THE DCIT, CENTRAL CIRCLE-1(1), AHMEDABAD V. M/S. BODAL CHEMICALS LTD., AHMEDABAD

ITSSA 27/AHD/2021

AI Insights

The case involves multiple appeals by the Revenue and the assessee, M/s Bodal Chemicals Ltd., concerning the assessment years 2006-07 to 2012-13. The primary issues revolved around the disallowance of depreciation on goodwill, the treatment of unabsorbed business losses and depreciation under MAT provisions, and the disallowance of CENVAT credit. The Tribunal examined the legal provisions under the Income Tax Act, relevant judicial precedents, and the facts presented by both parties. The Tribunal's decision emphasized the need for a consistent application of tax laws and the recognition of goodwill as a depreciable asset under the Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712948 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 31-07-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Assessment Year: 2006-2007
• Other Referred Cases: Smifs Securities Ltd. vs. CIT, PCIT vs. Zydus Wellness Ltd., ACIT vs. GE Plastics India Ltd., CIT vs. Sintex Industries Ltd., CIT vs. Torrent Power Ltd., DCIT vs. Voltamp Transformers Ltd, Pr. CIT vs. India Gelatine and Chemicals Ltd, Pr. CIT vs. Saumya Construction (P) Ltd., CIT vs. Kabul Chawla, Jignesh Hiralat Shah vs. ACIT, Shri Dineshbhai P. Sarothia vs. ACIT, ACIT vs. Shardaben Arvindbhai Patel, Ankur Chemfood Limited vs. Pr. CIT, DCIT vs. Amit Madanlal Gupta, Kwality Biscuits Ltd vs. CIT, Natural Gems Ltd vs. CIT, Rolta India Ltd vs. CIT, Mangalore Refinery & Petrochemicals Ltd. vs. PCIT, Amline Textiles (P) Ltd. vs. I.T.O., SICOM Ltd. vs. ACIT, Alok Industries Ltd vs. ACIT, Rockline Developers Pvt. Limited vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAMLESH MAKW ANA
• Assessee Lawyers: S.S. NAGAR; I. DCIT VS. M S. ADANI GAS LTD ITA NO. AHD; I. DCIT VS. M S. ADANI GAS LTD ITA NO. AHD
• Keywords: Set aside; Capital asset; Revised return; Business expenditure; Depreciation; Cost of acquisition; Rule of consistency; Capital Gains; Principle of natural justice; TDS; Search and seizure; Valuation report; Earning of tax free income; Unabsorbed depreciation; Transactions in derivatives; Rule 8D; Revision of order; Scheme of amalgamation
• Section: 147; 148; 143(3); 142(1); 263; 32; 132; 153A; 234B; 37; 14A; 115JB; 37(1); 139(5)

Judgement Text

" आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ ‘A’ अहमदाबाद। अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD ] ] BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER IT(SS)A No.27 TO 30/Ahd/2021 Assessment Year : 2006-07 TO 2009-10 IT(SS)A No.14/Ahd/2022 Asstt.Year : 2010-11 The Dy.CIT Cent.Cir.1(1) Ahmedabad. Vs M/s.Bodal Chemicals Ltd. Plot No.123-124 Phase-1, GIDC Vatva, Ahmedabad. PAN : AAACD 5352 M ITA No.318/Ahd/2022 Asstt.Year : 2009-10 IT(SS)A No.11 TO 13/Ahd/2022 Assessment Year : 2010-11 TO 2012-13 M/s.Bodal Chemicals Ltd. Plot No.123-124 Phase-1, GIDC Vatva, Ahmedabad. PAN : AAACD 5352 M Vs The Dy.CIT Cent.Cir.1(1) Ahmedabad. (Appellant) (Respondent) Assessee by : Shri S.S. Nagar, AR Revenue by : Shri Kamlesh Makwana, CIT-DR and Shri B.P. Srivastava, Sr.DR सुनवाई क तारीख/Date of Hearing : 20.02.2025, 15.05.2025 & 28.07.2025 घोषणा क तारीख /Date of Pronouncement: 31/07/2025 आदेश आदेश आदेश आदेश/O R D E R PER BENCH These are cross-appeals by the Revenue and the assessee. In all there are nine appeals – by the Revenue and four appeals by the assessee against the orders of the Commissioner of Income Tax (Appeals), Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 2 Ahmedabad. The Revenue has challenged the orders of the CIT(A) dated 18.01.2021 and 20.06.2022 for the assessment years 2006-07 to 2010- 11 arising out of the orders of the Assessing Officer under Section 143(3) read with Section 153A(1)(b) of the Act. The assessee is in appeal against the orders of the CIT(A) of even dated i.e. 20.06.2022 for the assessment years 2009-10 to 2012-13 arising out of the orders of the Assessing Officer under Section 143(3) read with section 153B(1)(b) of the Act. 2. For issue-wise adjudication, we take first the appeal of the Revenue in IT(SS)A.No.27/Ahd/2021 for Asst. Year 2006-07. 3. IT(SS)A.No.27/Ahd/2021 : (Revenue’s appeal for A.Y. 2006-07 Ground No.1 : Whether the Ld. CIT(A) has erred in deleting the disallowance of depreciation on goodwill of Rs.2,53,45,655/- without appreciating the fact that there was no block of assets for the intangibles in the books of account of the amalgamating company, therefore the same cannot be recorded in the books of accounts of the amalgamated company, in view of Explanation 7 to section 43(1) of the Act. 3.1. The assessee company was earlier known as M/s. Dintex Dyechem Ltd. In accordance with the scheme of amalgamation of M/s. Bodal Chemicals Pvt. Ltd., with erstwhile M/s Dintex Dyechem Ltd. (Bodal Chemicals Ltd.) sanctioned by the Hon’ble High Court of Gujarat vide order dated 27.04.2006, all the assets and liabilities of M/s Dintex Dychem Ltd. has been transferred to and vested in the assessee company w.e.f. 01.04.2004 and the same has been passed in the books of account of the assessee company in A.Y. 2006-07 which is the first year after amalgamation of the two companies. The assessee company filed its original return of income u/s. 139(1) of the Income Tax Act, 1961 on 28.12.2006 declaring total income at nil. The assessee company filed its revised return of income u/s. 139(5) of the Income Tax Act, 1961 on 04.03.2007 declaring total income at nil. A search operation u/s. 132(1) of the Income Tax Act, 1961 was conducted in the Bodal Group cases by issuing warrant of authorization u/s. 132(1) of the Act on 09.02.2012 and various documents/books of accounts/other valuable articles/other Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 3 things were found and seized from the various premises covered u/s. 132(1) and 132(1) of the Act. In the case of assessee also, a search warrant was issued and executed on 09.02.2012. A notice u/s. 153A of the Act was issued on 09.10.2012 which was served on the assessee. In response to the notice u/s. 153A(1)(a) of the Act issued on 09.10.2012, the assessee company filed its return of income on 16-01-2013 declaring total income as nil. A notice u/s. 143(2) of the Act was issued and served upon the assessee. Another notice u/s. 142(1) dated 07.08.2013 along with annexure A was issued and served on the assessee on 08.08.2013. In response to the above notices, chartered accountant who is duly authorized person/representative of the assessee attended the assessment proceedings from time to time and furnished details through replies. 3.2 In this case, the assessment order u/s. 143(3) of the Income Tax Act was passed on 31.12.2008 determining total income at Nil. The Assessing Officer observed that the assessee company paid tax under Section 115JB of the Income Tax Act, 1961. The Assessing Officer determined total book profit of Rs. 2,73,28,938/-. In the same assessment year, disallowances was made on account of late payment of provident fund at Rs. 624/-. The addition was also made on account of no TDS on payment of commission at Rs. 29,110/-. The Assessing Officer further made addition on account of late payment of TDS at Rs. 1,46,141/- and addition in respect of bad debt of Rs. 10,60,667/-. Thereafter, the assessee filed appeal before the CIT(A). After giving effect to CIT(A) order total income was reduced to Rs. nil after setting off of unabsorbed depreciation of Rs. 3,06,93,299/-. 3.3 The case of the assessee was reopened u/s. 147 vide notice u/s. 148 issued to the assessee on 11.06.2009. The action of the reopening was challenged by the assessee in the Hon’ble Gujarat High Court vide Special Civil Application No. 7 of 2010. The Hon’ble High Court stayed the conclusion of proceedings u/s. 147 till the final disposal of the Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 4 petition filed by the assessee. However, since with the issuance of notice u/s. 153A (dated 09.02.2012) to the assessee pursuant to the search and seizure action taken in its case u/s. 132 of the Act, the proceedings u/s. 147 got abated. The stay order by the Hon’ble High Court in respect of the same was automatically complied with by the operation of law. As a result, the proceedings u/s. 153A r.w.s. 143(3) was not affected by the Hon’ble High Court’s order and accordingly the Assessing Officer proceeded with the proceedings u/s. 153A. 3.4. The Assessing Officer observed that the assessee claimed a deduction amounting to Rs. 2,53,45,655/- as depreciation on goodwill. As per the assessee’s claim this goodwill was acquired by the assessee company on amalgamation with M/s. Dintex Dye Chem Ltd. The relevant entries for creation of goodwill as explained by the assessee are as under:- Particulars Amount -------------------------------------------------------------------------------------- Fixed assets (Net) 81,525,546 Investments 317,400 Current Assets (Net) 66,951,953 Misc. Expenditure 7,293 ----------------- 148,802,192 Less: Loans 62,376,684 Deferred tax Liabilities 19,283,770 81,660,454 ----------------------------------- 67,141,738 Less: Transfer of general reserve in books of Amalgamated company to general reserves of the company. 34,034,810 Transfer of investment allowance reserve in books of Amalgamated company to investment allowance reserve of the company 301,000 Transfer of balances of profit and Loss account of Amalgamated company to Profit & Loss account of the company. 23,990,048 58,325,858 ------------------------------------ 8,815,880 Less: Consideration for Amalgamation 8 (Eight) Equity shares of Rs.10/- each fully paid up against 1 (one) equity share 70,527,040 9 (Nine) Redeemable Non-cumulative preference shares of Rs.10/- each fully paid up against 2 (two) equity share 39,671,460 110,198,500 -------------------------------------- Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 5 Balance treated as Goodwill (101,382,620) -------------------------------------- 3.5 The Assessing Officer observed that the intangible assets in the form of goodwill were owned/held up by the amalgamating company prior to the amalgamation at nil cost only, therefore, after amalgamation, the same should have been taken at nil cost in the hands of the amalgamating company and asked the assessee company to justify its claim for depreciation of goodwill vide letter dated 20.01.2014. 3.6 In response to the same, the assessee submitted its written reply vide letter dated 27.01.2014. The assessee submitted before the Assessing Officer that the assessee have not claimed any amortization in the computation of income for A.Y. 2012-13. Grounds for allowing amortization of goodwill for A.Y. 2006-07 to A.Y. 2011-12, either as depreciation of goodwill u/s. 32(1)(ii) or allowing entire amount as business expenditure u/s. 37(1) of the Income Tax Act, 1961. The amount claimed as deduction is being claimed in successive years as a portion of ‘Paid goodwill’, paid on account of amalgamation of M/s. Dintex Dye Chem Ltd. with the assessee company and also on account of amalgamation of Mindstone Organics Ltd. (MOL) with the assessee company. The entire undertaking of BCPL and MOL was merged in the assessee company. As per the scheme of amalgamation (scheme), in addition to various physical assets recorded and accounted for in the books of BCPL and MOL (amalgamating company), several other intangibles like technical know-how for new products of BCPL and MOL, Effluent Treatment disposal entitlement rights of BCPL and MOL in common Effluent Treatment Plant for entire GIDC Vatva Industries Estate, Environmental Clearances from Government for a Chemical Plant of BCPL and MOL i.e. licenses to operate a chemical manufacturing unit, other such commercial rights, registrations, employees with their experience, customer base, export market, raw material resources, management expertise, a large banking base etc. were also part of the Undertaking transferred. These intangibles are effectively a bouquet of Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 6 intangibles which are crucial factors expressly purchased by paying specifically for them and termed as Goodwill as was required by Accounting Standard-14 of the Institute of Chartered Accountants of India (ICAI). The assessee further submitted in the submissions that the said tangibles were not recorded in books of BCPL and MOL as their recording was prohibited by mandatory accounting standard-26 issued by the ICAI. Nevertheless these existed as part of the BCPL and MOL undertaking and prime movers of a business enterprise, also having business and commercial importance and value. The fact that the same is not recording in books of amalgamating company due to applicability of AS-26, does not mean they did not exist or that they have commercial value. The assessee submitted before the Assessing Officer that the total payment (in the form of shares and negotiable instrument a valid mode of payment) was for a tangible asset (at their book value) and also for the said tangibles). Section 43(6) Explanation 2(b) will not be applicable as that section deals with an asset already recorded in the books of amalgamating company whatever the value thereof. The section pre- supposes and deals already recorded in books of accounts and having a written down value (WDV). The Explanation to the said section deals block of asset already having a written down value in books of account of transferring company on which the depreciation has been allowed in preceding/previous year. The assessee further submitted that Section is not applicable when an asset is not in the books of account of the transferring company and there is no value of written down value and on which no depreciation is allowed in previous year. In the case of assessee company the bouquet of intangible was not at all recorded nor was having written down value in the books of transferring company and hence this provision is not applicable. The assets are recorded in books of account automatically when they are purchased against consideration. There is no such automatic method for recording as generated assets. As per accounting standard-26, the same cannot be brought in the books of accounts. The intention of Section 43(6) Explanation 2(d) is to prohibit claim of higher depreciation on depreciated asset existing in books of Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 7 transferred company. The assessee submitted that in the present assessee’s case, that is not the situation, depreciation is not proposed to increase from what was provided in books of transferor company and hence this Section is not applicable. The assessee further submitted that it is subsequently proved by successive balance sheet for the year after merger that assessee company which was on the verge of closure could not only turn asset to merge to become the driest dies producing income and one of the top three companies in India in this industry. As a direct result of these acquisitions and more particularly acquisition of intangibles acquired and paid for. Thus, it was for business and hence the claim was made for allowing the expenditure either as emerges expenses or depreciation on goodwill. The depreciation on goodwill is allowed in the assessment order for A.Y. 2006-07. The assessee has given copies of various premises environmental clearances, manufacturing process and other documents in support of the intangible assets related to know-how for five products, their formulations and production, techniques/technologies thereof. The assessee submitted the documents of all such intangible and allocation, total payment of Rs. 1013.82 lakhs and debited to goodwill in case of acquisition of Bodal Chemicals Pvt. Ltd. The total allocation of total amount between main intangible is based on professional and extra valuation/estimates of cost which the assessee company would have had to incur, had the intangibles were not obtained from the merging company. Rs. Lacs Intangibles Valuation Allocation of Actual Payment (Goodwill) Commercial Right to Use Common ETP 1,900.00 856.11 Technical Know How for 5 Products 250.00 112.65 Other residuary intangibles 100.00 45.06 Total 2,250.00 1,013.82 3.7. The assessee submitted the decision of Hon’ble Apex Court in case of Smifs Securities (2012) 348 ITR 302 in which in accordance with the Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 8 case of amalgamation, goodwill has arisen in the books of company by way of excess consideration paid by assessee over the value of the net assets acquired on amalgamating company, that Explanation 3 to Section 32 states that the expression ‘asset’ shall mean an intangible asset being know-how, patent, copy right, trade mark, licences, franchises or any other business or commercial rights of similar nature. 3.8 After taking cognizance of the assessee’s submission, the Assessing Officer observed that what is transferred is the undertaking in assessee company’s case which consists of existing tangible assets as well as other existing intangible assets. These intangible assets are not recorded in the books of accounts of the transferor company. The Assessing Officer observed that it may be true that goodwill is to be recognized in the books of transferee company as per prescribed accounting standard. However, this accounting treatment itself does not entitle the assessee to claim depreciation in its books of account. The claim of depreciation to be allowed under the Income Tax Act is governed by the provisions of the Act. As per Section 47 of the Income Tax Act, any transfer of a capital asset in a scheme of amalgamation by the amalgamating company to the amalgamated company is not to be taxed as capital gains. These assets were owned by the amalgamating company prior to amalgamation is proved by the definition of the word “undertaking” in the scheme of amalgamation which is duly approved by the Hon’ble High Court. After capitalization of goodwill as done in the books of the assessee at Rs. 10.13 crores and if depreciation is allowed on this account as claimed by the assessee, then Explanation (2) to Section 43(6) would become redundant. The Assessing Officer further observed that these assets were neither acquired by the amalgamating entities or the resulting entity, so there is no actual cost incurred by either of the entities with regard to these assets. The value appearing under the head goodwill in the balance sheet of the assessee on 31.03.2016 is purely a result of valuation or re-valuation done in comparison to the claim of amalgamation of M/s. Bodal Chemical Pvt. Ltd. into the assessee Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 9 company formerly known as M/s. Dintex Dyechem Ltd. While taking cognizance of the decision of the Hon’ble Apex Court in case of Smifs Securities (supra) held that solely laid down goodwill is included in the definition of intangible assets being any other business or commercial right of a similar nature. Thus, the Assessing Officer disallowed the claim of the assessee relating to allowability of depreciation on goodwill to the extent of cost of Rs. 2,53,45,655/-. Further, the Assessing Officer disallowed the assessee’s adjustment claim on account of brought forward losses on computation of MAT thereby stating that the book profit is an amount higher by Rs. 3,56,51,941/- and thus assessed the total income at Rs. 1,22,75,860/-. The Assessing Officer further directed that the assessee is not allowed to carry forward any unabsorbed depreciation and business losses to the subsequent assessment years. 4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. The Ld. DR relied upon the Assessment Order and submitted that these intangible assets are not recorded in the books of accounts of the transferor company. Though the goodwill is recognized in the books of amalgamated company, its quantification is not in consonance with the standards established by ICAS as the assessee company itself admitted that the amount claimed as deduction is being claimed in successive years as a portion of ‘Paid goodwill’, paid on account of amalgamation of Bodal Chemicals Pvt. Ltd. with the assessee company and also on account of amalgamation of Mindstone Organics Ltd. (MOL) with the assessee company. The entire undertaking of BCPL and MOL was merged in the assessee company. As per the scheme of amalgamation (scheme), in addition to various physical assets recorded and accounted for in the books of BCPL and MOL (amalgamating company), several other intangibles like technical know-how for new products of BCPL and MOL, Effluent Treatment disposal entitlement rights of BCPL and MOL in common Effluent Treatment Plant for entire GIDC Vatva Industries Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 10 Estate, Environmental Clearances from Government for a Chemical Plant of BCPL and MOL i.e. licenses to operate a chemical manufacturing unit, other such commercial rights, registrations, employees with their experience, customer base, export market, raw material resources, management expertise, a large banking base etc. were also part of the Undertaking transferred. But these intangibles were not quantified either in Bodal Chemicals Pvt. Ltd. or in Mindstone Organics Ltd. (MOL). Further, the Ld. DR submitted that if depreciation is allowed on the account that the assessee company capitalized the goodwill in its books, then Section 43(6) Explanation (2) will become redundant. The Ld. DR submitted that the decision of Hon’ble Apex Court in case of CIT vs. Smifs Securities Ltd. 348 ITR 302 will not be applicable in the present case as in the present case the assessee company was having amalgamation with the Mindstone Organics Ltd. prior to the amalgamation with Bodal Chemicals Pvt. Ltd. Besides this the assessee company has not demonstrated that this is actually a component of goodwill itself derived from the amalgamating company. Mere quantification without any basis cannot be taken as valuation for goodwill. Thus, the Ld. DR submitted that the CIT(A) was not right in allowing the depreciation on goodwill in the present assessee’s case. 6. The ld. A.R. submitted that the assessee claimed depreciation on goodwill amounting to Rs.2,53,45,655/- arising pursuant to amalgamation of M/s. Dintex Dyechem Ltd. with M/s Bodal Chemicals Private Limited. However, depreciation on goodwill was disallowed by the Ld. AO pursuant to order passed u/s 153A. The Ld. AO in his order stated that this asset is neither acquired by amalgamating entities nor resulting entity. The Ld. AR relied upon the decisions of Jurisdictional Tribunal in the case of M/s Urmin Marketing Private Limited vs. DCIT (ITA No.1806/Ahd/2019), AIA Engineering Limited - vs.- DCIT (ITA No. 397/Ahd/2024) and Suzlon Energy Limited - vs.- DCIT (ITA No. 198/Ahd/2023). The Ld. AR submitted that the goodwill arisen out of amalgamation is tax depreciable asset. It is settled position of law that Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 11 intangible assets include goodwill. Accordingly, the goodwill is eligible for tax depreciation as an intangible asset as the same is in line with AS-14. The scheme of amalgamation has been approved by Hon'ble Gujarat High Court. It was clearly provided in the scheme that difference of purchase consideration and net value of assets shall be recorded as Goodwill. The Ld. AR relied upon the following judgments:- i. CIT vs. Smifs Securities Ltd, [348 ITR 302] ii. PCIT vs. Zydus Wellness Ltd. [87 taxmann.com 82] iii. ACIT vs. GE Plastics India Ltd. - ITA No. 483/Ahd/2007 (ITAT Ahmedabad). 7. We have heard both the parties and perused all the relevant material available on record. 7.1 The grievance of the Revenue on the issue of disallowance of depreciation on goodwill is for the reason that there was no block of assets for the intangibles in the books of the amalgamating company and, therefore, the same cannot be recorded in the books of amalgamated company (the assessee) in view of Explanation 7 to section 43(1) of the Act. The said explanation to section 43(1) is reproduced below for the sake of clear understanding: Explanation 7.—Where, in a scheme of amalgamation, any capital asset is transferred by the amalgamating company to the amalgamated company and the amalgamated company is an Indian company, the actual cost of the transferred capital asset to the amalgamated company shall be taken to be the same as it would have been if the amalgamating company had continued to hold the capital asset for the purposes of its own business. This explanation is applicable in the case where any capital asset is transferred by the amalgamating company to the amalgamated company in the scheme of amalgamation. In the present case, the goodwill was not transferred by the amalgamating company to the amalgamated company. Therefore, Explanation-7 to section 43(1) had no application at all. Here, the goodwill was generated in the Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 12 course of amalgamation, as the assets and liabilities of the amalgamating companies were transferred to the amalgamated company, for which certain consideration was paid by the amalgamated company. The excess payment made by the amalgamated company over and above the value of the assets of the amalgamating companies was considered as goodwill by the amalgamated company (i.e. the assessee) and depreciation was claimed on this self-generated asset. Since the Explanation-7 to section 43(1) was not at all applicable in the transaction as made by the assessee, the Ground no. 1 as raised by the Revenue is found to be inapplicable to the facts of the case and is liable to be rejected. The Hon’ble Supreme Court in the case of Smifs Securities Ltd. (supra) has held that in the case of scheme of amalgamation, the difference between the cost of assets and the amount paid, constituted goodwill and that the amalgamated company in the process of amalgamation acquires capital right in the form of goodwill, as a result of which the market worth of the amalgamated company stands increased. Thus, the undisputed fact is that the goodwill was generated by the assessee company in the scheme of amalgamation and it was not transferred by the amalgamating company. The Revenue had not disputed the value of goodwill as generated by the assessee company in the course of amalgamation. It is not the case that this goodwill was generated on re-valuation of the assets. The goodwill was also identifiable with the intangible assets acquired for consideration, duly supported by independent valuation, which was not disputed by the Revenue. Such goodwill acquired against consideration constitutes a depreciable capital asset and the depreciation claimed on the goodwill was liable to be allowed u/s. 32 of the Act. There is no prohibition under the Act to disallow the depreciation on goodwill generated in the scheme of Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 13 amalgamation. Therefore, we do not find any merit in the ground as raised by the Revenue. Now dealing with the observations made in the order dated 16.10.2019 passed by the Tribunal in assessee’s own case for A.Y. 2007-08, 2008-09, 2009-10 when the assessment orders under Section 143 and Section 147 of the Act were challenged. In para 12 and para 13 of the said order it is observed as follows: “12. Now coming to the present facts of the case we note that Indeed there was no entry in the books of the transferor company for the intangible assets/goodwill being self generated assets. Thus in the backdrop of the above stated facts we are of the view that impugned transaction for claiming the deduction on account of the depreciation is an arrangement for claiming the higher depreciation which is unwanted under the provisions of law. Before parting, we are conscious to the fact that the assessee was allowed for depreciation in respect of such goodwill in the 1st year of amalgamation i.e. AY 2006- 07. There was no action either under Section 263 or 147 of the Act by the Revenue. Therefore we can safely presume that the claim of the depreciation of the assessee in the 1st year has attained finality. Admittedly the 1st year is the base assessment year from where the issue of depreciation is emanating. 13. The question arise once the depreciation has been allowed in the 1st year then the same can be disturbed in the subsequent year without having any change in the facts and circumstances. In our considered view, in such a case the principles of consistency shall be applied as held by the Hon’ble Bombay High Court in the case of PCIT vs. Quest Investment Advisors Ltd. reported in 96 taxmann.com 157 wherein it was held as under: …….. In view of the above, the assessee succeeds on the principle of consistency. Accordingly we set aside the order of the learned CIT(A) and direct the AO to allow the depreciation to the assessee. Hence the ground of appeal of the assessee is allowed.” It is pertinent to note that the assessee submitted the details of intangible and also the allocation thereby the total payment of Rs. 1013.82 lakhs and debited the same to goodwill in case of acquisition of Bodal Chemicals Pvt. Ltd. in A.Y. 2006-07 which is a base year for claiming goodwill. The specifications and valuation of the intangibles are as follows: Rs. Lacs Intangibles Valuation Allocation of Actual Payment (Goodwill) Commercial Right to Use Common ETP 1,900.00 856.11 Technical Know How for 5 250.00 112.65 Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 14 Products Other residuary intangibles 100.00 45.06 Total 2,250.00 1,013.82 But whether these details were looked into or mentioned by the both the parties before the Tribunal is not mentioned in the said order dated 16.10.2019. In fact the said order is also not mentioning that the proceedings under Section 153A was started on 09.10.2012 and was concluded by passing assessment order under Section 143(3) r.w.s. 153A vide assessment order dated 21.03.2014. Thus, the finding given in para 12 in the said order of the Tribunal is on presumption. Besides this the observation that the impugned transaction for claiming the deduction on account of the depreciation is an arrangement for claiming the higher depreciation will also not sustain if the Tribunal has been given the valuation of intangibles and its actual allocation relating to goodwill as mentioned in the Table hereinabove. So this cannot be termed as arrangement but the same is actual calculation as per the Accounting Standard -14 of the ICAI. 7.2 The assessee’s contention that these total allocation of total amount between main intangible is based on professional and extra valuation/estimates of cost which the assessee company would have occurred in the present market had the intangibles were not obtained from the merging company and it has depreciable value over the period, appears to be correct. This valuation of the intangible assets/goodwill was not challenged/disputed by the Revenue at the time of the amalgamation scheme approved by the Hon’ble High Court vide order dated 27.04.2006. Thus, the Revenue has accepted the valuation at that time and also in the course of assessment proceedings. Once the valuation of the intangible assets was accepted by the Revenue before the Hon’ble High Court wherein the valuation report was finalized and approved, at this juncture the Revenue cannot take different stand all together that the valuation is not justifiable and thus, goodwill cannot be termed as intangible assets. No material has been brought on record to Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 15 dispute the valuation of the intangible assets. Therefore, the CIT(A) has rightly allowed the depreciation on the goodwill as it is recognized method in accounting standard-26 issued by the ICAI that the intangible assets also has depreciable value over the period and the same should be taken into account. It is held by Hon’ble Supreme Court in case of CIT vs. Smifs Securities Ltd. (2012) 348 ITR 302 (SC) that goodwill arising upon amalgamation is an intangible asset being a “business or commercial right of similar nature” and falls within the scope of assets eligible for depreciation under Section 32(1)(ii) of the Income Tax Act, 1961. The scheme of amalgamation under which the goodwill arose has been approved by the Hon’ble High Court of Gujarat which clearly set out that the consideration paid over and above the assets should be treated as goodwill and the Revenue has accepted the said scheme before the Hon’ble High Court which is mentioned in the said order passed by the Hon’ble High Court. Since the valuation of assets, including goodwill submitted before the Hon’ble High Court was not disputed by the Revenue and no objections were raised before the Hon’ble High Court regarding the quantum, nature or basis of goodwill therein, therefore, disregarding the goodwill would amount to undermining the judicial sanctity of the order of the Hon’ble High Court which has attained the finality. Once the Revenue has accepted the goodwill recorded being part of the consideration structure approved by the Hon’ble High Court the same has to be accepted for taxation purpose. The Hon’ble Apex Court in case of Smifs Securities Ltd. (supra) recognized that where goodwill is acquired against consideration, it constitutes depreciable capital assets. Thus, prior to the amendment brought by the Finance Act, 2021 the same has to be allowed by the Revenue. Thus, the CIT(A) has rightly allowed the same and there is no need to interfere with the findings of the CIT(A). Thus, Ground No. 1 of Revenue’s appeal is dismissed. 8. Ground No. 2: Whether the Ld. CIT(A) has erred in allowing the deduction of unabsorbed business loss/depreciation under clause (iii) of explanation (1) to Section 115JB(2) without appreciating the Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 16 fact that there was accumulated profit in the books of the assessee on account of amalgamation. 8.1. The Ld. DR submitted that it is a matter of fact that after adjustment of credit balance of general reserve & accumulated balances of amalgamation company, the question of brought forward losses and unabsorbed depreciation does not arise. The Ld. DR relied upon assessment order. 9. The Ld. AR submitted that the assessee claimed deduction amounting to Rs.3,56,51,941/- on account of clause (iii) to Explanation 1 to Section 115JB. However, the same was disallowed by the AO stating that after adjustment of credit balance of general reserve and accumulated balances of M/s. Bodal Chemicals Pvt. Ld. (amalgamating company) there will be no brought forward losses and unabsorbed depreciation. The Ld. AR submitted that firstly, the brought forward losses and unabsorbed depreciation allowed in respondent's own case. Further, without prejudice to above, it is stated that in the assessment order issued u/s 143(3) of the Act dated 31.12.2008, the deduction pertaining to brought forward losses and unabsorbed depreciation allowed by the AO was amounting to Rs. 2,13,32,640/- as against claimed by respondent of Rs.3,56,51,941/- on the grounds that figures of unabsorbed depreciation and brought forward losses has to consider on year to year basis and not consolidated basis. Further the above addition was deleted by the CIT-(A) vide its order dated 03.09.2010. Being aggrieved by the order of the CIT-(A), revenue filed appeal before Tribunal. In this regard, Tribunal has issued direction to follow Amline Textiles (P) Ltd. vs. I.T.O. [27 SOT 152]. The Ld. AR submitted that in original assessment neither the CIT (A) nor Tribunal or the Dept. has directed to adjust the general reserves and amalgamating company reserves while calculating brought forward losses and unabsorbed depreciation available for set off. The AO in the assessment order passed u/s 143(3) of the Act allowed the deduction of brought forward loss and unabsorbed depreciation considered on year on year basis as against Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 17 claimed by the respondent by considering on cumulative basis. The action of the AO was also affirmed by the Tribunal. Then putting new theory for set off losses against general reserves under MAT in regard to which no incriminating material has been found by department during search and seizure is invalid. Hence, the same needs to be deleted. As regards the second argument relating to creation of General Reserve by transfer other than from P&L, without prejudice to above the Ld. AR further submitted that it is not necessary that the General Reserves are always created out of accumulated profits. General Reserves can be created in many ways including following transactions; general reserves can arise out of revaluation of certain assets due to amalgamation. The Ld. AR relied upon the decision of Mumbai Tribunal in the case of ITO vs. United Estates Pvt. Ltd (20 taxmann.com 588). In the present case from Note-15 of Audited Financials of FY 2001-02 it is clear that general reserve was created on amalgamation of three other companies with M/s Bodal Chemicals Pvt. Ltd as per the approved scheme of Hon'ble Gujarat High Court. As regards to last day of Immediately preceding year should be considered as per Section 115JB, without prejudice to above the Ld. AR further submitted that calculation should be made as per P&L Account and the loss brought forward from earlier year i.e. Losses brought forward of Rs.11,37,52,126/- as on 01.04.2005 should be considered for calculation of Book Profit as per provisions of Section 115JB of the Act and any adjustment made for adjusting accumulated profits of M/s Bodal Chemicals Pvt. Ltd should not be considered as the necessary entries giving effect to amalgamation was passed after 01.04.2005 as the order of Hon’ble High Court of Gujarat was passed on 27.04.2006. The Ld. AR relied upon the decision of Hon'ble Delhi High Court in the case of CIT vs. Sumi Motherson Innovative Engg. Ltd. (195 Taxman 353). 10. We have considered the rival contentions. The assessee had claimed deduction of Rs. 3,56,51,941/- on account of unabsorbed loss in the computation of book profit u/s. 115JB of the Act for the assessment Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 18 year 2006-07. As per clause (iii) of Explanation 1 of section 115JB (2) of the Act, lower of the amount of the brought forward loss or unabsorbed depreciation as per books of accounts, is required to be reduced from the profit as per profit and loss account. The working of unabsorbed business loss of Rs. 3,56,51,941 reduced from the profit by the assessee was given as under: - Asst. Year Net loss during the year Business loss Depreciation Considered by Ld. A.O. 2002-03 2,76,43,882 1,15,05,619 1,61,38,263 1,15,05,619 2003-04 1,54,30,281 - 1,54,30,281 - 2004-05 4,78,57,068 3,10,88,183 1,67,68,885 1,67,68,885 Total 4,25,93,802 4,83,37,429 2,82,74,504 Less: Business loss utilized in A.Y. 2005-06 69,41,861 - 6,4,1861 Amount available for deduction in A.Y. 2006-07 3,56,51,941 4,83,37,429 2,13,32,643 Lower of unabsorbed depreciation on business loss 3,56,51,941 10.1 The Assessing Officer, however, had re-worked the deduction for business loss/depreciation, after taking into account the merger of M/s. Dintex Dyechem Ltd., and accordingly business loss of Rs. Nil and unabsorbed depreciation of Rs. 57,27,268/- was worked out. The working given by the Assessing Officer in the assessment order is found to be as under:- Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 19 Since the business loss re-worked by the Assessing Officer was Nil, no deduction was allowed on account of unabsorbed business loss/depreciation in the computation of book profit, as the lower of the two figures was required to be taken into consideration. 10.2 It is found that in working out the unabsorbed depreciation and business loss for computation of book profit u/s. 115JB of the Act, the Assessing Officer had taken into account the general reserve of M/s Bodal Chemical Ltd., pre- and post-amalgamation. This was done on the presumption that the general reserve represented the accumulated profit of M/s Bodal Chemical Ltd. The Ld. CIT(A) has, however, given a finding that the general reserve was created on amalgamation of three other companies with Bodal Chemical Ltd. as per approved scheme of Hon’ble Gujarat High Court. Under the circumstances, the Ld. CIT(A) held that the general reserve of the company didn’t represent purely accumulated profit. This fact has not been controverted by the Revenue. The Assessing Officer would have been correct to adjust the general reserve with the brought forward losses, only if the general reserve was created out of accumulated profits. No such specific finding was given by the Assessing Officer in the assessment order. Therefore, the adjustment of general reserve and profit and loss credit balance with the accumulated business loss/depreciation, to work out the book profit, cannot be held as correct. The ld. CIT(A) has given a categorical finding that the assessee had suffered loss continuously in the last four years and no material was brought on record that such loss was set off against any profit of the subsequent year in determining the book profit of the assessee company, after the year in which such loss was suffered. This finding of the ld. CIT(A) has also not been disputed by the Revenue. Under such circumstances, we do not find any reason to interfere with the order of ld. CIT(A) on this issue. 10.3 As regards quantum of loss of Rs. 3,56,51,941/- adjusted by the assessee while working out the book profit, it has been brought to our Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 20 notice that this issue was adjudicated by this Tribunal in the assessee’s own case in ITA No. 3174/Ahd/2010 dated 30.06.2011. The finding given by the Tribunal in this regard in the said order is found to be as under: “We have considered rival submissions and perused the material on record and have gone through the orders of the authorities below and the Tribunal decision in the case of Amline Textiles (P) Ltd. (supra). We find that A.O. has noted the figures of business losses and depreciation on page-2 of the assessment order. The A.O. had noted that the assessee has claimed cumulative figures of unabsorbed depreciation and brought forward business loss whichever is less instead of computing the least of the two year-wise. As per the assessee, brought forward business loss is of Rs 3,56,51,941/- and brought forward unabsorbed depreciation of Rs 4,83,37,429/- and hence, as per the assessee, brought forward business loss of Rs 356.51 lakhs being lower than brought forward unabsorbed depreciation should be reduced from the book profit to be computed u/s. 115JB. But the A.O. was not satisfied. He has re worked such working on page 3 of the assessment order and has worked out that when year-wise figure of business loss or depreciation whichever is lower is taken, the assessee is eligible for deduction of Rs 213.32 lakhs only. When the assessee carried the matter before the Ld CIT (A), the Ld. CIT (A) directed the A.O to consider unabsorbed depreciation and business losses together for all the years for computing the book profit u/s 115JB and while giving direction to the A.O, the Ld CIT(A) has followed the Tribunal decision in the case of Amline Textiles (P) Ltd.(supra). As per this Tribunal decision, aggregate amount of loss brought forward or unabsorbed depreciation, whichever is less as per the books of account is allowable deduction in computing the book profit u/s. 115JB. We find that the direction given by the Ld CIT (A) is somewhat confusing and hence, we modify the direction given by him and direct the A.O to decide this issue in line with the Tribunal decision rendered in the case of Almine Textiles (P) Ltd. (supra). The A.O should consider aggregate amount of losses brought forward or unabsorbed depreciation, whichever is less as per the books of accounts and the same should be allowed as deduction in computing book profit u/s 115JB. This ground of the Revenue is allowed for statistical purposes in terms indicated above.” In view of the direction as given above, we deem it proper to set aside this issue to the file of the Assessing Officer with a direction to correctly work out the quantum of brought forward business loss and unabsorbed depreciation in accordance with the above referred decision. The AO may allow deduction u/s. 115JB of the Act of the amount of business loss or unabsorbed depreciation, whichever is less, in order to compute the book profit. The Ground No. 2 is partly allowed for statistical purposes. 11. As regards to Ground No. 3 and 4, the same are general in nature hence not adjudicated. Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 21 12. Thus, IT(SS)A No. 27/Ahd/2021 for A.Y. 2006-07 filed by the Revenue is partly allowed for statistical purpose. 13. IT(SS)A.No.28/Ahd/2021 : Revenue’s appeal for Asst.Year 2007-08 Grounds “1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in holding that any addition during the assessment u/s 153A has to be confined to the incriminating material found during the course of search u/s. 132(1) of the Act, even though, there is no such stipulation in sec. 153A of the Act. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that sec 153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assess or re-assess the total income of those six assessment years, and that the scheme of assessment or re-assessment of the total income of a person searched will be brought to naught if no addition is allowed to be made for those six assessment years in the absence of any seized incriminating material. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that while computation of undisclosed income of the block period u/s 158BB was to be made on the basis of evidence found as a result of search of requisition of books of accounts, there is no such stipulation in sec. 153A and sec. 153BI specifically states that the provisions of Chapter-XIV-B, under which sec. 158BB falls would not be applied where a search was initiated u/s 132 after 31/5/2003. 4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that assessment in relation to certain issues not related to the search and seizure may arise in any of the said six assessment years after the search u/s. 132 is conducted in the case of the assessee, and that if the interpretation of the ld. CIT(A) were to hold it will not be possible to assess such income in the 153A proceedings, while no other parallel proceedings to assess such other income can be initiated leading to no possibility of assessing such other income, which could not have been the intention of the legislature. Further, the AO is duty bound to assess correct income of assessee as held in various judgments.” Ground No.1 to 4 : Initiation of search proceedings is bad in law and unlawful as the order u/s.143(3) of the Act has already been passed. Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 22 13.1. The assessee company filed its original return for AY 2007-08 declaring total income of Rs.5,66,22,990/- on 31.10.2007. The assessment proceedings u/s 143(3) were completed on 31.12.2009 determining total Income at Rs.8,27,65,735/-after making various disallowances. Consequently, the assessee preferred appeal to CIT-(A) who allowed various reliefs via order dated 28.02.2011. The proceeding before ITAT for AY 2007-08 completed on 16.10.2019. Meanwhile proceedings u/s 263 of the Act was initiated and order u/s 263 of the Act was passed on 04.01.2012. Being aggrieved by the order of the CIT, the assessee filed appeal before ITAT wherein the decision was pronounced in favour of assessee on 12.04.2016. On 09.02.2012 search and seizure operation was carried out on the premises of assessee. Thereafter the notice u/s 153A was issued on 09.10.2012. In response to the same, the assessee filed return of income as filed u/s 139(1) dated 16.01.2013. In respect of the assessee’s case, no incriminating documents were found during the course of search as per the assessee’s submissions. The Assessment order was passed u/s 143(3) r.w.s 153A dated 21.03.2014 thereby making following additions:- i) Disallowance under Normal Provisions: - Depreciation on Goodwill : Rs.1,90,09,241/- - Addition u/s 145A : Rs. 86,41,737/- - Unabsorbed Depreciation of MOL : Rs.2,77,65,820/- Being aggrieved by the assessment order the assessee preferred appeal before the CIT(A). The CIT-(A) deleted the additions made by the AO and allowed the appeal of the assessee. 14. The Ld. DR submitted that the documents found was that of the assessee company only and the initiation of the proceedings u/s 153A of the Act itself are just and proper. 15. The Ld. AR submitted that the AO has failed to appreciate the fact that completed assessments cannot be interfered with by Assessing Officer while making assessment under section 153A only on basis of Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 23 some incriminating material unearthed during course of search which was not produced or not already disclosed or made known in course of original assessment. The Ld. AR relied upon the following judgments:- i. Pr. CIT vs. Saumya Construction (P) Ltd. (2016) 387 ITR 529 ii. CIT vs. Kabul Chawla (2015) 61 taxmann.com 412 (Delhi HC) iii. Jignesh Hiralat Shah vs. ACIT (IT (881 A No. 100 to 108 / Ahd / 2021). iv. Shri Dineshbhai P. Sarothia vs. ACIT (ITA No. 744 / RJJ / 2014). v. ACIT vs. Shardaben Arvindbhai Patel (IT(SS)A No. 448 & 465/ AHP/2019). vi. Ankur Chemfood Limited vs. Pr. CIT (ITA No. 93 / Ahd / 20211. vii. DCIT vs. Amit Madanlal Gupta (IT(SS)A No. 23 / Ahd / 2021). 16. We have heard both the parties and perused all the relevant material available on record. The Ld. AR, at the time of hearing, pointed out that there is no incriminating document found during the course of search which was not accounted for in the books of accounts and hence the assessment proceedings conducted by the Assessing Officer is illegal and void ab initio. From the perusal of the records, it appears that there is no incriminating material upon which the Assessing Officer has given any finding. In fact the material which was taken as base is not relevant for the present assessment year at all. Thus, the CIT(A) was right in allowing this legal ground. There is no need to interfere with the findings of the CIT(A). The case laws relied by the Ld. AR are relevant in the present case. Hence, the Ground Nos. 1 to 4 for AY 2007-08 filed by the Revenue are dismissed. 17. Since the assessment itself does not sustain and the Ground No. 1 to 4 of the Revenue’s appeal is dismissed, there is no need to adjudicate Ground No. 5 to 10 of the Revenue’s appeal. Yet we don’t find any merit in the grounds taken by the Revenue, as discussed hereinunder. Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 24 18. Ground No.5 Disallowance of Depreciation on Goodwill in pursuant to explanation to section 32(1), 43(1) and 43(6)to the tune of Rs.1,90,09,241/-under normal provisions of the Act “5. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 1,90,09,241/- made by the AO on account disallowance of depreciation on Goodwill” As regards to Ground No. 5 already adjudicated in ITA (SS)No. 27/Ahd/2021 for A.Y. 2006-07 which is applicable in this year as well. Since the assessment itself does not sustain and the Ground No. 1 to 4 of the Revenue’s appeal is dismissed, there is no need to adjudicate Ground No. 5 of the Revenue’s appeal. 19. Ground No. 6 : Disallowance of CENVAT Credit of Rs.86,1,737/- 6. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.86,41,737/- made by the A.O. on account of Unutilized CENVAT Credit u/s 145A of the Act. 19.1 The Ld. DR submitted that the Assessing Officer has rightly disallowed the Cenvat Credit as the assessee has not given the details of the components which are outside the threshold of the Cenvat Credit. The Ld. DR relied upon the Assessment Order. 20. The Ld. AR submitted that the action of assessee is tax neutral. The assessee has followed exclusive method of accounting and therefore the closing stock has not been loaded with the taxes and dues as contemplated u/s 145A of the Act. The assessee is following exclusive method of accounting consistently, hence the action of the respondent is revenue neutral. Exclusive method of accounting postulates exclusion of tax, dues etc. embedded in purchases of raw material as well as in corresponding sale. Such taxes are accounted for separately for the purposes of discharging liabilities. The effect of such accounting does not ultimately have any impact on the ultimate profitability when followed Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 25 year after year. The above issue has been covered in favour of assessee by following judicial precedents: i. DCIT vs. M /s. Adani Gas Ltd ITA No. 775/Ahd/2014. ii. ACIT vs. Narmada Chematur Petrochemicals Ltd [2010] 194 Taxman 103 (Gujarat) 21. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee has consistently followed exclusive method of accounting and the Revenue has not disputed this method. The CENVAT credit taxes, duties and dues are embedded in purchase of raw-materials as well as in corresponding sales. The contention of the Ld. AR that the effect of such accounting does not ultimately have any impact on the profitability when followed year after year is correct in the light of decision of the Hon’ble Gujarat High Court in the case of Narmada Chematur Petrochemicals Ltd. (supra). Thus, the Ground No. 6 is dismissed. 22. Ground No. 7 Disallowance of Set off of Unabsorbed Depreciation pertaining to AY's prior to AY 2002-03 amounting to Rs.2,77,65,820/- 7. On the facts and circumstances of the case and in law, the Ld. CIT(A) earned in deleting the addition of Rs 2,77,65,820/- made by the A.O on account of disallowance of claim of set off of unabsorbed depreciation. 22.1 The Ld. DR relied upon the assessment order. 23. The Ld. AR submitted that alternatively, opening stock of succeeding years to be taken at increased value. Without prejudice above, and in the alternative, the AO ought to have increase the value of opening stock by the amount of unutilized CENVAT Credit of the earlier years. In the year under consideration, the assessee has taken set off of unabsorbed depreciation in AY 2007-08 amounted to Rs.2,77,65,820/-. Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 26 [The original claim of depreciation pertaining to AY 1996-97,1997-98 and 1998-99 was Rs.1,52,18,528/- which was increased to Rs.2,77,65,820/- after giving appeal effect to ITATs Order]. The AO has disallowed the same on grounds that unabsorbed depreciation prior to AY 2002-03 was allowed to be carry forward for only eight assessment years. The Ld. AO has made the above additions without any nexus to incriminating material found during search and seizure. The Ld. AR submitted that the set off of unabsorbed depreciation prior to AY 2002-03 allowed by ITAT in assessee’s own case. In assessee’s own case, the above addition was made via u/s 263. The assessee filed appeal before ITAT against order u/s 263 wherein, the ITAT allowed set off of unabsorbed depreciation of years prior to AY 2002-03 against income of AY 2007-08 via its order dated 12.04.2016. 24. We have heard both the parties and perused all the relevant material available on record. The set-off of unabsorbed depreciation prior to the Assessment Year 2002-03 was allowed by the Tribunal in assessee’s own case and, in fact, the said addition/disallowance of set-off of unabsorbed depreciation pertaining to the present assessment year was made in respect of the directions issued by the PCIT u/s 263 of the Act. The assessee filed appeal before the Tribunal against the order u/s 263, wherein the Tribunal allowed set-off of unabsorbed depreciation of years prior to AY 2002-03 against income of AY 2007-08 vide order dated 12.04.2016 and, therefore, the CIT(A) has rightly set-off of unabsorbed depreciation pertaining to the years prior to AY 2002-03 and the assessee has taken set-off of unabsorbed depreciation in AY 2007-08. Thus, the Ground No. 7 is dismissed. 25. Grounds 8 and 9 are as follows: 8. On the facts and circumstances of the case and in law, the Ld CIT(A) erred in not going to the merits of the additions/disallowance made by the AO in the assessment order and decided the appeal in favour of assessee on technical ground. 9. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the AO. Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 27 As relates to Ground No. 8 and 9, the same are general in nature, hence not adjudicated at this juncture. 26. Hence, IT(SS)A No. 28/Ahd/2021 for A.Y. 2007-08 filed by the Revenue is dismissed. 27. IT(SS)A.No.29/Ahd/2021 : Revenue’s appeal for Asst.Year 2008-09 Grounds “1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in holding that any addition during the assessment u/s. 153A has to be confined to the incriminating material found during the course of search u/s 132(1) of the Act, even though, there is no such stipulation in sec 15A of the Act. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that sec. 153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assess or re-assess the total income of those six assessment years, and that the scheme of assessment or re-assessment of the total income of a person searched will be brought to naught if no addition is allowed to be made for those six assessment years in the absence of any seized incriminating material. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that while computation of undisclosed income of the block period u/s.158BB was to be made on the basis of evidence found as a result of search or requisition of books of accounts, there is no such stipulation in sec. 153A and sec. 153BI specifically states that the provisions of Chapter-XIV-B, under which sec. 158BB falls would not be applied where a search was initiated us. 132 after 31/5/2003. 4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that assessment in relation to certain issues not related to the search and seizure may arise in any of the said six assessment years after the search u/s 132 is conducted in the case of the assessee, and that if the interpretation of the ld. CIT(A) were to hold it will not be possible to assess such income in the 153A proceedings while no other parallel proceedings to assess such other income can be initiated leading to no possibility of assessing such other income, which could not have been the intention of the legislature. Further, the AO is duty bound to assess correct income of assessee as held in various judgments. Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 28 Ground No.1 to 4 Initiation of search proceedings is bad in law and unlawful as the order u/s 143(3) of the Act has already been passed. 27.1. The assessee company filed its original return for AY 2008-09 declaring total income of Rs. 13,34,39,600/- on 29.09.2008. The assessment proceedings u/s 143(3) were completed on 27.12.2010 determining total Income at Rs. 15,10,54,901/-after making various disallowances. Consequently, the assessee preferred appeal to CIT-(A) who allowed various relief via order dated 08.11.2011. The proceeding before ITAT for AY 2008-09 completed on 16.10.2019. On 09.02.2012 search and seizure operation was carried out on the premises of assessee. Thereafter the notice u/s 153A was issued on 09.10.2012. In response to the same, the assessee filed return of income as filed u/s 139(1) dated 16.01.2013. During the course of hearing, various queries were raised. In response to the same, the assessee submitted various replies however, the AO did not appreciate the facts stated there in and made additions. The AO in the order passed u/s 143(3) r.w.s 153A dated 21.03.2014 made following disallowances:- (i) Disallowance under Normal Provisions:- Depreciation on Goodwill -Rs.15,10,81,300/- Addition u/s 145A Rs. 2,10,26,875/- Disallowance u/s 14A of the Act Rs. 1,12,031/- The CIT-(A) deleted the additions made by the AO and allowed the appeal. 28. The Ld. DR submitted that the documents found was that of the assessee company only and the initiation of the proceedings u/s 153A of the Act itself are just and proper. 29. The Ld. AR submitted that in respect of the assessee’s case, no incriminating documents were found during the course of search which has not been accounted in books of accounts and hence the search proceedings are illegal and void-ab-initio. The AO has failed to appreciate the fact that completed assessments can be interfered with by Assessing Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 29 Officer while making assessment under section 153A only on basis of some incriminating material unearthed during course of search which was not produced or not already disclosed or made known in course of original assessment. The Ld. AR relied upon the following decisions: i. Pr. CIT vs. Saumya Construction (P) Ltd. [2016] 387 ITR 529 (Gui) ii. CIT vs. Kabul Chawla (2015) 380 ITR 573 (Delhi HC) iii. Jignesh Hiralal Shah vs. ACIT (IT(SS)A No. 100 to 106/ Ahd/2021). iv. Shri Dineshbhai P. Sarothia vs. ACIT (ITA No. 744 /RJT/2014). v. ACIT vs. ShardabenArvindbhai Patel (IT (SS) A No. 448 & 465 / AHD / 2019). vi. Ankur Chemfood Limited vs. Pr. CIT (ITA No. 93/ Ahd/2021). vii. DCIT vs. Amit Madanlal Gupta (IT (SS) A No. 23/ Ahd/2021). 30. We have heard both the parties and perused all the relevant material available on record. The Ld. AR, at the time of hearing, pointed out that there is no incriminating document found during the course of search which was not accounted for in the books of accounts and hence the search proceedings conducted by the Assessing Officer is illegal and void ab initio. From the perusal of the records, it appears that there is no incriminating material upon which the Assessing Officer has given any finding. In fact the material which was taken as base is not relevant for the present assessment year at all. Thus, the CIT(A) was right in allowing this legal ground. There is no need to interfere with the findings of the CIT(A). The case laws relied by the Ld. AR are relevant in the present case. Hence, the Ground Nos. 1 to 4 for AY 2008-09 filed by the Revenue are dismissed. 31. Since the assessment itself does not sustain and the Ground No. 1 to 4 of the Revenue’s appeal is dismissed, there is no need to adjudicate Ground No. 5 to 10 of the Revenue’s appeal. Yet we don’t find any merit in the grounds taken by the Revenue, as discussed hereinunder. Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 30 32. Ground No. 5: Disallowance of Depreciation on Goodwill in pursuant to explanation to section 32(1), 43(1) and 43(6) to the tune of Rs.,50.81,300/-under normal provisions of the Act:- 5. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 1,50,81,301/- made by the AO on account disallowance of depreciation on Goodwill 32.1 The same is identical to Ground No. 1 of Revenue’s appeal being IT(SS)A No. 27/Ahd/2021 for AY 2006-07, hence the finding given in the said appeal hereinabove will be application herein. Therefore, the Ground No. 5 is dismissed. 33. Ground No.6 : Disallowance of CENVAT Credit of Rs.2,10,26,875/- 6. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs 2,10,26,875/- made by the A.O on account of Unutilized CENVAT Credit u/s 145A of the Act. 33.1 The same is identical to Ground No. 6 of Revenue’s appeal being IT(SS)A No. 28/Ahd/2021 for AY 2007-08, hence the finding given in the said appeal hereinabove will be application herein. Therefore, the Ground No. 6 is dismissed. 34. Ground No.7 : Disallowance u/s 14A amounted to Rs.1,12,031/-. 7. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 1,12,031/- made by the A.O. on account of disallowance u/s 14A of the Act. 34.1 The Ld. DR relied upon the Assessment order. 35. The Ld. AR submitted that for the year under consideration as against increase in investment of Rs.52,04,770/- the increase in own funds were Rs.11,63,09,979/-. It is clearly evident from same that assessee had sufficient own funds for investment. This aspect of huge Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 31 surplus funds is not disputed by the AO. As the assessee has sufficient own funds in that case disallowance u/s 14A cannot be made. The assessee placed reliance on following judgments: i. Pr. CIT vs. Sintex Industries Ltd.[20181 93 taxmann.com 24 (SC) ii. CIT vs. Torrent Power Ltd. [2014] 44 taxmann.com 441 (Gujarat) iii. DCIT vs Voltamp Transformers Ltd (ITA No. 2544/AHD/2014 dt 26-9-2017) iv. Pr. CIT vs. India Gelatine and Chemicals Ltd [20161 66 taxmann.com 356 (Gujarat) 36. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee is having his own funds which increased in the present assessment year and therefore the investment made by the assessee also increased. The revenue did not dispute that the assessee is having its own huge surplus funds for investment. Therefore, the disallowance u/s 14A made by the Assessing Officer is not justifiable. The CIT(A) was correct in deleting the same. Hence, ground No. 7 is dismissed. 37. Ground No. 8, 9 and 10 are as follows: 8. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not going to the merits of the additions/disallowance made by the AO in the assessment order and decided the appeal in favour of assessee on technical ground 9. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A. O 10. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.” Ground No. 8, 9 and 10 are general in nature and therefore, not adjudicated at this juncture. 38. Thus, IT(SS) No. 29/Ahd/2021 for A.Y. 2008-09 filed by the Revenue is dismissed. Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 32 39. IT(SS)A.No.30/Ahd/2021 : Revenue’s appeal for Asst.Year 2009-10 “1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in holding that any addition during the assessment u/s. 153A has to be confined to the incriminating material found during the course of search w/s. 132(1) of the Act, even though, there is no such stipulation in sec 153A of the Act. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that sec. 153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assess or re-assess the total income of those six assessment years, and that the scheme of assessment or re-assessment of the total income of a person searched will be brought to naught if no addition is allowed to be made for those six assessment years in the absence of any seized incriminating material. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that while computation of undisclosed income of the block period u/s.158BB was to be made on the basis of evidence found as a result of search or requisition of books of accounts, there is no such stipulation in sec. 153A and sec. 153BI specifically states that the provisions of Chapter-XIV-B, under which sec. 158BB falls would not be applied where a search was initiated u/s 132 after 31/5/2003. 4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that assessment in relation to certain issues not related to the search and seizure may arise in any of the said six assessment years after the search u/s 132 is conducted in the case of the assessee, and that if the interpretation of the ld. CIT(A) were to hold it will not be possible to assess such income in the 153A proceedings while no other parallel proceedings to assess such other income can be initiated leading to no possibility of assessing such other income, which could not have been the intention of the legislature. Further, the AO is duty bound to assess correct income of assessee as held in various judgments. Ground no.1 to 4 : Initiation of search proceedings is bad in law and unlawful as the order u/s 143(3) of the Act has already been passed. 39.1 The assessee company filed its original return for AY 2009-10 declaring total loss of Rs.2,33,15,728/- on 30.09.2009. The assessment proceedings u/s 143(3) were completed on 27.12.2011 determining total Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 33 loss at Rs.11,89,00,324/-after making various disallowances. On 09.02.2012 search and seizure operation was carried out on the premises of assessee. Thereafter the notice u/s 153A was issued on 09.10.2012. In response to the same, the assessee filed return of income as filed u/s 139(1) dated 16.01.2013. During the course of hearing, various queries were raised. In response to the same, the assessee submitted various replies. The Ld. AO in the order passed u/s 143(3) r.w.s 153A dated 21.03.2014 made following disallowances:- (i) Disallowance under Normal Provisions:- Depreciation on Goodwill of Rs.1,13,10,975/- Marked to Market loss on hedging of Foreign Exchange of Rs.9,85,57,184/- Disallowance u/s 14A of the Act of Rs.2,07,518/- The CIT-(A) deleted the additions made by the AO and allowed the appeal. 40. The Ld. DR submitted that the documents found was that of the assessee company only and the initiation of the proceedings u/s 153A of the Act itself are just and proper. 41. The Ld. AR submitted that the AO made additions which has no nexus to the incriminating material was found during the search. In respect of the assessee’s case, no incriminating documents were found during the course of search which has not been accounted in books of accounts and hence the search proceedings are illegal and void-ab-initio. The AO has failed to appreciate the fact that completed assessments can be interfered with by Assessing Officer while making assessment under Section 153A only on basis of some incriminating material unearthed during course of search which was not produced or not already disclosed or made known in course of original assessment. The Ld. AR relied upon the following judgments:- i. Pr. CIT vs. Saumya Construction (P) Ltd. [2016] 387 ITR 529 ii. CIT vs. Kabul Chawla (2015) 61 taxmann.com 412 (Delhi HC) Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 34 iii. Jignesh Hiralat Shah vs. ACIT (IT (SS) A No. 100 to 108 / Ahd / 2021). iv. Shri Dineshbhai P. Sarothia vs. ACIT (ITA No. 744 / RJJ / 2014). v. ACIT vs. Shardaben Arvindbhai Patel (IT (SS) A No. 448 & 465 / AHP / 2019). vi. Ankur Chemfood Limited vs. Pr. CIT (ITA No. 93 / Ahd / 2021). vii. DCIT vs. Amit Madanlal Gupta (IT (SS1 A No. 23 / Ahd / 2021). 42. We have heard both the parties and perused all the relevant material available on record. The Ld. AR, at the time of hearing, pointed out that there is no incriminating document found during the course of search which was not accounted for in the books of accounts and hence the search proceedings conducted by the Assessing Officer is illegal and void ab initio. From the perusal of the records, it appears that there is no incriminating material upon which the Assessing Officer has given any finding. In fact the material which was taken as base is not relevant for the present assessment year at all. Thus, the CIT(A) was right in allowing this legal ground. There is no need to interfere with the findings of the CIT(A). The case laws relied by the Ld. AR are relevant in the present case. Hence, the Ground Nos. 1 to 4 for AY 2009-10 filed by the Revenue are dismissed. 43. Since the assessment itself does not sustain and the Ground No. 1 to 4 of the Revenue’s appeal is dismissed, there is no need to adjudicate Ground No. 5 to 10 of the Revenue’s appeal. Yet we don’t find any merit in the grounds taken by the Revenue, as discussed hereinunder. 44. Ground No.5 Disallowance of Depreciation on Goodwill in pursuant to explanation to section 32(1),43(1) and 43(6) to the tune of Rs.1,13,10,975/-under normal provisions of the Act:- 5. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs 1,13,10,975/- made by the AO on account disallowance of/depreciation on Goodwill Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 35 44.1 The same is identical to Ground No. 1 of Revenue’s appeal being IT(SS)A No. 27/Ahd/2021 for AY 2006-07, hence the finding given in the said appeal hereinabove will be application herein. Therefore, the Ground No. 5 is allowed/dismissed. 45. Ground No.6 : Disallowance of Marked to Market loss on hedging of foreign exchange of Rs.9,85,57,184/- 6. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs 9,85,57,184/- made by the A.O on account of marked to market loss on hedging of foreign exchange. 45.1 The Ld. DR relied upon the Assessment Order. The Ld. DR submitted that during the year the assessee company has entered into forward exchange contracts. As on 31.03.2009, the assessee company had outstanding foreign exchange derivatives contracts aggregating to Rs. 8366.34 lacs. The assessee company has given details of anticipated /projected losses on the outstanding foreign exchange derivatives contracts by marking the same to the market as on the Balance Sheet Date. The Ld. DR submitted that the decision of the Apex Court in case of Woodward Governor (supra) decided the issue in favour of assessee and held that the department taxed the accrued foreign gains, however, derived foreign exchange gains as on the date of balance sheet date. Moreover, marked to market losses are contingent in nature as they arise out of the past contracts entered into by the assessee and whether they will actually occur or not cannot be reliable estimated until the occurrence of future uncertain events which is beyond the control of the assessee. The assessee has no liability to pay difference amount between the agreed price and the spot-price, the liability to pay arises only on the date as agreed in the derivatives contract. It is unlike any other loan or other liability which is certain and exists in balance sheet date. The Ld. DR further submitted that the assessee entered in forex derivatives forward contracts not for speculation but for hedging its losses. The foreign exchange derivative losses amounting to Rs. 985.57 lacs debited Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 36 by assessee in its accounts is contingent notional loss and thus the same cannot be allowed as deduction, being contingent liability. 46. The Ld. AR submitted that Marked to Market loss on hedging of foreign exchange on the balance sheet date is an allowable expense u/s.37. In this regard, the Ld. AR relied upon Hon'ble Apex Court in the case of CIT vs Woodward Governor India Private Limited (312 ITR 254) wherein it was held that loss suffered by the assessee on account of Fluctuation in the rate of foreign exchange as on the date of the balance sheet is an item of expenditure u/s 37(1) of the Act. Similar issue has been considered by Mumbai ITAT in the case of DCIT vs Kotak Mahindra Investment Ltd.(ITA No. 1502/MUM72012) and held that marked to market loss arising on derivative contract can be allowed, even though there is no actual loss. The derivatives contract are not purely contingent in nature where profit or loss is ascertained in view of constant watch on daily market value. 47. We have heard both the parties and perused all the relevant material available on record. It is seen that the Marked-to-Market Loss on hedging of foreign exchange on the balance-sheet date is an allowable expenses u/s 37 of the Act as stated by the Ld. AR and, in fact, in the decision of Hon’ble Apex Court in the case of Woodward Governor India Pvt. Ltd. (supra), it has been categorically held that loss suffered by the assessee on account of fluctuation in the rate of foreign exchange as on the date of balance-sheet is an item of expenditure u/s 37(1) of the Act. The contention of the Ld. AR is justifiable and hence disallowance of Marked-to-Market Loss on hedging of foreign exchange is not justified in the light of the decision of the Hon’ble Apex Court. Hence, Ground No. 6 for AY 2009-10 filed by the Revenue is dismissed. 48. Ground No. 7 is as follows: 7. On the facts and circumstances of the case and in law, the Ld CIT(A) erred in deleting the addition of Rs 2,07,518/- made by the A. O on account of disallowance u/s 14A of the Act. Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 37 48.1 The Ld. DR relied upon the assessment order. 49. The Ld. AR submitted that the assessee company itself made the disallowance, hence the CIT(A) has rightly deleted the disallowance under Section 14A of the Act. For the year under consideration as against increase in investment of Rs.3,59,100/- the increase in own funds were Rs.3,39,71,579/-. It is clearly evident from same that assessee had sufficient own funds for investment. This aspect of huge surplus funds is not disputed by the AO. As the assessee has sufficient own funds in that case disallowance u/s.14A cannot be made. The Ld. AR relied upon the following judgments:- i. Pr. CIT vs. Sintex Industries Ltd.[20181 93 taxmann.com 24 (SC) ii. CIT vs. Torrent Power Ltd. [2014] 44 taxmann.com 441 (Gujarat) iii. DCIT vs Voltamp Transformers Ltd (ITA No. 2544/AHD/2014 dt 26-9-2017) iv. Pr. CIT vs.India Gelatine and Chemicals Ltd [20161 66 taxmann.com 356 (Gujarat) 50. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee company has made suo moto disallowance and the revenue has not disputed the fact that the investment is done from assessee’s own fund. The CIT(A) has rightly deleted the disallowance. There is no need to interfere with the findings of the CIT(A). Thus, Ground No. 7 is dismissed. 51. Ground No. 8, 9 and 10 are as follows: 8. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not going to the merits of the additions/disallowance made by the AO in the assessment order and decided the appeal in favour of assessee on technical ground. 9. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the AO. 10. It is, therefore, prayed that the order of the ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.” Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 38 Ground No. 8, 9 and 10 are general in nature and therefore, the same are not adjudicated at this juncture. 52. In result, IT(SS)A No. 30/Ahd/2021 for A.Y. 2009-10 filed by the Revenue is dismissed. 53. IT(SS)A.No.14/Ahd/2022 : Revenue’s appeal for Asst.Year 2010-11 “1. On the facts and in the circumstances of the case and in law the ld CIT(A) has erred in allowing the deduction of unabsorbed business loss/depreciation of Rs 8,33,09,277/- under clause (i) of explanation (1) to section 115JB (2) without appreciating the fact that there was accumulated profit in the books of the assessee on account of amalgamation, hence the Assessing Officer has rightly taken the b/f loss as Nil. Ground No.1: Disallowance of unabsorbed depreciation under MAT Provisions. 53.1 The assessee had incurred loss of Rs.16,99,67,977/- in the F.Y. 2008-09 which comprises of depreciation of Rs.8,33,09,277/- and loss of Rs.8,66,58,700/- which has been carried forward for the purpose of computation u/s 115JB in the F.Y 2009-10 (AY 2010-11). Hence, same is calculated as under: In computing MAT, brought forward depreciation of Rs.8,33,09,277/- was claimed of FY 2008-09. The relevant portion of the financial statement Particular Amount (in Rs.) Brought forward balance of Profit & loss in FY 2008-09 18,14,84,414 Less: Profit already taxed in earlier years 18,14,84,414 Balance NIL Depreciation of FY 2008-09 8,33,09,277 Business Loss of FY 2008-09 8,66,58,700 Loss carried forward of FY 2008-09 to FY 2009- 10 16,99,67,977 Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 39 evidencing that the brought forward depreciation & loss has been carried forward from FY 2008-09 was disallowed by the AO. 54. The Ld. DR relied upon the assessment order. The Ld. DR further submitted that the assessee had no brought forward loss as assessee is having huge general reserves and credit balance of profit and loss account on 01.04.2009. Thus, the Assessing Officer rightly disallowed the deduction claimed by the assessee while computing book profit under Section 115JB of the Income Tax Act, 1961. 55. The Ld. AR submitted that the AO wrongly stated that after adjustment of credit balance of general reserve there will be no brought forward losses and unabsorbed depreciation. The Ld. AR relied upon the decision of Jurisdictional Tribunal in the case of Rajendra Ship Breakers Pvt. Ltd in ITA No. 2177/AHD/2018 wherein under identical facts relief was allowed to the assessee. 56. We have heard both the parties and perused all the relevant material available on record. The Ld. AR relied upon the decision of Jurisdictional Tribunal in the case of Rajendra Ship Breakers Pvt. Ltd in ITA No. 2177/AHD/2018 wherein under identical facts relief was allowed to the assessee. Since this aspect was based on the Assessment Year 2006-07 as mentioned by the CIT(A) in his order at para 13.3 and as per the finding given hereinabove in para 10 for Ground No. 2 of the said assessment year by us, it will be appropriate to remand back this issue to the file of Assessing Officer/TPO for proper adjudication and verification. Thus, Ground No. 1 is partly allowed for statistical purpose. 57. Ground No. 2 : Erroneous Levy of Interest u/s.234B and 234C without appreciating the fact that respondent has been assessed under MAT Provisions for the assessment year under consideration Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 40 2. On the facts and in the circumstances of the case and in law the ld CIT(A) has erred in allowing the additional ground of chargeability of interest u/s 234B & 234C for non payment of advance tax of MAT without considering the CBDT Circular No 13/2001 dated 9/11/2001. 57.1 The Ld. DR relied upon the assessment order. 58. The Ld. AR submitted that the assessee was assessed under the MAT provisions of the Act and it is a clear position that no interest u/s 234B & 234C is leviable if tax is payable u/s 115JB of the Act. The Ld. AR relied upon the following decisions, prevailing at that point of time, wherein it has been held that no interest u/s 234B or 234C is leviable, if tax is determined under section 115JB of the Act:- i. Kwality Biscuits Ltd (284 ITR 434) (Date of Order -26-04-2006) ii. Snowchem India Ltd (313 ITR 170) (Bom) iii. Natural Gems Ltd (327 ITR 269) (Bom) Subsequently the Hon'ble Supreme Court in case of Rolta India Ltd (330 ITR 470) (SC) dated 7 January 2011 contrary to the above decisions, has held that interest is leviable even if income tax is payable under MAT provisions. Bombay High Court in the case of PCIT -vs.- Mangalore Refinery & Petrochemicals Ltd. (ITA No. 875 of 2017) - Order dated 17.03.2020 - wherein it has been held that interest u/s 234B, 234C is not chargeable with respect to tax liability determined under minimum alternate tax (MAT) for AY 2004-05. The High Court in the aforesaid case observed that the Apex Court decision in Rolta which upheld the livability of interest u/s. 234B & 234C upon failure to pay advance tax was rendered much later i.e., in 2011 and at the time of payment of advance tax by the assessee for the subject year, the decision of the Karnataka HC in Kwality Biscuits rendered in 1999 (holding that assessee was not required to pay advance tax on book profits) was holding the field. The Ld. AR further submitted that similar view has been upheld in the following cases :- Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 41 i. SICOM Ltd. (ITA No. 1522/M/2009) dated 6 December 2016 (Mum) ii. Alok Industries Ltd (ITA No. 8340/M/2010) dated 20 February 2015 (Mum) iii. Charbhuja Industries Pvt Ltd (ITA No. 6901/M/2012) dated 24 January 2014 (Mum) iv. Rockline Developers Pvt. Limited -vs.- ITO. ITA No. 6595/Mum/2014 (Dated 01.01.16) The Ld. AR further, pointed out that the reference placed of the Circular No.13/2001 dated 09.11.2001 by the department is binding on the AO and not on the assessee. In view of the above arguments and judicial pronouncements, the addition deleted by CIT(A) is sustainable in the interest of justice. 59. We have heard both the parties and perused all the relevant material available on record. The Hon’ble Apex Court in case of Rolta Ltd. (supra) has categorically held that the assessee cannot envisage any liability of interest under Section 234B and 234C of the Income Tax Act, 1961 as on the date of filing the return of income. Thus, following the said decision of the Hon’ble Apex Court, the CIT(A) has rightly directed the Assessing Officer not to charge interest under Section 234B on returned income for any delay in depositing self assessment tax. As regards interest under Section 234C of the Act the same is always levied on return income, hence the CIT(A) rightly directed the Assessing Officer to levy such interest from the date of decision of Hon’ble Supreme Courts in case of Rolta Ltd. (supra) to the date of assessment order. Thus, the CIT(A) correctly directed the Assessing Officer to recompute interest under Section 234B and 234C of the Act. There is no need to interfere with the findings of the CIT(A). Hence Ground No. 2 is dismissed. 60. Ground No.3 : Disallowance under section 14A 3. On the facts and in the circumstances of the case and in law, the ld CIT(A) has erred in deleting the disallowance u/s 14A of Rs 1,80,634/- out of total disallowance of Rs 2,12,799/- despite the Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 42 fact that the assessee has not disallowed the expenses disallowable u/s 14A rws Rule 8D and the assessee was using mixed funds for investment. 60.1 The Ld. DR relied upon the Assessment Order. 61. The Ld. AR submitted that during the previous year relevant to the assessment year under consideration, the assessee has earned exempt income amounting to Rs.1,12,350/-. Also from the audited financial statements as at 31st March 2010, it can be seen that assessee has total paid-up share capital of Rs.19,90,23,020/-and general reserves of Rs.37,59,30,396/-. Therefore, it is clearly evident that assessee has sufficient interest free funds to make investments. Relevant portion of Audited Financial Statement were referred by the Ld. AR. The Ld. AR further submitted that however, the AO has failed to appreciate that as against decrease in investment of Rs.3,465/- the increase in own funds was of Rs.7,15,32,274/-. The assessee had sufficient own funds for investment. Irrespective of the fact, the AO has made disallowance under rule 8D(2)(ii) amounting to Rs.1,80,634/- and 8D(2)(iii) amounting to Rs.32,165/-. Aggrieved from the order of the AO assessee filed appeal before CIT(A) and it vide order dated 20.06.2022 passed u/s 250, has directed Ld. AO to delete such addition made under rule 8D(2)(ii) of Rs.1,80,634 based on the fact that assessee had sufficient interest free funds during the year and had earned exempt dividend income of Rs.1,12,350/- only. Further, the CIT(A) has placed reliance on the decision in the case of Pr. CIT-vs. Sintex industries Ltd. (2017) 82 Taxmann.com 428 (Gujarat). During the year under consideration, against decrease in investment of Rs.(3,465)/- the increase in own funds was of Rs.7,15,32,274/-. It is dearly evident from same that respondent had sufficient own funds for investment. This aspect of huge surplus funds is not disputed by the Ld. AO. As the respondent has sufficient own funds in that case disallowance u/s 14A cannot be made. The Ld. AR placed reliance on following judgments:- i. Pr. CIT vs. Sintex Industries Ltd.[20181 93 taxmann.com 24 (SC) ii. CIT vs. Torrent Power Ltd. [2014] 44 taxmann.com 441 (Gujarat) Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 43 iii. DCIT vs Voltamp Transformers Ltd (ITA No. 2544/AHD/2014 dt 26-9-2017) iv. Pr. CIT vs.India Gelatine and Chemicals Ltd [2016] 66 taxmann.com 356 (Gujarat) As the issue has been covered squarely in the assessee’s own case, the addition made by the AO is not sustainable and direction would be issued to delete the same in the interest of justice. 62. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee is having his own funds which increased in the present assessment year. In fact during the present assessment year the investment made by the assessee decreased. The revenue did not dispute that the assessee is having its own huge surplus funds for investment. Therefore, the disallowance u/s 14A made by the Assessing Officer is not justifiable. The CIT(A) was correct in deleting the same. Thus, Ground No. 3 is dismissed. 63. Ground No.4 Disallowance of CENVAT Credit of Rs.1,08,408/- 4. On the facts and in the circumstances of the case and in law the ld CIT(A) has erred in deleting the addition u/s 145A of Rs 11,08,408/- towards unutilized CENVAT credit without appreciating the fact that the assessee was following exclusive method of accounting. 63.1 The Ld. DR submitted that the Assessing Officer has rightly disallowed the Cenvat Credit as the assessee has not given the details of the components which are outside the threshold of the Cenvat Credit. The Ld. DR relied upon the Assessment Order. 64. The Ld. AR submitted that the action of assessee is tax neutral. The assessee has followed exclusive method of accounting and therefore the closing stock has not been loaded with the taxes and dues as contemplated u/s 145A of the Act. The assessee is following exclusive Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 44 method of accounting consistently, hence the action of the respondent is revenue neutral. Exclusive method of accounting postulates exclusion of tax, dues etc. embedded in purchases of raw material as well as in corresponding sale. Such taxes are accounted for separately for the purposes of discharging liabilities. The effect of such accounting does not ultimately have any impact on the ultimate profitability when followed year after year. The above issue has been covered in favour of assessee by following judicial precedents: i. DCIT vs. M /s. Adani Gas Ltd ITA No. 775/Ahd/2014. ii. ACIT vs. Narmada Chematur Petrochemicals Ltd [2010] 194 Taxman 103 (Gujarat) 65. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee has consistently followed exclusive method of accounting and the Revenue has not disputed this method. The CENVAT credit taxes, duties and dues are embedded in purchase of raw-materials as well as in corresponding sales. The contention of the Ld. AR that the effect of such accounting does not ultimately have any impact on the profitability when followed year after year is correct in the light of decision of the Hon’ble Gujarat High Court in the case of Narmada Chematur Petrochemicals Ltd. (supra). Thus, the Ground No. 4 is dismissed. 66. Ground No. 5 and 6 are as follows: 5. On the facts and in the circumstances of the case and in law, the Ld CIT(A) ought to have upheld the order of the A.O. 6. It is therefore, prayed that the order of the Ld CIT(A) be set aside and that of the AO be restored to the above extent.” 66.1 As regards to Ground No. 5 and 6, the same are general in nature, hence not adjudicated at this juncture. Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 45 67. Hence, IT(SS)A.No.14/Ahd/2022 for Asst.Year 2010-11 appeal filed by the Revenue is partly allowed for statistical purpose. 68. Assessee’s Appeal in ITA No.318/Ahd/2022: A.Y. 2009-10. “1.1 The order passed u/s. 250 on 20.06.2022 for A.Y.2009-10 by CIT(A)-11, Abad upholding the disallowance of depreciation of Rs. 1,13,10,975/-on goodwill is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld CIT(A) has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned disallowance. The Ld. CIT(A) has erred in distinguishing the order of Tribunal for A.Y 2007-08 in case of the appellant on this very issue. 2.1 The Ld. CIT(A) has grievously erred in law and on facts in confirming disallowance of depreciation of Rs. 1,13,10,975/- on goodwill. 2.2 That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) ought not to have upheld the disallowance of depreciation of Rs. 1,13,10,975/- on goodwill. 3.1 The Ld. CIT(A) has erred in law and/or on facts in upholding that goodwill in the present case was not eligible intangible asset within the meaning of sec 32(1). It is, therefore, prayed that the disallowance of depreciation of Rs 1,13,10,975/-on goodwill upheld by the CIT(A) may kindly be deleted.” Ground no.1, 1.2, 2.1, 2.2 and 3.1:Disallowance of Depreciation on Goodwill amounting to Rs.1,13,10,975/- 68.1 The same is identical to Ground No. 1 of Revenue’s appeal being IT(SS)A No. 27/Ahd/2021 for AY 2006-07, hence the finding given in the said appeal hereinabove will be applicable herein. Therefore, the Ground No. 1, 1.2, 2.1, 2.2 and 3.1 are allowed. 69. Assessee’s Appeal in ITA No.11/Ahd/2022: A.Y. 2010-11. “1.1 The order passed u/s.250 on 20.06.2022 for A.Y.2010-11 by CIT(A)-11, Abad upholding the disallowance of depreciation of Rs. 84,83,230/-on goodwill is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld CIT(A) has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned disallowance. The Ld. CIT(A) has erred in distinguishing the order of Tribunal for A.Y.2007-08 in case of the appellant on this very issue. Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 46 2.1 The Ld. CIT(A) has grievously erred in law and on facts in confirming disallowance of depreciation of Rs. 84,83,230/-on goodwill. 2.2 That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) ought not to have upheld the disallowance of depreciation of Rs. 84,83,230/-on goodwill. 2.3 The Ld. CIT(A) has erred in law and/or on facts in upholding that goodwill in the present case was not eligible intangible asset within the meaning of sec 32(1). 2.4 The Ld. CIT(A) has grievously failed to appreciate that on the date of search on 09.02.2012, the assessment of AY 2010-11 was not pending so that it had abated and no disallowance /addition could be made in the order u/s 153A r.w.s. 143(3) which do not arise out of search & seizure material so that the impugned disallowance of depreciation on goodwill was illegal and unlawful. 3.1 The Ld. CIT(A) has grievously erred in law and on facts in not disposing off ground no. 6.1 & 6.2 of the appeal memo relating to adjustment of unabsorbed depreciation of Rs. 8,33,09,277/- while working out book-profit u/s 115JB. It is, therefore, prayed that the disallowance of depreciation of Rs. 84,83,230/- on goodwill upheld by the CIT(A) may kindly be deleted.” Ground no.1, 1.2, 2.1, 2.2 and 2.3 : Disallowance of Depreciation on Goodwill in pursuant to explanation to section 32(1), 43(1) and 43(6) to the tune of Rs.84,83,230/- under normal provisions of the Act. 70. The same is identical to Ground No. 1 of Revenue’s appeal being IT(SS)A No. 27/Ahd/2021 for AY 2006-07, hence the finding given in the said appeal hereinabove will be applicable herein. Therefore, the Ground No. 1, 1.2, 2.1, 2.2 and 2.3 are allowed. 71. Assessee’s Appeal in ITA No.12/Ahd/2022: A.Y. 2011-12. “1.1 The order passed u/s. 250 on 20.06.2022 for A.Y.2011-12 by CIT(A)-11, Abad upholding the disallowance of depreciation of Rs. 63,62,424/-on goodwill is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. CITIA) has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned disallowance. The Ld. CITIA) has erred in distinguishing the order of Tribunal for A.Y. 2007-08 in case of the appellant on this very issue. 2.1 The Ld. CITIA) has grievously erred in law and on facts in confirming disallowance of depreciation of Rs 63,62,424/-on goodwill. Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 47 2.2 That in the facts and circumstances of the case as well as in law, the Ld. CITIA) ought not to have upheld the disallowance of depreciation of Rs. 63,62,424/-on goodwill. 3.1 The Ld. CIT(A) has erred in law and/or on facts in upholding that goodwill in the present case was not eligible intangible asset within the meaning of sec 32(1). It is, therefore, prayed that the disallowance of depreciation of Rs 63,62,424/-on goodwill upheld by the CIT(A) may kindly be deleted.” 72. Ground no.1.1, 1.2, 2.1, 2.2 and 3.1 :Disallowance of Depreciation on Goodwill in pursuant to explanation to section 32(1) to the tune of Rs.63,62,424/- . 72.1 The same is identical to Ground No. 1 of Revenue’s appeal being IT(SS)A No. 27/Ahd/2021 for AY 2006-07, hence the finding given in the said appeal hereinabove will be applicable herein. Therefore, the Ground No. 1, 1.2, 2.1, 2.2 and 3.1 are allowed. 73. IT(SS)A No. 13/Ahd/2022 A.Y. 2012-13 filed by assessee “1.1 The order passed u/s 250 on 20.06.2022 for A.Y.2012-13 by CIT(A)-11. Abad upholding the addition of Rs. 1,90,87,270/- towards disallowance of cost of acquisition of goodwill is wholly illegal, unlawful and against the principles of natural justice. 2.1 The Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned addition. 2.2 The Ld. CIT(A) has grievously erred in law and on facts addition of Rs. 1,90,87,270/ towards disallowance of cost of acquisition of goodwill. 2.3 That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) ought not to have upheld the addition of Rs. 1,90,87,270/- towards disallowance of cost of acquisition of goodwill. It is, therefore, prayed that the disallowance of cost of acquisition of Rs. 1,90,87,270/-on goodwill upheld by the CIT(A) may kindly be deleted.” 74. The same is identical to Ground No. 1 of Revenue’s appeal being IT(SS)A No. 27/Ahd/2021 for AY 2006-07, hence the finding given in the said appeal hereinabove will be applicable herein. Therefore, the Ground No. 1.1, 2.1, 2.2 and 2.3 are allowed. Printed from counselvise.com IT(SS)A No. 27 to 30/Ahd/2021 and 14/Ahd/2022 A.Ys. 2006-07 to 2010-11 DCIT vs. M/s Bodal Chemicals Ltd. ITA No. 318/Ahd/2022 IT(SS)A No. 11 to 13/Ahd/2022 A.Ys. 2009-10 to 2012-13 M/s Bodal Chemicals Ltd. vs. DCIT 48 75. In the result, the appeals being IT(SS)A No. 27, 28, 29 and 30/Ahd/2021 and IT(SS)A No. 14/Ahd/2022 filed by the Revenue are partly allowed for statistical purpose and ITA No. 318/Ahd/2022 to IT(SS)A No. 11 to 13/Ahd/2022 filed by the assessee are allowed. Order pronounced in the Court on 31st July, 2025 at Ahmedabad. Sd/- Sd/- (NARENDRA PRASAD SINHA) ACCOUNTANT MEMBER (SUCHITRA R. KAMBLE) JUDICIAL MEMBER Ahmedabad dated 31/07/2025 ak/vk* आदेश क\u0007 \bितिलिप अ\u000eेिषत आदेश क\u0007 \bितिलिप अ\u000eेिषत आदेश क\u0007 \bितिलिप अ\u000eेिषत आदेश क\u0007 \bितिलिप अ\u000eेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u0016 / The Appellant 2. \u0017\u0018यथ\u0016 / The Respondent. 3. संबंिधत आयकर आयु / Concerned CIT 4. आयकर आयु (अपील) / The CIT(A) 5. िवभागीय \u0017ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड# फाईल / Guard file. आदेशानुसार आदेशानुसार आदेशानुसार आदेशानुसार/BY ORDER, उप उप उप उप/सहायक पंजीकार सहायक पंजीकार सहायक पंजीकार सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद अहमदाबाद अहमदाबाद अहमदाबाद / ITAT, Ahmedabad Printed from counselvise.com "