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Commissioner of Income-tax-4, Mumbai Versus Karma Energy Ltd.

2015 (6) TMI 216 - BOMBAY HIGH COURT

Depreciation on the inflated cost of windmills - whether Tribunal was right in allowing excess lease rentals on the basis of inflated cost of windmills ? - Held that:- Tribunal considered the statement of comparable cases made by the assessee and concluded that the payment made by the assessee was certainly not inflated. The Tribunal considered the fact that setting up of windmills was a specialized task and came to the conclusion that the Assessing Officer had no evidence on record to establish .....

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ee paid lease rent of ₹ 5,51,788/- to Weizmann group Ltd. on account of the windmills taken on lease and the contention of the Assessing 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. The Tribunal found that the CIT (A) wa .....

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7-4-2015 - S.C. DHARMADHIKARI AND A.K. MENON, JJ. For The Appellant. : Mr. Suresh Kumar For The Respondent : Mr. J.D. Mistri, Sr. Adv. With Mr. Atul K. Jasani JUDGMENT (PER A.K.MENON, J.) All these appeals raise the following common questions of law, which read as under: "(A) Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in allowing the assessee company is the actual price and noted inflated price as held by the Assessing Officer despite there .....

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6 and 2006-07. In Income Tax Appeal No.1515/13 and 1713/13, these three questions are common. There is however, an additional question which is common in appeal Nos. ITXA Nos.1713/13 & 1511/13 which is reproduced below: "D. Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that the payments made for sharing of utilities do not attract section 194C of the Income Tax Act and, therefore, disallowance made by the Assessing Officer under .....

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between ₹ 2.25 to ₹ 2.50 crores whereas the sale price to this group was between ₹ 3.6 to ₹ 3.6 crores. 4. In the assessment proceedings, the assessee had claimed 100% depreciation on 12 windmills. According to the Assessing Officer, the excess payment made towards purchase price of windmills was received back by the Weizmann group routed through third parties while maintaining a claim of 100% depreciation by the assessee. The Assessing Officer, therefore, disallowed dep .....

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that during the search and seizure of the business premises, no evidence of the assessee's complicity in the transactions with NEG Micon was gathered. It was also noticed that the assessment order did not indicate that the assessee had paid a higher price for the purchase of windmills. Apropos, the lease rentals, the Commissioner of Income Tax (Appeals) deleted the disallowance. All payments were made by crossed account payee cheques and it was fully accounted for in the books of account. T .....

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f the windmills purchased by the assessee was not the actual price but an inflated price. According to Mr. Suresh Kumar, the findings of survey at NEG Micon revealed bogus purchase bills of ₹ 15.31 crores. He further submitted that sum was received back in cash. He submitted that commission had been paid by NEG Micon only in respect to the sales to Weizmann group. According to the Revenue, in respect of parties related to the Weizmann group, there were certain non-existent business transac .....

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ase. 8. Mr. Mistri on the other hand submitted that the case of the Revenue is completely consistent with the record which will show that the Assessing Officer had proceeded merely on the basis of conjecture without any evidence as the assessee causing the costs to be inflated in order to enable the group company to benefit. According to Mr. Mistri, the contention of the revenue is that subsequent transactions have been put into place all of which enure to benefit of the Weizmann group is incorr .....

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d that disallowance made by the Assessing Officer was under section 40A(2)(b) of the I.T. Act is to be rightly deleted. 10. Having heard both counsel and having perused the record, we find that the order of the Appellate Tribunal cannot be faulted. The order of the Appellate Tribunal in the set of appeals filed by the Revenue against M/s. Karma Energy Ltd., the Respondent herein as well M/s. Weizmann Ltd. has also taken into account all contentions including that during the course of investigati .....

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known as Suhami Power & Finance Corporation), whose address is the same as that of the present assessee. According to the Assessing Officer, the commission paid by NEG Micon to Suhami was thus received by a Weizmann group company. Therefore, the excess money paid for the windmills was routed back to Weizmann Group, while the assessee, also a Weizmann group company claimed 100% depreciation. The collusion between NEG Micon and Weizmann group it is alleged was in order to deprive the Revenue. .....

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the assessee, it revealed that Savita Chemicals purchased similar windmills at price of ₹ 405.00 lacs as against ₹ 360.64 lacs in the case of the assessee. The performance, specifications and type of requirements were very similar in these cases. 13. Accordingly, the Tribunal considered the statement of comparable cases made by the assessee and concluded that the payment made by the assessee was certainly not inflated. The Tribunal considered the fact that setting up of windmills wa .....

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was paid, namely M/s. Suhani Traders. 14. Mr. Mistri highlighted the fact that although the receipt of commission by Weizmann group company is alleged, there is no merit whatsoever in the contention that could justify disallowance of the depreciation claim. The Tribunal found that there is no excessive payment. The Assessing Officer has not disputed the fact that the assessee paid lease rent of ₹ 5,51,788/- to Weizmann group Ltd. on account of the windmills taken on lease and the contenti .....

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