TaxTMI 
TaxTMI 
2024 (1) TMI 1134
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....ndition u/s 32 were fully satisfied. (iii) That in any case, the beneficial ownership of the appellant is not in dispute and as per the decision of SC in the case of Mysore Minerals Ltd. v. CIT 239 ITR 775, there is no valid basis for disallowance of statutory claim which was in accordance with Income Tax Rules, 1962. (iv) That appellant has accounted for the revenue from running of such Windmills and same having been accepted by the assessing officer, the disallowance of claim of depreciation is illogical, irrational and against the well settled principle of beneficial ownership. (v) That the procedure followed by the seller so as to suit its convenience cannot be relevant for drawing adverse inference in the case of appellant. 2(i) That on facts and circumstances of the case, the Ld. CIT(A) has grossly erred in confirming addition to the extent of Rs. 3,24,20,850/-u/s 56(2)(viib) of the Income Tax Act, 1961 in respect of premium even though the valuation of Fair Market Value of equity shares is duly supported from valuation report issued by Chartered Accountant. (ii) That the valuation of shares is on the basis of Discounted Cash Flow ....
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.... out of which value of land is Rs. 53,40,250/- and balance consideration of Rs. 32,40,71,403/-has been capitalized under the head plant and machinery in the FY. 2014-15 and has claimed depreciation on the same (which is the subject matter of this appeal) b. As per the terms of agreement dated 23/03/2015, the appellant company has agreed to purchase the wind mill from the transferor for a lump sump of Rs. 32,94,11.653/- and the transfer of said asset will complete on completion date. The completion date has been defined in the Slump sale agreement as the date on which transferor company completes all the activities / obligations prescribed under the slum sale agreement Further, the said date is to be achieved within 180 days from the date of execution of agreement i.e 180 days from 23.03.2015. c. That the obligations/activities prescribed under the agreement includes: 1. Registration of land lease deed in favor of the appellant company 2. Submission of letter from GEDA to GUVNL directing or transfer of power purchase agreement in favor of the appellant company 3. No dues certificate from lender to the wind mill business. 4. Recei....
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....all their rights and obligations and assets and liabilities in favor of M/s Rugby Renergy Pvt. Ltd, the request for change in name can not be processed. 2. M/s Ansal Properties & Infrastructure Limited (seller) is required to furnish their Board Resolution for assignment of all their rights, obligations, assets and liabilities in favor of M/s Rugby Renergy Pvt. Ltd. From the above remarks of M/s Gujarat Urja Vikas Nigam Limited (GUVNL) it can be noted that M/s Ansal Properties & Infrastructure Limited (seller) has not assigned their rights, obligations, assets and liabilities in favor of M/s Rugby Renergy Pvt. Ltd. h. That the operation and management agreement to run the wind mill was executed between the appellant company and M/s Suzion Global services Ltd on 27/07/2015 with effective date from 01/07/2015 which is also one of the essential conditions for completion of sale as per the slump sale agreement. The effective date and the execution date of this agreement both fall in subsequent year. This also signifies that no sale of wind mill has taken place in the year under consideration. i. That the enquiry from the assessing officer of M/s Ansa....
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....d mill has not been transferred to the appellant company in the year under consideration. The observations of the year are duly supported by enquiries conducted by him during the course of assessment proceedings. With respect to the observation of the AO that M/s Ansal Properties & Infrastructure Limited (seller) has claimed depreciation for the whole year with respect to the wind mill in its books of accounts and no sale of wind mill has been declared by it, the appellant has simply stated that the wrong claim of depreciation by one party would not disentitle the other party to make genuine claim in this regard it is relevant to note here that transfer of an asset is a bilateral act. Based on the consent and agreement of both the parties. Accordingly, it is onus of the appellant to prove that how the transfer of asset and put to use of the same has taken place in the your under consideration in light of the fact that the seller party has not recorded any sale transaction in its books of accounts. In this regard it is also relevant to refer to the comments / objections raised by GUVNL vide its letter dated 10.04.2015 (quoted in the assessment order) that no request for transfer of ....
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....the wind mill with M/s Suzlon Global services Ltd. These facts further substantiate the stand of the AO in the assessment order that no transfer of the asset (wind mill) has taken place in the year under consideration. Further, as regard the argument of the appellant that in the year under consideration it has booked revenue from the wind mill, the AO in the assessment order has rightly stated that there was no written agreement between the two parties that wind mill in the year under consideration is to be run by the appellant company and billing of revenue was to be done by M/s Ansal Properties & Infrastructure Limited and then the same is to be passed on to the appellant company. The revenue declared by the appellant can at best be said to be a private arrangement of revenue sharing between the parties to compensate the appellant for interest and other expenses. However, the said arrangement does not change the fact that the transfer of wind mill has not completed in the year under consideration so as to make the appellant eligible for claiming of depreciation of the same as per the provision of section 32 of the act. Further it is noted that the appellant in its written submiss....
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.... had purchased the wind mill during the Financial Year relevant to A.Y. 2015-16 due to lack of any supporting document and the fact that enquiry by the Ld. AO revealed that no sale of wind mill was recorded in the books of the seller APIL for Financial Year 2014-15. Admittedly, seller company APIL has claimed depreciation on wind mill during the A.Y. 2015-16. Therefore denial of impugned depreciation in the hands of the assessee is justified. The contention raised during appellate proceedings have been dealt with by the Ld. CIT(A) by recording cogent reasons. The decision of Hon'ble Madras High Court in the case of Smt. Sivakami (supra) will not render assistance to the assessee as in that case the assessee established ownership of buses by documentary evidence whereas in the case at hand purchase of wind mill in the Financial Year 2014-15 could not be proved with documentary evidence. The twin conditions precedent, namely ownership and use of the asset i.e. wind mill, for purposes of assessee's business during the Financial Year 2014-15 relevant to A.Y. 2015-16 are not satisfied in the case of the assessee. We, therefore decline to interfere and decide ground No. 1 and its sub-gro....
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....as of the view that the projections made by the appellant are highly inflated, hence not reliable. Thereafter, the AO required the appellant to work out the value of shares on the basis of assets and liabilities as provided under Rule 11UA of the IT Rules. The appellant submitted its working before the AD as per which the Book value of the shares was worked out at Rs. 39.15. However, the same was rejected by the AO as the working was not as per the methodology give in the rule 11UA. Lastly the AO in the assessment order has computed the fair market value of the shares based on value of assets and liabilities as on last audited balance sheet as prescribed under Rule 11UA and worked out the fair market value of shares at Rs. 23.05 per share. Based on the said value of share the AO in the assessment has worked the excessive value recovered by the appellant company at Rs. 3,24,20,850/- which has been added in the hands of the appellant under section 56(2)(viib) of the Act. 4.3. The appellant in the written submissions made during the appellate proceedings has tried to justify the financial projections for 20 years used in the valuation report prepared as per discounted cash fl....
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..... In this regard, it is noticed that the appellant has claimed to have acquired 12 MW windmill power project from M/s Ansal Properties & Infrastructure Limited (APIL), however this issue has already been adjudicated against the appellant in ground no one and it is held that the appellant has not taken the possession of the plant in the year under consideration and hence the transfer of asset cannot be said to be taken place in the year under consideration. Even otherwise if it is assumed that on the date of valuation of shares i.e. on 14.11.2014, it was not possible for the appellant to anticipate correctly that whether the 12MW project will be taken over by it or not, then also the appellant was not justified in taking projections with respect to the said project. In this regard it is noticed that as on the date of valuation of the shares le 14.11.2014 the appellant did not even had the technical due diligence report/study based since the report has been issued by the expert m/s Mitcon Consultancy & Engineering Services Limited, Pune for the first time on 26.12.2014. As on the date of valuation the appellant did not have any document or evidence in its hand which could have enable....
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....owever the same does not mean that every person filing the bid can assume that his bid is successful and value its shares at higher price using projections. In the present case of the appellant has itself submitted that it was declared the highest bidder on 24 11.2014, however the valuation date is 14,11.2014 in view of these facts, on the date of valuation of shares ie. 14.11.2014, surprisingly there is nothing on record which could be treated as persuading factor which lead the appellant company believe that the power project against which bid has made will be allotted to it only. Moreover, the bid was not even made by but by some other company. These whole set of facts proves that the appellant had acted highly superficially in making projections with respect to a project with which it had no nexus on the date of valuation of shares and using the said projections for the purpose of valuation of shares in this regard, it is also noticed that the appellant has not even the basis or documents or facts and figures based on which the projections were made and subsequently used by the valuer in valuation report. Hence, projections of the appellant company with respect to the 48 4MW po....
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....ppellant. Accordingly, the valuation done by the AO in the assessment order based on assets and liabilities and value of shares at Rs. 23.05 per share worked out from the same is hereby upheld. Hence, the addition made by the AQ of Rs 3,24.20,850/- is hereby confirmed. This ground of appeal is ruled against the appellant." 10. Before us, the Ld. AR relied upon the written submission made before the Ld. CIT(A) which appears at pages 7 -12 of the revised Paper Book. He emphasised that the assessee issued during the year 12,03,000/- equity shares having face value of Rs. 10/- at Rs. 50/- each and received Rs. 6,01,50,000/-. The valuation is supported by Chartered Accountant's certificate wherein he determined the fair market value at Rs. 50.50 per share in accordance with the Discounted Cash Flow method as prescribed under Rule 11UA(2)(b) of the Income Tax Rules, 1962. This was not acceptable to the Ld. AO who recomputed the fair market value at Rs. 23.05 per share on the basis of Net Worth of the company amounting to Rs. 2,77,29,150/- and added the difference of Rs. 3,24,20,850/- (Rs. 6,01,50,000 - Rs. 2,77,29,150/-) to the income of the assessee u/s 56(2)(viib) of the Act. The Ld....
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.... Act. Undisputedly, the assessee is an wholly owned subsidiary of M/s. Puran Associates Pvt. Ltd. and in the year under consideration, the assessee had allotted 10,000 equity shares to its holding company at a sale price of Rs. 1,500/- per shares having face value of Rs. 100 per share. In other words, the assessee has charged share premium of Rs. 1,400/- over and above the face value of each share. As rightly contended by learned counsel appearing for the assessee, on a careful analysis of the speech of Hon'ble Finance Minister while introducing Finance Bill, 2012, section 56(2)(viib) is an anti-abuse provision introduced to the statute to check and regulate introduction of unaccounted money through share premium. 10. In the facts of the present appeal, the transaction relating to allotment of shares is between a holding company and its wholly owned subsidiary. Therefore, no outsider is benefited through such transaction. When the assessee-company has been promoted by the holding company, infusion of additional fund through share premium can only benefit either the holding company or the subsidiary and no third party is involved. In such a scenario, logically, no addition ....
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.... valuation is made, it is based on reflections of the potential value of business at that particular time and also keeping in mind underline factors that may change over the period of time and thus, the value which is relevant today may not be relevant after a certain period of time. 14. Moreover, valuation of an unquoted equity share, in terms of Rule 11UA of the Rules can, at the option of the assessee, be determined as per either NAV Method or as per DCF Method, which means that the option is given to the assessee and once the assessee has exercised an option, the Assessing Officer is bound to follow the same unless by bringing cogent material on record, the Assessing Officer establishes perversity in the method adopted by the assessee. 15. The Hon'ble High Court of Delhi in the case of PCIT Vs. Cinestaan Entertainment 433 ITR 82 has held a under: "13. From the aforesaid extract of the impugned order, it becomes clear that the learned ITAT has followed the dicta of the Hon'ble Supreme Court in matters relating to the commercial prudence of an assessee relating to valuation of an asset. The law requires determination of fair market values as per....