Gita Wind Energy, CHENNAI V. ITO, CHENNAI

ITA 750/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5693 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 20-07-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 27-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: V RA VICHANDRAN
• Keywords: Depreciation; Cost of acquisition; Fair market value; Valuation report
• Section: 32

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NOS.750 & 751/MDS/2017 ( )( / ASSESSMENT YEARS : 2011-12 & 2012-13 M/S GITA WIND ENERGY, 4/7, THIRU VI KA ROAD, MYLAPORE, CHENNAI - 600 004. PAN : AAJFG 7091 A V. THE INCOME TAX OFFICER, BUSINESS WARD 1(2) / NON- CORPORATE WARD 1(2), CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI V. RAVICHANDRAN, FCA -.+, / 0 / RESPONDENT BY : MS. S. VIJAYAPRABHA, JCIT 1 / 2% / DATE OF HEARING : 27.09.2017 3') / 2% / DATE OF PRONOUNCEMENT : 30.11.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH THE APPEALS OF THE ASSESSEE ARE DIRECTED AG AINST THE COMMON ORDER PASSED BY THE COMMISSIONER OF INCOME T AX (APPEALS)-2, CHENNAI, DATED 13.01.2017 FOR THE ASSE SSMENT YEARS 2011-12 AND 2012-13. SINCE COMMON ISSUE ARISES FOR CONSIDERATION IN BOTH THE APPEALS, WE HEARD THESE A PPEALS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2 I.T.A. NOS.750 & 751/MDS/17 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IN BOTH THE APPEALS IS WITH REGARD TO DEPRECIATION CLAIMED BY THE ASSESSEE ON THE WINDMILLS. 3. SHRI V. RAVICHANDRAN, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE-PARTNERSHIP F IRM IS ENGAGED IN THE BUSINESS OF GENERATION OF POWER THROUGH WIND ENERGY. DURING THE ASSESSMENT YEAR 2011-12, THE ASSESSEE PURCHASED 4 WINDMILLS FROM M/S RASI SEEDS PVT. LTD. ACCORDING TO THE LD. REPRESENTATIVE, M/S RASI SEEDS PVT. LTD. IS NOT RELATED TO THE ASSE SSEE AT ALL. THE ASSESSEE CLAIMED DEPRECIATION ON THE COST OF THE AS SET. ACCORDING TO THE LD. REPRESENTATIVE, THE TOTAL COST OF THE FO UR WINDMILLS IS 8.32 CRORES. THE ASSESSEE CLAIMED DEPRECIATION OF 3,32,80,000/- AS AGAINST THE TOTAL INCOME OF 49,20,485/-. IN FACT, THE ASSESSEE CLAIMED LOSS OF 2,83,69,515/-. REFERRING TO THE ASSESSMENT ORDER, THE LD. REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER REJECTED THE CLAIM OF DEPRECIATION AND PRICE PAID BY THE ASS ESSEE BEING THE COST OF THE ASSET. BY INVOKING EXPLANATION 3 TO SE CTION 43(1) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'), THE ASSE SSING OFFICER FOUND THAT THE TAX LIABILITY IS REDUCED SINCE THE A SSESSEE WAS CLAIMING DEPRECIATION ON THE COST PAID TO THE VENDO R. ACCORDING TO 3 I.T.A. NOS.750 & 751/MDS/17 THE LD. REPRESENTATIVE, THE ASSESSEE ALSO FILED A V ALUATION REPORT FROM THE REGISTERED VALUER. HOWEVER, THE SAME WAS REJECTED BY THE ASSESSING OFFICER. ACCORDING TO THE LD. REPRESENT ATIVE, THE WRITTEN DOWN VALUE OF THE WINDMILLS IN THE BOOKS OF THE VEN DOR, NAMELY, M/S RASI SEEDS PVT. LTD. WAS 83,37,300/- AS PER COMPANIES ACT. 4. PLACING RELIANCE ON THE DECISION OF AHMEDABAD BE NCH OF THIS TRIBUNAL IN NIRMA INDUSTRIES (P.) LTD. V. DCIT (201 4) 148 ITD 126, THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED T HAT WHEN THE ASSESSEE FILED A VALUATION REPORT, IT IS INCUMBENT UPON THE ASSESSING AUTHORITY TO DISLODGE THE SAME BY BRINGING ADEQUATE MATERIAL AVAILABLE ON RECORD IN THE FORM OF DEPARTMENTAL VAL UATION REPORT. IN THE ABSENCE OF DEPARTMENTAL VALUATION OFFICERS REPORT, THE ASSESSING OFFICER CANNOT DISLODGE THE REPORT OF THE REGISTERED VALUER. IN THIS CASE, ACCORDING TO THE LD. REPRESE NTATIVE, THE ASSESSING OFFICER WITHOUT GETTING THE DEPARTMENTAL VALUATION OFFICERS REPORT, HAS REJECTED THE REPORT OF THE RE GISTERED VALUER, THEREFORE, THE CIT(APPEALS) IS NOT JUSTIFIED IN CON FIRMING THE ORDER OF THE ASSESSING OFFICER. MOREOVER, THE VENDOR IS NOT RELATED TO THE ASSESSEE, THEREFORE, IT CANNOT BE SAID THAT THE INT ENTION OF ACQUISITION OF WINDMILLS WAS TO REDUCE THE TAX LIAB ILITY BY CLAIMING HIGHER DEPRECIATION. 4 I.T.A. NOS.750 & 751/MDS/17 5. THE LD. REPRESENTATIVE FOR THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE DECISION OF PUNE BENCH OF THIS TRIB UNAL IN DCIT V. JAYA HIND SCIAKY LTD. (2016) 156 ITD 547 AND SUBMIT TED THAT WHEN THE FAIR MARKET VALUE WAS CERTIFIED BY THE REGISTER ED VALUER AND THE ASSESSING OFFICER HAS NOT OBTAINED ANY REPORT FROM DEPARTMENTAL VALUATION OFFICER, THEN THE VALUATION REPORT SUBMIT TED BY THE ASSESSEE OUGHT TO HAVE BEEN ACCEPTED, THEREFORE, IT CANNOT BE SAID THAT THE TRANSACTION WAS TO REDUCE THE TAX LIABILIT Y. FOR SIMILAR PROPOSITION, THE LD. REPRESENTATIVE HAS ALSO PLACED RELIANCE ON THE DECISION OF MUMBAI BENCH OF THIS TRIBUNAL IN WESTER N MAHARASHTRA FLOURINE CHEMICAL INDUSTRIES V. JCIT (2006) 7 SOT 5 72 AND ALSO THE JUDGMENT OF GUJARAT HIGH COURT IN ASHWIN VANASPATI INDUSTRIES V. CIT 92002) 255 ITR 26. 6. ON THE CONTRARY, MS. S. VIJAYAPRABHA, THE LD. DE PARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE ADMITTE DLY PURCHASED FOUR WINDMILLS FROM M/S RASI SEEDS PVT. LTD. DURING THE ASSESSMENT YEAR 2011-12. ACCORDING TO THE LD. D.R., THE INCOM E DECLARED FROM THE WINDMILLS WAS 49.20 LAKHS BEFORE DEPRECIATION. IN FACT, M/S RASI SEEDS PVT. LTD. HAD ALSO AVAILED DEPRECIATION ON THE VERY SAME WINDMILLS AND THE WRITTEN DOWN VALUE IN THE HA NDS OF M/S RASI 5 I.T.A. NOS.750 & 751/MDS/17 SEEDS PVT. LTD. WAS ALMOST NIL. THEREFORE, ACCORDI NG TO THE LD. D.R., THE ASSESSING OFFICER INVOKED THE PROVISIONS OF EXPLANATION 3 TO SECTION 43 OF THE ACT TO ADOPT THE WRITTEN DOWN VALUE OF THE WINDMILLS IN THE HANDS OF M/S RASI SEEDS PVT. LTD. AS THE ACTUAL COST IN THE HANDS OF THE ASSESSEE. ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER WAS SATISFIED THAT THE VERY OBJEC T OF TRANSFER OF WINDMILLS WAS TO REDUCE THE TAX LIABILITY BY CLAIMI NG DEPRECIATION ON THE ENHANCED COST. THE ASSESSING OFFICER, IN FACT, EXAMINED THE VALUATION REPORT AND REJECTED THE SAME SINCE IT HAS NOT PROVIDED THE METHOD FOR ADOPTING THE VALUATION. THE RATE OF DEP RECIATION WAS ALSO NOT MENTIONED. THEREFORE, ACCORDING TO THE LD . D.R., THE CIT(APPEALS) HAS CONFIRMED THE ORDER OF THE ASSESSI NG OFFICER. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE COST OF ACQUISITION OF THE WINDMILLS BY THE ASSESSEE FROM M /S RASI SEEDS PVT. LTD. IS NOT IN DISPUTE. THE ONLY OBJECTION OF THE LD. DEPARTMENTAL REPRESENTATIVE IS THAT THE COST OF THE ASSET HAS TO BE TAKEN AT THE WRITTEN DOWN VALUE IN THE HANDS OF THE VENDOR, NAMELY, M/S RASI SEEDS PVT. LTD. IT IS NOT THE CASE OF THE REVENUE THAT M/S RASI SEEDS PVT. LTD. IS RELATED TO THE ASSESSEE-PAR TNERSHIP FIRM. 6 I.T.A. NOS.750 & 751/MDS/17 8. WE HAVE CAREFULLY GONE THROUGH EXPLANATION 3 TO SECTION 43(1) WHICH CLEARLY SAYS THAT WHEN THE ASSET ACQUIR ED BY THE ASSESSEE WAS USED BY ANY OTHER PERSON BEFORE THE DA TE OF ACQUISITION FOR THE PURPOSE OF THEIR BUSINESS OR PR OFESSION, THEN IN CASE THE ASSESSING OFFICER SATISFIED THAT THE MAIN OBJECT FOR TRANSFER OF SUCH ASSET IS DIRECTLY OR INDIRECTLY TO REDUCE T AX LIABILITY BY CLAIMING DEPRECIATION WITH REFERENCE TO ENHANCED CO ST, THE ACTUAL COST TO THE ASSESSEE SHALL BE SUCH AMOUNT AS THE AS SESSING OFFICER WOULD DETERMINE HAVING REGARD TO ALL THE CIRCUMSTAN CES OF THE CASE. IN THIS CASE, THE ASSESSING OFFICER HAS TAKEN WRITT EN DOWN VALUE IN THE CASE OF M/S RASI SEEDS PVT. LTD. THE ASSESSEE HAS FILED THE VALUATION REPORT FROM A REGISTERED VALUER BEFORE TH E ASSESSING OFFICER. THE ASSESSING OFFICER WITHOUT REFERRING T HE MATTER TO THE DEPARTMENTAL VALUATION OFFICER TO GET ANOTHER TECHN ICAL REPORT, HAS EXAMINED THE SAME AND REJECTED THE REPORT ON THE GR OUND THAT THE REPORT OF THE REGISTERED VALUER DOES NOT PROVIDE TH E METHOD OF VALUATION. IT IS NOT IN DISPUTE THAT THE ASSESSING OFFICER IS NOT A TECHNICAL EXPERT FOR VALUING WINDMILLS. WHEN THE A SSESSEE HAS FILED A TECHNICAL REPORT FROM A REGISTERED VALUER, AS FOU ND BY THE AHMEDABAD BENCH OF THIS IN NIRMA INDUSTRIES (P.) LT D. (SUPRA), THE 7 I.T.A. NOS.750 & 751/MDS/17 SAME CAN BE DISLODGED BY ANOTHER TECHNICAL REPORT F ROM THE VALUER WHO IS EXPERT IN VALUING THE WINDMILLS. A SIMILAR VIEW WAS TAKEN BY PUNE BENCH OF THIS TRIBUNAL IN JAYA HIND SCIAKY LTD . (SUPRA). IN THE ABSENCE OF ANY TECHNICAL REPORT FROM DEPARTMENTAL V ALUATION OFFICER, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER CANNOT REJECT THE REGISTERED VALUERS REPOR T FILED BY THE ASSESSEE. 9. MOREOVER, IT IS NOT IN DISPUTE THAT THE ASSESSEE ACQUIRED THE WINDMILLS AT 8.32 CRORES. IT IS ALSO NOT IN DISPUTE THAT THE AS SESSEE HAS IN FACT PAID 8.32 CRORES TO M/S RASI SEEDS PVT. LTD. WHEN THE VENDOR IS NOT RELATED TO THE ASSESSEE, IT IS NOT KN OWN HOW THE ASSESSEE IS GOING TO GET BENEFIT BY CLAIMING DEPREC IATION ON THE ACTUAL COST PAID TO THE VENDOR. THE MATTER WOULD S TAND DIFFERENTLY IN CASE BOTH THE ASSESSEE AND THE VENDOR, NAMELY M/S R ASI SEEDS PVT. LTD. ARE RELATED PARTIES. MERELY BECAUSE THE ASSESSEE IS CLAIMING DEPRECIATION ON THE COST OF THE ASSET BEIN G THE COST PAID TO THE VENDOR, IT CANNOT BE PRESUMED THAT TAX LIABILIT Y WAS REDUCED CONSIDERABLY. SECTION 32 OF THE ACT PROVIDES FOR D EPRECIATION ON THE ACTUAL COST. THEREFORE, UNLESS AND UNTIL THERE IS A MATERIAL TO SUGGEST THAT INTENTION OF THE PARTIES TO TRANSFER T HE WINDMILLS TO THE 8 I.T.A. NOS.750 & 751/MDS/17 ASSESSEE WAS TO REDUCE THE TAX LIABILITY, THIS TRIB UNAL IS OF THE CONSIDERED OPINION THAT EXPLANATION 3 TO SECTION 43 (1) OF THE ACT CANNOT BE APPLIED. IN THIS CASE, NO SUCH MATERIAL IS AVAILABLE TO INDICATE THAT THE OBJECT OF TRANSFER OF WINDMILLS T O THE ASSESSEE IS TO REDUCE THE TAX LIABILITY BY CLAIMING DEPRECIATION O N THE ENHANCED COST. IT IS NOBODYS CASE THAT THE COST PAID BY TH E ASSESSEE IS NOT THE MARKET VALUE. IN THOSE CIRCUMSTANCES, THIS TRI BUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER IS NO T JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE. THEREFORE, WE ARE UNABLE TO UPHOLD THE ORDER OF THE LOWER AUTHORITY. ACCORDING LY, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE AS SESSING OFFICER IS DIRECTED TO ALLOW THE DEPRECIATION AS CLAIMED BY TH E ASSESSEE. 10. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED. ORDER PRONOUNCED ON 30 TH NOVEMBER, 2017 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 30 TH NOVEMBER, 2017. KRI. 9 I.T.A. NOS.750 & 751/MDS/17 / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-2, CHENNAI-34 4. PRINCIPAL CIT-1, CHENNAI 5. 7: -2 /DR 6. ( ; /GF.