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2017 (2) TMI 544 - AT - Income TaxAcquisition of second hand windmill and pricing of such windmill - assessee is aggrieved on adoption of value as actual cost, whereas, the Revenue is aggrieved on rejection of the value assigned by the Assessing Officer - Held that:- It is not disputed that depreciated value of the said windmill in the hands of M/s Soundararaja Mills Ltd. was negligible at the time of such sale. M/s Enercon (India) Ltd. who manufactured the windmill had certified that the model sold by M/s Soundararaja Mills Ltd. to the assessee was no more in market. They also declined to assign a value which, in other words, mean that the windmill which was more than 5-1/2 years old was of obsolete technology. These factors, in our opinion, clearly indicate that the transfer of windmill to the assessee from M/s Soundararaja Mills Ltd. at a price of ₹ 2.36 Crores itself was a questionable and doubtful one, with the only intention to reduce tax liability. It may be true that assessee had raised a loan of ₹ 144 lakhs from M/s Canara Bank, based on a valuation report requisitioned by the said bank and in the said valuation report, the value of the windmill was fixed as ₹ 2,19,00,000/-. It may also be true that Government approved valuer had fixed the value of windmill at ₹ 2,95,00,000/-. However, for invoking Explanation 3 to Section 43(1) what is required is the objective satisfaction reached by the Assessing Officer that the main purpose of transfer is reduction of tax liability. The valuations may be relevant in ordinary circumstances but when the cumulated depreciation claimed was far in excess of the cost, relevance of such valuations, in our opinion, is insignificant. Especially so since CIT(Appeals) had found glaring deficiencies in such valuation, where only depreciation for one year alone was considered. CIT(Appeals), in our opinion, was not justified in substituting the value adopted by the A.O. with one based on a method adopted by TIIC, a Government agency. A.O. had adopted a fair method of multiplying the average generation per year with per unit cost of electricity generated. This was the method adopted by the assessee itself for valuing four numbers of windmill offered by it as collateral for raising loan from M/s Canara Bank, except for the difference in unit rate. In our opinion, the conditions for invoking Explanation 3 to Section 43(1) of the Act were satisfied. We, therefore, have no hesitation to set aside the order of the CIT(Appeals) and reinstate the order of the A.O.
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