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2015 (4) TMI 444 - BOMBAY HIGH COURT

2015 (4) TMI 444 - BOMBAY HIGH COURT - TMI - Excess lease rentals on the basis of inflated cost of windmills allowed - Tribunal allowing depreciation on the inflated cost of windmills purchased by the assessee - Held that:- The order of the Appellate Tribunal cannot be faulted as the Tribunal considered the previous findings of certain group companies of Weizmann being involved and on inquiry, it was found that the commission / fees paid by NEG Micon was not received by the assessee

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had proceeded on the basis of a presumption that the cost of each windmill is inflated by ₹ 1 crore and it had not been proved by documentary evidence that such money came back to the assessee from the concern to whom commission was paid, namely M/s.Suhani Traders. The Tribunal found that the Commissioner of Income Tax (Appeals) was justified in holding that there is nothing on record to prove the excessive amount of lease rent was paid. The said issue is identical in all appeals and the .....

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izmann group of is not in the nature of income but was expenditure reimbursed which cannot be regarded as a revenue receipt and therefore, the Tribunal considering the provisions of Section 194C of the Act has upheld the order of the Commissioner of Income Tax (Appeals) rejecting the contention of the department. Appeal dismissed. - Income Tax Appeal No. 413 of 2013, Income Tax Appeal No. 458 of 2013, Income Tax Appeal No. 449 of 2013, Income Tax Appeal No. 1511 of 2013, Income Tax Appeal No. 17 .....

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cer despite there being clear evidence to the contrary ? B. Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in allowing depreciation on the inflated cost of windmills purchased by the assessee? C. Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in allowing excess lease rentals on the basis of inflated cost of windmills ? 2. These three identical questions pertain to assessment years 2002-03, 2003-04, 2004-0 .....

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der section 40(a)(ia) is to be deleted ? 3. It will be necessary to advert to a few facts before dealing with these appeals. The facts in Income Tax Appeal No.413/13 may be taken up. The assessee belongs to the Weizmann Group of companies. A survey was conducted at the premises of NEG Micon (I) P. Ltd. at Chennai. The department found that the said company had sold 20 windmills to the Weizmann Group which included the assessee. According to the department, the average price of the windmill was b .....

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ciation in respect of 12 windmills installed by the assessee holding that the cost of windmills were inflated by ₹ 1 crore per windmill. The Assessing Officer also noticed that the assessee had taken a 9MW windfarm on lease from M/s.Weizmann Ltd. and has paid lease rent of ₹ 5,80,51,788/-. The assessee claimed reliefs under Section 40(2)(b) of the Income Tax Act, 1961 (the Act). 5. The Commissioner of Income Tax (Appeals) deleted the additions made by the Assessing Officer stating th .....

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Commissioner of Income Tax (Appeals) further held that since there was nothing on record to prove that there was excessive payment on account of lease rent, there was no question of adopting a different figure for the purchase price in respect of leased windmills. 6. Being aggrieved by the order, the Revenue filed an appeal before the ITAT on or about 6th June, 2007. By order dated 7th September, 2012 the ITAT dismissed the appeal. 7. Learned counsel for the Revenue submitted that the price of t .....

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s to accommodate flow of funds. Funds have been routed only come back to the Weizmann group which clearly shows that there was collusion between M/s. NEG Micon and Weizmann whereby accommodation entries in the form of commission were resorted to with the specific intention of enriching the Weizmann group. The Assessing Officer had disallowed the claim on the ground that the value of equipment was inflated and, therefore, the provisions of section 40A(2)(b) of the IT Act would apply in this case. .....

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t is the revenue's contention that the commission involved in the deal has been indirectly handed back to the Weizmann group. According to Mr.Mistri, these contentions are misconceived. He supported the order of the Commissioner of Income Tax (Appeals) as well as the ITAT and contended that no question of law would arise in these appeals. 9. On the additional question in ITXA Nos.1511/13 and 1713/013, Mr.Mistri submitted that no substantial question arises in the facts of the case and that d .....

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icon was unable to provide any corroborative evidence before the Assessing Officer. Apparently, NEG Micon denied that they have paid these commissions. 11. The Tribunal considered the previous findings of certain group companies of Weizmann being involved and on inquiry, it was found that the commission / fees paid by NEG Micon was not received by the assessee. M/s.Samrat Spinner and M/s.Kakatiya Industries had paid ₹ 115 lacs and ₹ 303 lacs to M/s.Suhami Traders (presently known as .....

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parative chart has been prepared of the transactions entered into by the Respondent as well as Precot Mills Ltd. claiming difference in prices of windmills pegged at about ₹ 98 lacs. However, comparison with companies like Rajasthan State Power Corporation Ltd. reveals that the price is easily justifiable given the difference in specifications. It is necessary to mention that in the course of the comparison provided between the price paid by Weizmann and Savita Chemicals Ltd. and the asses .....

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lized task and came to the conclusion that the Assessing Officer had no evidence on record to establish that the price of windmills paid by the assessee was not the actual price or that the price was inflated. The Tribunal found that the Assessing Officer had proceeded on the basis of a presumption that the cost of each windmill is inflated by ₹ 1 crore and it had not been proved by documentary evidence that such money came back to the assessee from the concern to whom commission was paid, .....

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sessing Officer that lease rents were unreasonable was not based on any cogent material but only based on assumption and presumption. In fact, the lease rents were fixed in accordance with the formula provided by Indian Renewable Energy Development, a Government of India Company which provided support to Electricity Project. 15. The Tribunal found that the Commissioner of Income Tax (Appeals) was justified in holding that there is nothing on record to prove the excessive amount of lease rent was .....

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