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2017 (6) TMI 1123 - ITAT CHENNAIDeduction under section 80-IA - Held that:- Assessee had correctly claimed the deduction under section 80-IA of the Act relying upon the decision in the case of Velayudhaswamy Spinning Mills (P) Ltd Vs. ACIT [2010 (3) TMI 860 - Madras High Court]. Assessing Officer's view that since the Revenue was on appeal against the decision of the Hon’ble Madras High Court in the case Velayudhaswamy Spinning Mills P. Ltd (supra) before the Hon’ble Apex Court, he need not follow that decision is not correct as he did not realize that mere filing of the SLP before the Apex Court is not a valid ground for not following the judgment of the Hon’ble Madras High Court. Further, it is not the case of the Revenue that the judgment of the Hon’ble Madras High Court in the case Velayudhaswamy Spinning Mills P. Ltd (supra) is stayed by the Hon’ble Apex Court. - Decided in favour of assessee. Addition made on account of depreciation claimed - assessee has purchased a second hand windmill - AO has observed that the claim of the cost of the windmill was excessive and in the place of actual cost paid by the assessee, adopted the WDV of the asset - invoking Explanation 3 to subsection (1) of section 43 - Held that:- Once the Assessing Officer was of the opinion that the assessee has purchased the second hand windmill at a higher cost, then the burden to prove the fair market value is on the Assessing Officer. In this case, estimation of fair market value by the Chartered Engineer and Registered Valuer is very much available before the Assessing Officer. Moreover, the authorities below have not made any exercise to determine the fair market value of the windmill and they have simply adopted the WDV of the windmill in the hands of Shri K.N. Muthaiah as the cost of the windmill for the purpose of calculating depreciation. We are of the considered opinion that the Explanation 3 to section 43(1) of the Act is applicable if the assessee claims enhanced cot as the actual cost and the Assessing Officer is able to show that the cost claimed by the assessee is more than the market value of the asset. Thus, the Assessing Officer has no reason to invoke the Explanation 3 to section 43(1) of the Act. There is no prohibition or connected parties to carry arms' length transactions where real value of them transferred is paid. Law frowns on fraudulent transaction carried to hoodwink the Revenue. Having held that the assessee has shown enhanced cost of assets, the Assessing Officer under Explanation 3 to section 43(1) of the Act has to determine the "actual cost" to assessee which can only mean arm's length value or real value or worth of assets transferred.- Decided in favour of assessee.
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