Feedback   New User   Login      
Tax Management India. Com TMI - Tax Management India. Com
Home Acts / Rules Notifications Circulars Tariff/ ITC HSN Forms Case Laws Manuals Short Notes Articles News Highlights
Extracts
Home List
← Previous Next →

Smt. V. Sabithamani, C/o Pioneer Corporation Versus The Assistant Commissioner of Income Tax, Circle II, Coimbatore And Vice-Versa

2017 (2) TMI 544 - ITAT CHENNAI

Acquisition 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

8377; 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. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ncy. 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Revenue are reproduced hereunder:- Grounds taken by assessee:- 1. The Commissioner of Income Tax (Appeals) is not justified in holding that by implication the assesseeappellant acceded to the actual cost of determination at ₹ 1,50,00,000/- the filing of cross-objection is as good as filing appeal by assessee and CIT(A) cannot take advantage based on this fact. 2. The Commissioner of Income Tax (Appeals) erred in estimating the cost of acquisition of second-hand windmill at ₹ 1,50,00, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

erred in law and on facts of the case in failing to appreciate that the assessing officer, while computing the actual cost of the asset, has taken into account the effective life of the asset, the wear and tear of the asset during its utilisation, the amount of depreciation already allowed on the asset in the hands of the seller and the intent of the legislature in allowing an accelerated depreciation on the renewable energy device. 3. The Ld. CIT(A) has erred in law and facts of the case that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l performance of the asset. 5. The Ld. CIT(Appeals) has failed to appreciate the facts that the value adopted by the Assessing Officer with the approval of the Joint Commissioner of Income Tax was based on the effective life of the asset and average generation of electricity from the windmill. 6. The Ld. CIT(A) has erred in adopting the value by which the depreciation claimed by the assessee and the previous owner put together would exceed the cost of the asset. All the grounds relate to issue o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

273/-. Original return was processed under Section 143(1) of the Act. Thereafter assessment was reopened for a reason that assessee had claimed excessive depreciation. A.O. noted that the claim of depreciation of ₹ 98,21,273/- included depreciation of ₹ 94,44,000/- on a windmill. As per the A.O., such claim of depreciation was on second hand windmill acquired by the assessee on 29.03.2013 from one M/s Soundararaja Mills Ltd. According to the A.O., the windmill was already used by ano .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

epreciation of ₹ 2,07,68,000/- for the period March 2009 to March 2010, based on an enhanced value of windmill. Thus, as per the A.O., the total asset value, if depreciation alone was considered, came to ₹ 5,07,68,000/-. The A.O. noted that the manufacturer of the windmill, namely, Enercon (India) Ltd. had certified its cost as ₹ 3,00,00,000/- and if the aggregate of the depreciation claimed by M/s Soundararaja Mills Ltd. and by Smt. V. Sabithamani, the assessee, considered tog .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the windmill as on the date of acquisition by the assessee was only ₹ 1920/-. In any case, as per the A.O., by acquiring the windmill at ₹ 2,36,00,000/- from M/s Soundararaja Mills Ltd., assessee was taking undue benefit of the enhanced rate of depreciation available for windmills under the Act. Relying on Explanation 3 to Section 43(1) of the Act, the Ld. A.O. held that the main purpose of acquiring windmill was reduction of liability to tax, by claiming depreciation with referen .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tered valuer and such registered valuer had given a value higher than the price paid by the assessee. Contention of the assessee was that she had raised a term loan of ₹ 144 lakhs from M/s Canara Bank, Gandhipuram Branch, Coimbatore, for buying the windmill from M/s Soundararaja Mills Ltd. Relying on the valuation report given by Shri P. Muthuperumal, registered valuer, appointed by M/s Canara Bank, the assessee contended that the total valuation given by the said valuer was ₹ 2,55,3 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

not offer any short term capital gains for the sale of windmill to her. However, according to the assessee, they had confirmed receipt of the consideration and how they treated the amount in their books of account was not relevant. 6. However, the Ld. CIT(Appeals) was not impressed by the above arguments. According to him, what the assessee had acquired was a wholly depreciated windmill having negligible value. As per the Ld. CIT(Appeals), there were deficiencies in the valuation report produced .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the method of arriving at the actual cost adopted by the Assessing Officer was not a reasonable one. According to him, the Assessing Officer had applied a multiplication of average units of power generated per annum with per unit value of ₹ 3/- for arriving at such value. As against this, as per the Ld. CIT(Appeals), the assessee had given a working based on a unit rate of ₹ 15/-. The Ld. CIT(Appeals) was of the opinion that the method of valuation based on number of units generated .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rected the A.O. to consider the actual cost as ₹ 1,50,00,000/- and recompute the disallowance. 7. Now before us, the assessee is aggrieved on adoption of value of ₹ 1,50,00,000/- as actual cost, whereas, the Revenue is aggrieved on rejection of the value assigned by the Assessing Officer. 8. The Ld. representative for the assessee submitted that Explanation 3 to Section 43(1) of the Act had no application. According to him, the said Explanation could be applied only where the main pu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

a lucrative and profit earning business. According to him, the second hand windmill was having a high value considering the profit potentiality. Just because the earlier owner had derived benefit of enhanced depreciation on windmill, would not, as per the Ld. A.R., discredit the claim of assessee for depreciation on the cost at which assessee had acquired the windmill. According to Ld. A.R., the agreement for transfer of windmill entered with M/s Soundararaja Mills Ltd. was never doubted by the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of Explanation 3 to Section 43(1) of the Act did not arise. Further, as per the Ld. A.R., the Ld. CIT(Appeals) had assigned the value of ₹ 1,50,00,000/- based on a method of estimation devised by TIIC, the Government agency and how such method was applied to arrive at value of ₹ 1.5 Crores was never explained by the Ld. CIT(Appeals) at any part of his order. Thus, according to him, the CIT(Appeals) had erred in not allowing the depreciation claim of the assessee in full. Though one o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

owner were considered, the total depreciation was in excess of ₹ 5 Crores, whereas the windmill itself had a cost of less than ₹ 3 Crores. Thus, according to him, this was the right case where Explanation 3 to Section 43(1) was invoked. 10. We have perused the orders and heard the rival contentions. Claim of the assessee is that she had acquired windmill from M/s Soundararaja Mills Ltd. for a price of ₹ 2,36,10,000/- and M/s Soundararaja Mills Ltd. was in no way related to her .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rectly or indirectly by any other person or authority: Provided that where the actual cost of an asset, being a motor car which is acquired by the assessee after the 31st day of March, 1967, but before the first day of March, 1975, and is used otherwise than in a business of running it on hire for tourists, exceeds twenty-five thousand rupees, the excess of the actual cost over such amount shall be ignored, and the actual cost thereof shall be taken to be twenty-five thousand rupees. Explanation .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n 3.- Where, before the date of acquisition by the assessee, the assets were at any time used by any other person for the purposes of his business or profession and the Assessing Officer is satisfied that the main purpose of the transfer of such assets, directly or indirectly to the assessee, was the reduction of a liability to income-tax (by claiming depreciation with reference to an enhanced cost), the actual cost to the assessee shall be such an amount as the Assessing Officer may, with the p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sfaction is that the depreciation claimed by the earlier owner as well as the assessee on the windmill when aggregated, came to a sum in excess of ₹ 5 Crores, and this was much higher than original cost of the windmill as such. In our opinion, when original cost of the windmill was itself much less than ₹ 5 Crores, the main purpose of transfer of windmill by M/s Soundararaja Mills Ltd. to the assessee could only be seen as motivated by an intent to reduce liability to income-tax. It .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ndmill from M/s Soundararaja Mills Ltd. to the assessee was only a business transaction, in our opinion, were not relevant factors. Relevant factor was the main purpose which motivated the assessee to acquire the second hand windmill at an excessive cost. 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

Forum
what is new what is new
  ↓     bird's eye view     ↓  


|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version