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2024 (1) TMI 1134 - AT - Income TaxDisallowance of depreciation on wind mill - sequence of events to show that the assessee is the beneficial owner of the asset - AR submitted that depreciation is claimed by the transferor of the assets and therefore not allowed in the hands of the assessee in the same year - AO did not accept the explanation of the assessee that it had purchased the wind mill during the FY relevant to A.Y. 2015-16 due to lack of any supporting document and the fact that enquiry by the Ld. AO revealed that no sale of wind mill was recorded in the books of the seller APIL for Financial Year 2014-15 HELD THAT:- Admittedly, seller company APIL has claimed depreciation on wind mill during the A.Y. 2015-16. Therefore denial of impugned depreciation in the hands of the assessee is justified. The contention raised during appellate proceedings have been dealt with by the Ld. CIT(A) by recording cogent reasons. The decision in the case of Smt. Sivakami [2009 (11) TMI 127 - MADRAS HIGH COURT] will not render assistance to the assessee as in that case the assessee established ownership of buses by documentary evidence whereas in the case at hand purchase of wind mill in the Financial Year 2014-15 could not be proved with documentary evidence. The twin conditions precedent, namely ownership and use of the asset i.e. wind mill, for purposes of assessee’s business during the Financial Year 2014-15 relevant to A.Y. 2015-16 are not satisfied in the case of the assessee. We, therefore decline to interfere and decide ground No. 1 against the assessee. Addition u/s 56(2)(viib) - shares being issued at excessive rate - adopting a different method i.e. Net Asset Value method of valuation - HELD THAT:- As not in dispute that the assessee issued 12,03,000/- equity shares to its 100% holding company, at a premium of Rs. 40/- each. It is also not in dispute that shares have been issued at premium based on fair market value as computed and certified by Chartered Accountant who determined the fair market value in accordance with Discounted Cash Flow method which is a well recognised method of valuation under Rule 11UA of the Income Tax Rules, 1962. In this view of the matter, in our humble opinion, AO/ CIT(A) are not justified in adopting a different method i.e. Net Asset Value method of valuation resulting in the impugned addition u/s 56(2)(viib) of the Act. In an identical case of KBC India Pvt. Ltd [2022 (11) TMI 1362 - ITAT DELHI] equity shares were allotted by the assessee to its holding company at premium and the Tribunal held that in such a scenario no addition can be made u/s 56(2)(viib). Thus we hold that the objective behind the provisions of section 56(2)(viib) of the Act is to prevent unlawful gain by issuing company in the garb of capital receipts. In the transaction between holding and its subsidiary company no income can be said to accrue to the ultimate beneficiary i.e. holding company. The chargeability of deemed income arising from transactions between holding and subsidiary or vice-versa militates against the solemn object of section 56(2)(viib) - Decided in favour of assessee.
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