M/S. GINNI GLOBAL PVT. LTD., ALWAR V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, ALWAR

ITA 1009/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3725 (ITAT-JAIPUR)
• Duration Of Justice: 7 month(s) 29 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 29-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 31-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C GUPTA
• Keywords: Depreciation; Fair market value; Valuation report; Set aside; Liquidation
• Section: 56(2)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE A JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 1009/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2013-14 M/S GINNI GLOBAL PVT. LTD., SP-2/1A & 2/2, RIICO IND. AREA, NEEMRANA, ALWAR (RAJ.)-301705 CUKE VS. THE ACIT, CIRCLE-2, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAACG3064H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI V. P. GUPTA (ADV.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI K. C. GUPTA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 04/02/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 02/05/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-22, ALWAR DATED 09.08.2018 FOR A.Y 2013-14 W HEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT THE CIT(A) ERRED IN UPHOLDING ADDITION OF RS. 99,22,000/- MADE BY THE ASSESSING OFFICER ALLEGING THAT PREFERE NCE SHARES HAVE BEEN ISSUED AT A PRICE MORE THAN THE FAIR MARK ET VALUE WITHOUT CORRECTLY APPRECIATING THE FACTS OF THE CAS E AND ALSO THE PROVISIONS OF SECTION 56(2)(VIIB) OF THE ACT READ W ITH RULE 11UA OF INCOME-TAX RULES. ITA NO. 1009/JP/2018 M/S GINNI GLOBAL PVT. LTD. VS. ACIT 2 2.THAT THE CIT(A) ERRED IN UPHOLDING THE ADDITION O F RS.99,22,000/- IN RESPECT OF PREFERENCE SHARES ISSU ED BY THE COMPANY WITHOUT APPRECIATING THAT THE COMPANY HAD C ORRECTLY DETERMINED THE NAV AS PER RULE 11UA OF INCOME-TAX R ULES WHEREAS THE ASSESSING OFFICER HAD COMMITTED PATENT MISTAKE IN DETERMINING THE NAV AS HE HAD EXCLUDED THE AMOUN T OF PREFERENCE SHARE CAPITAL FROM THE NET VALUE BUT HAD DIVIDED THE NET VALUE BY THE NUMBER OF PREFERENCE SHARES AN D THE CIT(A) FAILED TO UNDERSTAND THE MISTAKE IN CALCULAT IONS POINTED OUT BY THE COMPANY. 3. THAT THE CIT(A) ERRED IN UPHOLDING THE ADDITION IN RESPECT OF PREFERENCE SHARES ISSUED DURING THE YEAR WITHOUT AP PRECIATING THAT THE COMPANY HAD DULY SUBMITTED REPORT OF CHART ERED ACCOUNTANTS BEFORE THE ASSESSING OFFICER DETERMININ G THE FAIR MARKET VALUE AND THE ASSESSING OFFICER HAD NOT POIN TED OUT ANY MISTAKE IN THE REPORT BUT HAD PROCEEDED TO DETERMIN E THE NAV IN THE MANNER WHICH WAS INCONSISTENT WITH REPORT OF TH E CHARTERED ACCOUNTANTS AS WELL AS RULE 11UA OF INCOME-TAX RULE S. 4.THAT THE CIT(A) ERRED IN UPHOLDING DISALLOWANCE O F RS.2,85,835/-MADE BY THE ASSESSING OFFICER IN RESPE CT OF DEPRECIATION CLAIMED BY THE COMPANY ON RESIDENTIAL BUILDING WITHOUT APPRECIATING THAT SINCE NO RATE HAD BEEN PR ESCRIBED IN APPENDIX-IA FOR RESIDENTIAL BUILDING, DEPRECIATION WAS ALLOWABLE AS PER RATES PROVIDED IN APPENDIX-I ON WD V METHOD. 5. THAT THE CIT(A) ALSO ERRED IN NOT CONSIDERING AN D ADJUDICATING THE ALTERNATIVE GROUND RAISED BY THE COMPANY THAT I N CASE RATE OF DEPRECIATION OF 3.02% AS WAS PROVIDED IN SCHEDULE-I A WAS APPLICABLE TO RESIDENTIAL BUILDING ALSO THEN DEPREC IATION OUGHT TO HAVE BEEN ALLOWED ON SLM BASIS AND NOT ON THE BASIS OF WDV. 2. REGARDING GROUND NO. 1- 3, BRIEFLY STATED, THE F ACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE A SSESEE COMPANY HAS ITA NO. 1009/JP/2018 M/S GINNI GLOBAL PVT. LTD. VS. ACIT 3 ISSUED 2,00,000 PREFERENCE SHARES OF RS. 100 EACH @ PREMIUM OF RS. 100 PER SHARE. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, THE ASSESSEE WAS ASKED TO SUBMIT CALCULATION OF FAIR MA RKET VALUE FOR THE PURPOSES OF SECTION 56(2)(VIIB) OF THE ACT. IN RESP ONSE, THE ASSESSEE SUBMITTED ITS JUSTIFICATION FOR VALUATION OF PREFER ENCE SHARES AT PREMIUM AND ALSO SUBMITTED VALUATION REPORT FROM A CHARTERE D ACCOUNTANT. HOWEVER, SUCH VALUATION WAS NOT FOUND ACCEPTABLE TO THE ASSESSING OFFICER AND REFERRING TO THE PROVISIONS OF SECTION 56(2)(VIIB) READ WITH RULE 11UA, THE AO DETERMINED THE FAIR MARKET VALUE OF PREFERENCE SHARES AT RS. 150.39 PER SHARE. THEREFORE, THE EXCE SS AMOUNT RECEIVED BY THE ASSESSEE OVER AND ABOVE THE FAIR MARKET VALU E AMOUNTING TO RS. 99,22,000/- WAS BROUGHT TO TAX AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE ORDER OF THE A O AND HIS FINDINGS ARE AS UNDER:- IN THE PRESENT CASE BOTH THE A.O. AND THE APPELLA NT THROUGH THE CHARTERED ACCOUNTANT HAS VALUED THE SHARES ON NAV B ASIS. HOWEVER, I HAVE FOUND THAT THE VALUATION ADOPTED BY THE CHARTE RED ACCOUNTANT HAS TAKEN AFTER DISCOUNT OF 3-4%/ FURTHER, THE A.O HAS RIGHTLY ADOPTED THE VALUE BY EXCLUDING PREFERENTIAL SHARES FROM THE VAL UATION. PREFERRED SHARES ARE NOT INCLUDED IN YOUR STANDARD MARKET CAP CALCULATION BECAUSE THEIR CHARACTERISTICS ARE MORE LIKE DEBT, T HUS EQUITY VALUE TO COMMON SHAREHOLDERS IS REDUCED BY AMOUNTS OWED TO P REFERRED SHAREHOLDERS. WITH PUBLICLY TRADED COMPANIES, PREFE RRED SHAREHOLDERS ARE ESSENTIALLY DEBT HOLDERS ENTITLED TO A PERIODIC (GENERALLY ANNUAL) INTEREST PAYMENT EQUAL TO THE PAR VALUE OF THE PREF ERRED SHARES ITA NO. 1009/JP/2018 M/S GINNI GLOBAL PVT. LTD. VS. ACIT 4 MULTIPLIED BY A PRE-STATED PREFERRED DIVIDEND PER CENTAGE, DETERMINED AT ISSUANCE. IN VIEW OF THE FACTUAL MATRIX OF THE C ASE AND ON THE BASIS OF PROVISIONS AS CONTAINED IN SECTION 56(2) (VIIB) OF THE ACT TO BE READ WITH RULE 11UA(2) OF IT RULES, 1962, IT IS MAY CONS IDERED VIEW THAT THE SHARES ARE ALLOTTED TO M/S JASMINE BARTER PVT. LTD AT A VALUE HIGHER THAN THE MARKET VALUE AND THEREFORE, A.O. IS JUSTIFIED I N MAKING ADDITION OF RS. 99,22,000/- U/S 56(2) OF THE ACT. ACCORDINGLY, THE ADDITION OF RS. 99,22,000/- IS SUSTAINED. APPELLANTS GROUND OF APP EAL ON THIS ISSUE IS DISMISSED. 4. AGAINST THE AFORESAID FINDINGS OF THE LD CIT(A) , THE ASSESSEE IS NOW IN APPEAL BEFORE US. DURING THE COURSE OF HEARI NG, THE LD. AR SUBMITTED THAT PROVISIONS OF SECTION 56(2)(VIIB) AR E NOT APPLICABLE IN THE CASE OF ISSUE OF PREFERENCE SHARES. IT WAS FURTHER SUBMITTED THAT EVEN WHERE IT IS HELD THAT PROVISIONS OF SECTION 56(2)(V IIB) ARE APPLICABLE IN THE INSTANT CASE, THE VALUATION OF PREFERENCE SHARE S HAVE TO BE DONE AS PER CLAUSE (C) OF RULE 11UA(1) AND NOT RULE 11UA(2) WHICH HAS BEEN INVOKED BY THE LD. CIT(A). IT WAS SUBMITTED THAT RU LE 11UA(1)(C) PROVIDES THAT THE FAIR MARKET VALUE OF UNQUOTED SHA RES AND SECURITIES OTHER THAN EQUITY SHARES SHALL BE DEEMED TO BE THE PRICE IT WOULD FETCH IF SOLD IN THE OPEN MARKET ON THE VALUATION DATE AN D THE ASSESSEE MAY OBTAIN A REPORT FROM A MERCHANT BANKER OR AN ACCOUN TANT IN RESPECT OF SUCH VALUATION. IT WAS SUBMITTED THAT THE ASSESSEE HAS OBTAINED THE REPORT OF A CHARTERED ACCOUNTANT WHEREIN HE HAS FUL LY EXPLAINED THE VALUATION METHODOLOGY OF DETERMINING THE VALUE OF P REFERENCE SHARES AND FAIR VALUE OF PROPOSED PREFERENCE SHARE OF THE COMPANY HAS BEEN DETERMINED AT RS. 200/- AND WHICH HAS NOT BEEN RIG HTLY APPRECIATED BY THE LOWER AUTHORITIES. IT WAS ACCORDINGLY SUBMITTED THAT THE ORDER ITA NO. 1009/JP/2018 M/S GINNI GLOBAL PVT. LTD. VS. ACIT 5 PASSED BY THE LD. CIT(A) MAY BE SET ASIDE AND THE V ALUATION SO ADOPTED BY THE ASSESSE DULY SUPPORTED BY THE VALUATION REPO RT SHOULD BE ACCEPTED. 5. PER CONTRA, THE LD. DR HAS RELIED ON THE FINDING OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE VALUATION OF PRE FERENCE SHARES HAS BEEN RIGHTLY DETERMINED BY THE ASSESSING OFFICER WH ICH HAS BEEN CONFIRMED BY THE LD CIT(A). HE SUPPORTED THE FINDI NGS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE GONE THROUGH THE PROVI SIONS OF SECTION 56(2)(VIIB) AND IT DOSENT MAKE ANY DISTINCTION BET WEEN EQUITY SHARES AND PREFERENCE SHARES AND THEREFORE, THE FIRST CONT ENTION OF THE LD. AR CANNOT BE ACCEPTED. REGARDING THE VALUATION OF THE PREFERENCE SHARES, THE VALUATION SHOULD BE DETERMINED AS PER RULE 11UA (1)(C) WHICH REQUIRES THE ASSESSEE TO OBTAIN A REPORT FROM A MER CHANT BANKER OR A CHARTERED ACCOUNTANT TO DETERMINE THE PRICE WHICH P REFERENCE SHARES WILL FETCH IF SOLD IN THE OPEN MARKET ON THE VALUAT ION DATE. IN THIS REGARD, WE REFER TO THE VALUATION REPORT ISSUED BY THE CHARTERED ACCOUNTANT AND THE RELEVANT EXTRACT OF THE VALUATIO N REPORT IS REPRODUCED AS UNDER:- C. VALUATION METHODOLOGY WHILE ASCERTAINING THE VALUATION OF EACH REDEEMABLE PREFERENCE SHARE OF THE COMPANY AS AT ON 31.03.2012 EVEN THOUG H WE HAVE RELIED UPON THE BASIC FRAMEWORK OF VALUATION METHOD OLOGY BUT AT THE SAME TIME WE HAVE GIVEN DUE WEIGHTAGE TO THE EXERCI SE OF DISCRETION ITA NO. 1009/JP/2018 M/S GINNI GLOBAL PVT. LTD. VS. ACIT 6 AND JUDGMENT NEEDED TO ARRIVE AT A FAIR AND EQUITAB LE VALUE OF EACH SUCH PREFERENCE SHARE OF THE COMPANY AS ON 31.03.20 12. HOWEVER, WHILE ASCERTAINING THE VALUATION OF SUCH PREFERENCE SHARE WE HAVE NOT CARRIED OUT ANY DUE DILIGENCE OR CONDUCTED ANY FINANCIAL OR TECHNICAL FEASIBILITY STUDY OF THE COMPANY. ONE OF THE MOST WIDELY USED MODEL FOR VALUING PREFE RENCE SHARES OF THE COMPANIES IS THE DIVIDEND DISCOUNT MODEL. HOWEV ER, SUCH METHODOLOGY IS USED WHEN PREFERENCE SHARES DO NOT C ARRY ANY OTHER RIGHTS SUCH AS REDEMPTION PREMIUM, CONVERSION RIGHT ETC AND HOLDER OF SUCH SHARE ONLY GET PREDETERMINED COUPON RATE OF DI VIDEND. SINCE PROPOSED ISSUE OF PREFERENCE SHARES WILL GET SUBSTA NTIAL REDEMPTION PREMIUM BESIDES OPTION TO CONVERT THE SAME INTO EQU ITY SHARES OF THE COMPANY BEFORE DUE DATE OF REDEMPTION THEREFORE, DI VIDEND DISCOUNT MODEL IS NOT SUITABLE METHOD FOR ASCERTAINING FAIR VALUE OF SUCH PREFERENCE SHARES. FURTHER SINCE THE PREFERENCE SHARES TO BE VALUED AR E OPTIONALLY CONVERTIBLE SHARES , CONVERTIBLE INTO EQUITY SHARES OF THE COMPANY, THEREFORE , ESSENTIAL CHARACTERISTIC ON EXERCISE OF CONVERSION OPTION IS THAT OF EQUITY SHARES AND HENCE NET ASSET VALUE MET HOD FOR VALUATION OF THESE SHARES NEED TO BE CONSIDERED . SINCE, PROPOSED PREFERENCE SHARE HAS TWO OPTIONS NA MELY:- 1. REDEMPTION AFTER A TENURE OF 12 YEARS 2. CONVERSION INTO EQUITY SHARES THEREFORE, VALUATION NEED TO CARRIED OUT CONSIDERIN G BOTH THE ABOVE OPTIONS. ITA NO. 1009/JP/2018 M/S GINNI GLOBAL PVT. LTD. VS. ACIT 7 OPTION - I REDEMPTION AFTER TENURE OF 12 YEARS PREFERENCE SHARES ARE PROPOSED TO BE REDEEMED AT A REDEMPTION PREMIUM OF 8% P.A I.E AT A VALUE OF RS 196 /- AFTER 12 YEAR S. THEREFORE, ON THE BASIS OF REDEMPTION VALUE, FAIR VALUE OF SUCH PREFE RENCE SHARES CAN BE WORKED OUT AS RS 196/- PER SHARES SPECIALLY WHEN SU CH SHARES ARE ENTITLED FOR DIVIDEND UPTO 20% P.A. OPTION-II CONVERSION OF PREFERENCE SHARES INTO EQUITY SHARES SINCE PREFERENCE SHARES HAVE AN OPTION TO CONVERT T HE SAME INTO EQUITY SHARES, THEREFORE, SUCH SHARES WILL HAVE A CHARACTE RISTIC OF EQUITY SHARES ALSO. WE HAVE WORKED OUT VALUATION ON THE BASIS OF NET ASSETS, A METHOD PRESCRIBED UNDER RULE 11UA OF INCOME TAX, USING THE NET ASSETS VALUES AS PER AUDITED FINANCIAL STATEMENTS OF THE COMPANY AS AT 31 ST MARCH 2012. COMPUTATION OF FAIR VALUE PER SHARE AS PER NET ASSE T VALUE METHOD: THE FAIR VALUE PER EQUITY SHARE (PRESUMING CONVERSI ON OF EXISTING PREFERENCE SHARES IN ACCORDANCE WITH THE RIGHTS ATT ACHED WITH THEM) IS COMPUTED AS BELOW:- PARTICULARS VALUE IN RS. NET ASSET VALUE METHOD SHARE HOLDER FUND (INCLUDING EQUITY VALUE AFTER CONVERSION OF EXISTING PREFERENCE SHARES, AS PER TERMS OF THEIR ISSUE) 8,79,50,000 ADD: RESERVE AND SURPLUS 12,45,03,096 ITA NO. 1009/JP/2018 M/S GINNI GLOBAL PVT. LTD. VS. ACIT 8 TOTAL FUNDS AVAILABLE FOR SHAREHOLDER AS AT ON 31.03.2012(A) 21,24,53,096 NO OF EXISTING EQUITY SHARES 3,10,000 ADD: NEW EQUITY SHARE ON CONVERSION OF EXISTING PREFERENCE SHARES 84,85,000 TOTAL NO OF EQUITY SHARES (B) 87,95,000 VALUE OF EQUITY SHARE (FACE VALUE RS. 10/-) A/B 24.16 VALUE OF PREFERENCE SHARE (FACE VALUE RS. 100) 241.60 COMPUTATION OF FAIR VALUE AS PER WEIGHTED AVERAGE O F BOTH THE ABOVE OPTIONS: COMPUTATION OF FAIR VALUE PRICE WEIGHTAGE FAIR VALUE ON THE BASIS OF REDEMPTION VALUE 196.00 3 FAIR VALUE ON THE BASIS OF CONVERSION RIGHT 241.60 1 AVERAGE VALUE 207.40 4 WE HAVE ASSIGNED MORE WEIGHTAGE TO FAIR VALUE BASED ON REDEMPTION VALUE BASIS THAN CONVERSION RIGHT BASIS AS BALSIO P ROJECT OF THE COMPANY IS STILL UNDER IMPLEMENTATION AND TARAILA PROJECT WAS UNDER RESTORATION AS ON 31.03.2012, THEREFORE, RISK & RETURN ON BOTH THE PR OJECT WERE UNCERTAIN AS ON 31.03.2012. E. OPTION MOREOVER SINCE, LIQUIDATION MARKET OF ABOVE PREFERE NCE SHARES ARE LIMITED AND TENURE OF PROPOSED PREFERENCE SHARE ARE 12 YEAR S, THEREFORE, CONSIDERING RESTRICTED LIQUIDITY, WE ARE OF THE OPI NION THAT FAIR VALUE OF PROPOSED PREFERENCE SHARE AS CALCULATED ABOVE IS FU RTHER TO BE DISCOUNTED BY 3 TO 4 % SO AS TO DETERMINE ITS MOST PRECISE FAI R VALUE AND THUS WE ARE OF THE OPINION THAT FAIR VALUE OF THE PROPOSED PREF ERENCE SHARE OF THE ITA NO. 1009/JP/2018 M/S GINNI GLOBAL PVT. LTD. VS. ACIT 9 COMPANY WILL BE ABOUT RS. 200/- PER SHARE. IT IS TH E VALUE WHICH SUCH PREFERENCE SHARE CAN FETCH IF SOLD IN THE OPEN MARK ET BASED ON THE INFORMATION AVAILABLE AND AS PER ABOVE VALUATION ME THODOLOGY. 7. THE REVENUE HAS NOT DISPUTED THE ADOPTION OF TH E NAV METHOD BY THE ASSESSEE. THEREFORE, ONCE THE NAV METHOD HAS BEEN ACCEPTED, WHAT HAS TO BE DETERMINED IS THE VALUATION OF THE PREFERENCE SHARES BASED ON NET ASSET VALUE AS ON THE DATE OF ISSUE OF SUCH PREFERE NCE SHARES. THE VALUATION DATE THUS HAS TO BE THE DATE OF ISSUANCE OF PREFERENCE SHARES AND NOT AS PER THE LAST BALANCE SHEET DATE AS HAS B EEN ADOPTED CURRENTLY. THE NET ASSET VALUE IS DETERMINED BY APPLYING THE F ORMULA WHERE DIFFERENCE BETWEEN THE TOTAL ASSETS AND TOTAL LIABI LITIES AS ON THE DATE OF ISSUANCE OF SHARES IS DIVIDED BY TOTAL AMOUNT OF PA ID UP CAPITAL OF THE COMPANY AND MULTIPLIED BY PAID UP VALUE OF NEW SHAR ES. IN THE INSTANT CASE, GIVEN THAT THERE ARE EXISTING EQUITY AND PREF ERENCE SHARE CAPITAL, PAID CAPITAL IN RESPECT OF BOTH OF THESE CATEGORY O F SHARES SHALL BE CONSIDERED FOR DETERMINING TOTAL PAID UP CAPITAL OF THE COMPANY. IN THE RESULT, WE SET-ASIDE THE MATTER TO THE FILE OF THE AO WHO SHALL DETERMINE THE VALUE OF THE PREFERENCE SHARES AS PER THE NAV M ETHOD BASED ON FORMULA DISCUSSED ABOVE AND SUCH VALUATION HAS TO B E DETERMINED AS ON THE DATE OF ISSUANCE OF SUCH PREFERENCE SHARES. IN THE RESULT, THE GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN GROUND NO. 4 & 5, THE ASSESSEE HAS CHALLENGED THE RATE OF DEPRECIATION OF 3.02% ON W.D.V BASIS AS AGAINST 5% ON W.D.V BASIS APPLIED BY THE ASSESSEE IN RESPECT OF HOUSING COLON Y FOR ACCOMMODATION OF STAFF INVOLVED IN THE POWER PROJECT. IN THIS RE GARD, IT IS NOTED THAT THE ASSESSEE IN RESPECT OF OTHER ASSETS BELONGING TO TH E POWER PROJECTS HAVE COMPUTED DEPRECIATION ON SLM BASIS AS PER SECTION 3 2(1)(I), HOWEVER, IN RESPECT OF HOUSING COLONY, THE DEPRECIATION HAS BEE N CLAIMED ON W.D.V ITA NO. 1009/JP/2018 M/S GINNI GLOBAL PVT. LTD. VS. ACIT 10 BASIS. AS PER SECTION 32(1)(I), IN CASE OF ASSETS OF AN UNDERTAKING ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTIO N OF POWER, SUCH PERCERNTAGE ON THE ACTUAL COST THEREOF TO THE ASSES SEE AS MAY BE PRESCRIBED. THE RATES OF DEPRECIATION ON ALL SUCH ASSETS OF THE UNDERTAKING ENGAGED IN THE POWER PROJECTS THUS HAVE TO BE COMPUTED ON SLM BASIS AND THE ASSESSEE CANNOT PICK AND CHOOSE C ERTAIN ASSETS AND CLAIM DEPRECIATION ON SLM AND ON OTHER ASSETS, CLAI M DEPRECIATION ON WDV BASIS. THE HOUSING COLONY IS VERY MUCH PART OF THE BUSINESS ASSETS OF THE UNDERTAKING INVOLVED IN THE POWER PROJECTS A ND THUS, DEPRECIATION THEREON HAS TO BE COMPUTED ON SLM BASIS. AS FAR AS RATE OF DEPRECIATION IS CONCERNED, THE HOUSING COLONY WILL FALL IN THE R ESIDUARY CATEGORY (VI)- OTHERS UNDER CLAUSE (D) BUILDINGS AND CIVIL ENGIN EERING WORKS OF PERMANENT NATURE AND THE RATE OF DEPRECIATION WHICH HAS BEEN PRESCRIBED IS 3.02%. IN LIGHT OF THE SAME, THE ASSESSING OFFI CER IS DIRECTED TO COMPUTE THE DEPRECIATION ON HOUSING COLONY AT THE R ATE OF 3.02% ON SLM BASIS. IN THE RESULT, THE GROUND OF APPEAL NO. 4 I S DISMISSED AND GROUND NO. 5 IS ALLOWED. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISPOSED O FF IN LIGHT OF ABOVE DIRECTIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 02/05/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 02/05/2019 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S GINNI GLOBAL PVT. LTD., ALWAR ITA NO. 1009/JP/2018 M/S GINNI GLOBAL PVT. LTD. VS. ACIT 11 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CIRCLE-2, ALWAR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 1009/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR