GMM Pfaulder Ltd. Vs PCIT (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, considered an appeal filed by GMM Pfaudler Ltd. against the order of the Principal Commissioner of Income Tax (Pr. CIT), Ahmedabad-1, dated 7 March 2025. The Pr. CIT had exercised revisionary jurisdiction under Section 263 of the Income-tax Act, 1961, for Assessment Year (AY) 2020-21, contending that the assessment order passed by the Assessing Officer (AO) was erroneous and prejudicial to the interests of the Revenue.
The assessee raised three primary grounds of appeal against the Pr. CIT’s invocation of Section 263: (i) disallowance of depreciation of Rs. 1,48,30,256 on goodwill acquired in the Industrial Mixing Solution Division; (ii) disallowance of provision for warranty amounting to Rs. 48,50,000; and (iii) disallowance of deduction claimed under Section 80G amounting to Rs. 62,17,634 related to Corporate Social Responsibility (CSR) donations. The assessee contended that all three issues were duly examined and considered by the AO during the assessment proceedings and that revision under Section 263 merely for a change of opinion was impermissible in law.
The facts of the case showed that the assessee filed its income tax return for AY 2020-21 declaring a total income of Rs. 77,93,72,310. The assessment was completed under Sections 143(3) read with 144B on 16 September 2022, accepting the declared income. The Pr. CIT, upon examination, observed that the AO had not conducted requisite verifications on: (i) allowability of depreciation on goodwill, (ii) allowability of provision for warranty as per conditions laid down in Rotork Controls India (P) Ltd. v. CIT (2009) 314 ITR 62 (SC), and (iii) allowability of deduction under Section 80G for CSR donations in light of Explanation 2 to Section 37(1). Consequently, a show-cause notice under Section 263 was issued to the assessee on 21 January 2025.
