DCIT Vs Gujarat Narmada Valley Fertilizers & Chemicals Ltd (ITAT Ahmedabad)
In , the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, dismissed the Revenue’s appeal against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] for Assessment Year 2016–17. The dispute related to two issues: depreciation on goodwill arising from amalgamation and transfer pricing adjustment affecting deduction under Section 80IA of the Income Tax Act.
The assessee, engaged in the business of manufacturing and trading chemical fertilizers and industrial products, had filed its return declaring nil income under normal provisions after claiming deduction under Chapter VI-A under Section 80IA. During assessment proceedings, the Assessing Officer disallowed depreciation of ₹31,70,425 claimed on goodwill. The Assessing Officer also made a substantial adjustment relating to electricity transferred from the captive power generation unit to the assessee’s manufacturing units, resulting in disallowance of deduction under Section 80IA amounting to ₹146,16,52,346.
On the issue of goodwill, the assessee contended that the goodwill arose pursuant to amalgamation of Narmada Chematur Petrochemicals Ltd. under a scheme approved by the Gujarat High Court. According to the assessee, the goodwill represented commercial rights and intangible assets eligible for depreciation under Section 32(1)(ii) of the Act. However, the Assessing Officer rejected the claim.
