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Issues: (i) whether depreciation on the solar power plants was allowable on the footing that the assets had been put to use during the relevant year; (ii) whether addition made under section 56(2)(viib) on account of share premium could be sustained by rejecting the assessee's valuation under the Discounted Cash Flow method and substituting the Net Asset Value method; (iii) whether brokerage paid on commodity derivatives attracted disallowance for non-deduction of tax at source and whether the section 14A disallowance was to be restricted.
Issue (i): whether depreciation on the solar power plants was allowable on the footing that the assets had been put to use during the relevant year.
Analysis: The record contained purchase and installation invoices, generation and sale invoices, bank realisations, and a Chartered Engineer's certificate showing installation and generation of power during the year. The objection that production on the first day was low was treated as a matter of suspicion and not as a basis for rejecting the evidence. The assessee established actual use of the plants and not merely readiness for use.
Conclusion: The depreciation disallowance was not justified and was deleted in favour of the assessee.
Issue (ii): whether addition made under section 56(2)(viib) on account of share premium could be sustained by rejecting the assessee's valuation under the Discounted Cash Flow method and substituting the Net Asset Value method.
Analysis: The assessee had adopted a recognised valuation method and supported it with independent valuation reports. The Revenue did not demonstrate a demonstrably wrong approach, a defect going to the root of the valuation process, or any material justifying rejection of the valuation merely because the projections were later said to be unrealistic. The statutory scheme permitted the assessee to opt for the prescribed method, and the Assessing Officer could not substitute another method on mere apprehension.
Conclusion: The addition under section 56(2)(viib) was deleted and the assessee's valuation was accepted.
Issue (iii): whether brokerage paid on commodity derivatives attracted disallowance for non-deduction of tax at source and whether the section 14A disallowance was to be restricted.
Analysis: Brokerage paid in connection with trading in securities, including commodity derivatives, fell outside the mischief of section 194H as applied by the Tribunal. On the section 14A issue, the disallowance was confined to the amount of exempt income in line with the binding jurisdictional precedent relied on by the Tribunal.
Conclusion: The disallowance under section 40(a)(ia) was deleted and the section 14A disallowance was sustained only to the limited extent already restricted by the lower authority.
Issue (iv): whether the common approval under section 153D was valid and whether the consequent assessment for the relevant year could stand.
Analysis: The approval was granted in a consolidated manner for multiple assessees and assessment years. Prior approval under section 153D must reflect independent application of mind for each assessee and each assessment year. A mechanical, omnibus approval does not satisfy the statutory requirement and vitiates the assessment framed in consequence.
Conclusion: The approval under section 153D and the consequent assessment for the relevant year were quashed in favour of the assessee.
Final Conclusion: The Revenue's appeals failed, and the assessee obtained partial relief, including quashment of the assessment for the relevant year and deletion of the principal additions challenged on merits.
Ratio Decidendi: A recognised share valuation method adopted by the assessee cannot be displaced by the Assessing Officer on mere suspicion without demonstrable defect in the valuation process, and a consolidated approval under section 153D lacking case-specific application of mind is invalid.
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