. The assessee has passed entry in its books of account on amalgamation, investment of Rs.6,955 lakhs shown in “assets side” and equity of Rs.6,955 shown in “capital side” have been cancelled against each other, which was approved by Hon'ble jurisdictional High Court in a scheme of amalgamation. If the investment was not cancelled by the assessee-company, on “asset side” investment would have been higher by Rs.6,955 lakhs and on “liability side”, capital would have been higher by same amount, Under the present situation, the goodwill amount would have been the same. The cancellation of investment has nothing to do with goodwill and amalgamation reserve as presumed by the Assessing Officer. The Hon'ble jurisdictional High Court in para-9(vii) of its order approving the scheme has held “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.” The Ld. CIT(A) on his consideration held that Assessing Officer has made remarks on this issue merely on assumption and without considering the detail written ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 12 submission made by assessee on the scheme of amalgamation approved by the Hon'ble jurisdictional High Court and the effect of the same was given in the books of account of the assessee in accordance with the direction of Hon'ble jurisdictional High Court. The Ld. CIT(A) further held that similar depreciation of goodwill is allowed in assessment years 2009-10, 2010-11 and 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. CIT- DR of the Revenue submits that by way of Finance Act, 2021, ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 13 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 challenging such orders in subsequent years, thus, the issue has not attained finality. 10. On the other hand, Ld. AR for the assessee supported the order passed by Ld. CIT(A). the ld. AR for the assessee submits that amendment made in Finance Act, 2021 with effect from 01.04.2021 to provide that depreciation of goodwill not to be allowed is applicable from assessment year 2021-22. The Ld. AR for the assessee submits that in the details in the memorandum to the amendment, amended clause (11) of section 2 of the Act provide that “block of asset” shall not include goodwill of a business or profession. Further, amendment clause-(ii) of sub-section (1) of section 32 of the Act to provide that goodwill of a business or profession shall ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 14 not be considered as an asset for the purpose of the said clause and therefore not eligible for depreciation. The amendment 50 of the Act to provide that in a case where goodwill of a business or profession formed part of a “block of asset” for assessment year beginning on the 1 st April, 2020 and depreciation has been obtained by the assessee under the Act, the written down value of that block of asset and short- term capital gain, if any, shall be determined in the manner as may be prescribed. As per memorandum and notes to the clause Finance Act, 2021 and subsequent assessment years. 11. The Ld. AR for the assessee submits that amendment in the Act that goodwill is no longer considered as intangible asset entitled to depreciation under section 32 of the Act and in case of “block of assets” as on 31.03.2020 included goodwill, then the amendment in section 43(6)(c)(ii) requires that the written down value of “block of assets” is to be reduced by the written down value of the goodwill falling within the block. The Ld. AR for the assessee reiterates that amended proviso in withdrawal the depreciation not allowing goodwill will apply prospectively. ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 15 To support his submission, Ld. AR of the assessee relied upon the following decisions: -  PCIT Vs Zydus Wellness Ltd. [2017) 87 taxmann.com 82 (Guj.) (SLP dismissed by Supreme Court in) 113 taxmann.com 154  Urmin Marketing P. Ltd. v. DCIT 122 taxmann.com 40 (Ahd-Trib)  Banc Tec TPS India P. Ltd. vs. ACIT 117 taxmann.com 979 (Mum-Trib)  JX Nippon Two Lubricants India Pvt. Ltd. TS-131-ITAT-2021  Classic Stripes Pvt. Ltd. TS-413-ITAT-2020 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 ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 16 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 allowable. The assessee should have been allotted shares of itself, in proportion of shares holding in merged entity, in proportion of shareholding in merged company as has been done for other shareholders of merged company. These shares so allotted could have been kept by the assessee as treasury stock which could have been sold off in proportion by the assessee whenever deemed fit. The Assessing Officer held that no goodwill has been created on account of merger of amalgamated company rather it is resulted in amalgamation result of Rs.5266 lakh. As recorded above before ld CIT(A) the assessee filed detailed written submissions. We find that the ld CIT(A) granted relief to the assessee by taking view that his ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 17 predecessor in assessee own case in assessment years 2009- 10, 2010-11 and 2011-12 has allowed depreciation. The Ld. CIT(A) further held that assessee has paid a consideration of Rs.7849.25 lakhs consisting of Rs.6,955 lakhs against shares of its own and remaining amount of Rs.894.25 against the share of other shareholders. The assessee has passed entry in its books of account on amalgamation, investment of Rs.6,955 lakhs shown in “assets side” and equity of Rs.6,955 shown in “capital side” have been cancelled against each other, which was approved by Hon'ble jurisdictional High Court in a scheme of amalgamation. If the investment was not cancelled by the assessee-company, on “asset side” investment would have been higher by Rs.6,955 lakhs and on “liability side”, capital would have been higher by same amount, Under the present situation, the goodwill amount would have been the same. The cancellation of investment has nothing to do with goodwill and amalgamation reserve as presumed by the Assessing Officer. 13. The Ld. CIT(A) on his consideration held that Assessing Officer has made remarks on this issue merely on assumption and ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 18 without considering the detail written submission made by assessee on the scheme of amalgamation approved by the Hon'ble jurisdictional High Court and the effect of the same was given in the books of account of the assessee in accordance with 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 ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 19 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) Limited (supra), Mumbai Tribunal in Banc Tec TPS India (P) Limited Vs ACIT (supra). 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. 15. In the result, Revenue’s appeal is dismissed. ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 20 16. Now adverting to revenue’s appeal in ITA No.432/SRT/2018 for assessment year 2012-13. The Revenue has raised the following grounds of appeal: - “1. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred by deleting the addition of Rs.3,58,86,421/- treating as revenue expenditure instead of capital expenditure. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in deleting disallowance of Rs.4,69,74,652/- made under section 40(a)(ia) of the IT Act considering discount given to the dealers is not in the nature of commission liable for deduction of tax at sources u/s 194H of the IT Act. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred by deleting the disallowance of Rs.4,22,24,655/- on account of depreciation on goodwill when in fact no goodwill was created on account of merger of Narmada Chematur Petrochemicals Limited (NCPL) particularly when assessee itself was the promoter of NCPL. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in deleting disallowance of Rs.35,68,134/- claimed as business expenditure incurred towards discharging its corporate social responsibility for social and economic upliftment and education. 5. The appellant craves to add to, amend or alter the above ground as may be deemed necessary. Relief claimed in appeal. The order of the CIT(A) on the above issue be set aside and that of the order u/s 143(3) passed by the Assessing Officer be restored.” 17. At the outset of hearing the ld AR for the assessee submits that all the grounds of appeal raised by revenue are covered in ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 21 favour of the assessee and against the revenue 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 ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 22 and no further appeal is filed before Hon’ble Supreme Court on this issue. Further, the assessing officer himself allowed similar relief to the assessee from AY 2017-18 onwards. The ld AR for the assessee submits that the order of the Tribunal and High Court is placed on record. 18. On the other hand, the ld CIT-DR for the revenue supported the order of assessing officer. 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. 5.246 Crore on account of replacement of certain parts of the machineries. The assessing officer 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 current repairs. The assessing officer allowed depreciation at different rate on different part and worked out total depreciation of Rs. 1.657 Crore and remaining of Rs. 3.588 Crore was disallowed. We find that before ld CIT(A) the ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 23 assessee mad similar submissions as made before us and relied on various case laws. The ld CIT(A) after considering the submissions of the assessee held that the assessee has replaced the exiting part of machine or replaced the parts which have become obsolete and the replacement was essential. It was held that the replacement has not increased the existing capacity, so entire expenditure was treated as revenue expenditure. We find that on similar disallowance the assessee was allowed relief by Tribunal and granted relief 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. Further, the assessing officer himself allowed similar relief to the assessee from AY 2017-18 onwards. Hence, we find that ground of appeal is squarely covered in favour of assessee and against the Revenue. Thus, following the principal of consistency we affirm the order of Ld. CIT(A). In the result, this ground of appeal is dismissed. 20. Ground No. 2 relates to deleting the disallowance of Rs.4,697 crore under section 40(a)(ia) for non-deduction of tax at source ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 24 on the discount given to dealers. The ld AR for the assessee 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 ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 25 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. In the result, this ground of appeal is dismissed. ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 26 24. Ground No. 3 relates to deleting disallowance of Rs.4,222 crore on account of depreciation on “goodwill”. We find that this ground of appeal is similar to ground No.1 raised by Revenue in ITA No.431/SRT/2018 for assessment year 2007- 08, which we have already dismissed, therefore, following the principle of consistency this ground of appeal is dismissed with similar observation. In the result, this ground of appeal is dismissed. 25. Ground No. 4 relates to deleting disallowance of Rs.35,68,134/- of corporate social responsibility claimed as business expenses. The ld AR for the assessee submits that this ground of appeal is also covered in favour of the assessee. The ld. AR for the assessee submits that during the assessment, the assessee, before the assessing officer filed the details of the Corporate Social Responsibility (CSR) contribution and the justification thereof. The assessee is owned and managed by Government of Gujarat and has to mandatory contribute for certain project of social upliftment. The expenses were incurred out of commercial expediency and allowable under section 37 of the Act. Such contribution ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 27 would help in development of rural area in and around Gujarat and resultantly build brand image of assessee in the mind of customers. The ld AR for the assessee submits that in AY 2010-11 the assessee made contribution to educational institution, trust, 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), ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 28  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. On the other hand, the ld CIT-DR for the revenue supported the order of the assessing officer. 27. We have 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 notice to the assessee to justify the claim. The assessee filed very detailed reply as recorded in para 8.1 at page number 41 to 46 of the assessment order. The Assessing Officer has not accepted the reply of the assessee and held that such expenditure would not be allowable under section 37(1) of the Act if it is incurred ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 29 wholly and exclusively for the purpose of assessees business. The assessee-company was not able to prove how exactly these contributions are helpful either in promotion of its future business activities or directly connected with business activities in the year under consideration. The Assessing Officer disallowed the claim of such deduction under section 37(1) of the Act and added back to the total income of the assessee in the computation of total income. Aggrieved the assessee filed the appeal before Ld. CIT(A). Before Ld. CIT(A) the assessee stated that corporate social responsibility (CSR) as a joint sector larger scale industry in the state of Gujarat, makes contribution in the ordinary course of its business towards socially useful activities which help in the development particularly of the Bharuch District in which the assessee-company has its manufacturing facilities as also to earn goodwill from people at large and which help assessee- company in running its business smoothly. It is decided by the assessee-company to undertake various activities as a part of its social commitment in and around Bharuch District in particular as also in the state of Gujarat. It is also decided that ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 30 the thrust areas under CSR policy of the assessee-company will be education providing quality education as also establishing centres for training and skill development, agriculture extension services providing easy access to farm- input, market access 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 ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 31 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 deduction. 28. The Ld. 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 ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 32 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 High Court, the order of the Tribunal was upheld in Tax Appeal No. 146 of 2019. Thus, respectfully following the order of High Court, we affirm the order of ld CIT(A) with additional observation. In the result, this ground of appeal is also dismissed. 29. In the result, Revenue’s appeal is dismissed. 30. Now coming to the Cross Objection No. 12/Srt/2021, filed by the assessee in appeal of revenue for AY 2012-13. At the time of hearing, Ld. AR for the assessee states at the bar that he does not press the grounds raised by the assessees in its cross objection (CO) due to the latest amendment in Act by Finance Act 2022, with regard to Education cess. Hence, same is dismissed as not pressed. 31. In combined result, both the appeal of the Revenue is dismissed and assessees CO by assessee in AY 2012-13 is ITA No.431-432/SRT/2018 & CO 12/SRT/2021 (A.Ys 07-08 & 12-13) M/s Gujarat Narmada Valley Fertilizers & Chemicals Ltd. 33 dismissed as not pressed. A copy of the instant common order be placed in the respective case file(s). Order pronounced in the open court on 22/08/2022 and the result was also placed on the Notice Board. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) [लेखा सद᭭य/ACCOUNTANT MEMBER] [᭠याियक सद᭭य JUDICIAL MEMBER] Surat, Dated: 22/08/2022 Dkp. Out Sourcing Sr.P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT 5. DR 6. Guard File True copy/ By order // True Copy // Sr.P.S./Assistant Registrar, ITAT, Surat