TaxTMI 
TaxTMI 
2026 (3) TMI 1557
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....are quite low and can be shown in meter during test/trial runs only. 2. On facts and circumstances of the case Ld. CIT(A)- IV, Kanpur has erred in allowing the appeal of the assessee ignoring the fact that the assessee in its form 3CD mentions only business to be of trading of wheat and other commodities and not solar plant. It must also be noted that there is a difference between ready to use and put to use as per IT Act. As per section 32 of IT Act 1961, there should be commercial exploitation of the asset. However, it is not the case of the assessee. Hence the depreciation claimed by the assessee was rightly disallowed. 3. That the appellant craves leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other. 3. Brief facts of the case are that the assessee company filed its return of income on 11.02.2016 declaring income of Rs. 7,45,28,871/-. The case was selected for scrutiny assessment under CASS and in the course of assessment proceedings the AO noticed that the assessee had claimed depreciation on solar plant which was used for less than 180 days. The AO required ....
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....ch copy of permission letters from govt, authority. Said letters being attached but first of all they are in other language i.e. Marathi. Further, these permission letters were in respect of some other plants and not in respect of this plant as evidenced from capacity mentioned in them. Lastly, out of said letters, some belong to September 2015 and not in relation to FY 2014-15. 6. Even, ITR & Form 3CD, mentions only business to be of Trading of wheat & other commodities and not Solar Plant. 7. It must be noted that there is difference between situation of ready to use versus put to use. It is well established by various courts that in case of situation ready to use, depreciation is not allowed as the same is not equal to situation put to use. What section 32 warrants is actual usage of the asset during the year for the purpose of business or profession or in other words actual commercial exploitation of the coasts, which in the case here is not so Solar plant capacity 350kwp The said plant cannot be said to be put to use on or before 31/03/15 considering the above facts only with following immaterial differences: 1. Assessee produced on....
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....sment year under consideration. 8. The Ld. CIT(A) after considering the evidences on record and the averments of the AO concluded that the solar power plants have been put to use by the assessee, deleted the disallowance of depreciation by observing as under :- 5.3 in the assessment order Ld. AO states that the appellant has added Rs. 10,74,28,871/- in the block of plant and machinery, which is illegible for 80% depreciation and has claimed to have put to use the same for less than 180 days and thus claimed depreciation of Rs 4,29,71,548/- [40% of Rs. 10,74,28,871/-]. In the matter of solar plant of capacity 1000 KWP, Ld. AO states that the said plant cannot be said to be put to use on or before 31/03/15 since the appellant produced one invoice 002 dated 31/03/2015 showing 2123 units generated by the plant and billed for Rs 13,906/-. This amount was received on 07/04/2015. Ld. AO states that a solar plant of one KWP installed at roof-top of residential house produces approx. 4-6 units during a day, therefore this plant being a solar plant of 1000KWP, even if technology is same as that of residential solar plant, a single day production should have been around 4000-6000 ....
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....e basis of meter readings and invoice raised only and no other fact was brought as evidence. 5.7 Considering all these facts, Ld. AO concludes that solar plants of 1000 KWP and 350 KWP had not been put to use during the year under consideration and hence claim of depreciation amounting to Rs 4,29,71,548/- for both solar plants cannot be allowed. 5.8 On the other hand Ld. AR submits that in the assessment proceedings, copy of Bank statement showing release of payments against solar power plants purchase & installation, commissioning, etc. He submits that invoice 001 dt. 31.03.2015 was raised by appellant against payee M/s. Tata Motors Ltd. for Solar Plant of capacity for 350KWP and amount of Rs 31,236/- was billed for producing 4460 units (KWH) Further in the matter of invoice solar plant of capacity 1000 KWP, he submits that invoice no. 002 dt. 31.03.2015 was raised by appellant against payee M/s. Tata Communications Ltd. for Solar Plant of capacity for 1000KWP and amount of Rs. 13,906/- was billed for producing 2123 units (KWH) 5.9 Ld. AR submits that the said solar power plants were purchased by the assessee company from M/s Clean Max Enviro Energy Solu....
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....ed o pay Rs. 31,236/- and Rs. 13,906/- respectively. Apart from these details the appellant has also furnished Certificate of Charted Engineers dt. 31.03.2015 who has inspected and certified generation of solar power from these plants. Ld. AO has disallowed claim of appellant based on suspicion that the capacity of these plants is much more than the production of claimed units of solar power in a day. Ld. AO has further raised some doubts on the erection of these plants but these doubts are not based on some inquiry physical inspection or solid reasoning based on which the claim of appellant may be conclusively rejected. 5.12 The reliance of appellant on various judicial pronouncements is acceptable since sufficient evidences of 'put to use of the solar plants under consideration have been furnished and looking to the same, claim of appellant cannot be countered unless these certificates and evidences are found bogus. And from the observation of the Ld. AO in the assessment order, there is no trace of such inquiry which may conclusively establish that these certificates are bogus. Therefore, looking to the facts and circumstances of the case, the disallowance of Rs. 4,....
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....ny exempt income or can be made even if there is no income but investment has the potentiality to earn income in future. Hence, the provisions of section 14A were rightly applicable in the case in the light of CBDT circular. Further it is nowhere mentioned in the Act of any CBDT circular that the amount of disallowance u/s. 14A cannot exceed the amount of exempt income. 11. Brief facts are that during the assessment year under consideration the assessee received share capital alongwith premium from M/s.RRK. Holdings Pvt. Ltd. and Mr. Raghav Bahl. In the case of RRK Private Pvt. Ltd. the assessee issued preference shares and in the case of Raghav Bahl the assessee issued equity shares. 12. In the course of assessment proceedings the AO noticed that the assessee issued these shares with the huge premium though the company is making losses. He required the assessee to give the details of valuation as per Rule 11 UA of IT Rules. In response the assessee furnished valuation report as on 01.04.2016 and 24.03.2017 under DCF method valuing fair market value of shares at Rs. 65,000/- and Rs. 84,904/- respectively. The valuation report was furnished to the AO. However, the AO was of th....
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.... how much money the company is going to make in future However he observes that it is very easy to increase or decrease the valuation substantially in the DCF method by changing the assumptions that is why it is so important to be thoughtful and careful when specifying the reports. Ld. AO observes that the assumptions should be based on sufficient research and that there should be complete foot notes and details of documentary evidences and thought process behind the assumptions and also the projections should be near the actual figures. He states that the presumptions should not in any way be based on wild guess or imagination and that the presumptions should be based on rationality and the market trend. Ld. AO states that in the instant case, there is no rationality in the projections and the assumptions are not based on any research, which is evident from the valuation report. He states that there are no foot-notes regarding the basis of assumptions and also that there is no match between the presumptions and the actual business trend which can be ascertained from the facts that the assumptions are nowhere near the actual. Therefore Ld. AO concludes that considering all....
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....articulars Date of Issuance Total Amount (Rs.) Remarks 7,587 Preference Shares @ Rs. 65,000 per share (FV = Rs. 100 per share) 04.04.2016 & 19.04.2016 49,31,55,000/- Value adopted as per Valuation Report dated 01.04.2016 obtained from M/s. VR Associates, Chartered Accountants, wherein valuation has been determined at Rs. 65,000/- as per DCF Method. (Copy of valuation report attached at Page No. 126 - 127) 7,067 Equity Shares @ Rs 84,904 per share (FV = Rs. 10 per share) 24.03.2017 60,00, 16,568/- Value adopted as per Valuation Report dated 24.03.2017 obtained from M/s. VR Associates, Chartered Accountants wherein valuation has been determined at Rs. 84,904/- as per DCF Method. (Copy of valuation report attached at Page No. 124 - 125) Ld. AR submissions that taxability of aforesaid transactions, Ld AO has invoked provisions of section 56(2) (viib) of the IT Act and IT Rule, section 11UA of the IT Rules, as applicable on the date of execution of said transactions. Ld. AR submits that section 56(2)(viib) provides that when a company, not being a company in which the public are substantially interested, receives, in any previous year, from any ....
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.... that in respect of equity shares issued by a company, provisions of Rule 11UA(2) of the IT Rules will be applicable, which provides the company with an option to opt for any of the following, whichever is beneficial to the company valuation based of Net Asset Value Method, with certain modifications prescribed u/r 11UA(2)(a) of the rules or valuation determined by any merchant banker or an independent Chartered Accountant as per Discounted Cash Flow Method Ld. AR further submits that in respect of preference shares issued by a company, provisions of Rule 11UA(1)(c)(c) of the rules will be applicable, wherein it has been prescribed that the company shall adopt the valuation of shares as determined by any merchant banker or an independent Chartered Accountant. 6.9 It is submission of Ld. AR that in light of the aforesaid legal analysis of the applicable provisions of the IT Act, the appellant company had duly adhered with the applicable provisions of the Act while determining the tax implication in respect of impugned transactions related to issuance of preference shares and equity shares during the period under consideration. He submits that in respect of both of ....
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....ppellant-Revenue had the option to conduct its own valuation and determine FMV on the basis of either the DCF of NAV Method The Respondent-Assessee being a start-up company adopted DCF method to value it's shores This was carried out on the basis of information and material available on the date of valuation and projection of future revenue. There is no dispute that methodology adopted by the Respondent-Assessee has been done applying a recognized and accepted method Since the performance did not match the projections, Revenue sought to challenge the valuation, on that footing This approach lacks material foundation and is erational since the valuation is intrinsically based on projections which can be affected by various factors. We cannot lose sight of the fact that the valuer makes forecast or approximation, based on potential value of business However, the underline facts and assumptions can undergo change over a period of time The Courts have repeatedly held that valuation is not an exact science, and therefore cannot be done with arithmetic precision. It is a technical and complex problem which can be appropriately left to the consideration and wisdom of experts in the fi....
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....t specialist without any cogent reason is nowhere justified on the part of the Ld. AO. He submits that Ld AO observes that there was no rationality in the projections, the assumptions were not based on any research which is evident from the valuation report and no foot-notes regarding the basis of assumptions are mentioned, however Ld. AO failed to justify his observations regarding impugned valuation reports issued by independent Chartered Accountants and merely mentioned general observations to be addressed by the valuer while computing valuation of any shares without supporting his allegations relating to unreliable projections, assumptions and presumptions with necessary supporting factual findings in such regard. 6.14 Ld. AR further submits that the Ld. AO had erred in law in making additions to the tune of Rs. 44,95,23,926/- u/s 56(2)(viib) of the IT Act merely on the apprehension that the valuation adopted by the appellant company was not reasonable, irrespective of the fact that the appellant company had adopted the valuation computed by independent Chartered Accountant, a prescribed specialist, in such regard whereas no proper application of mind has been applied ....
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....n related to equity shares was executed on 24.03.2017. He submits that as per Rule 11U of IT Rules, valuation should be based upon figures of most recent Audited Financial Statements and accordingly, for preference shares, figures of audited financial statements drawn for year ending on 31.03.2015 is adopted whereas for equity shares, figures of audited financial statements drawn for year ending on 31.03.2016 is adopted, the valuation is as under: S. No. Particulars As on 31.03.2016 As on 31.03.2015 1 Share Capital - Equity Shares 1,61,540 1,00,000 - Preference Shares 13,84,600 10,00.000 2 Reserves & Surplus 1,37,13,72,113 65,76,80,351 3 Long term Borrowings 1.23,50,29,456 73,51,31,870 4 Deferred Tax Liability 5,52, 17,406 1,48,73,910 5 Short Term Borrowings 29,41,18,443 11,71,32,513 6 Trade Payables 2,57,87,401 1,80,62,476 7 Other Current Liabilities 1,41,01,265 4,31,74,294 8 Short term Provisions 3,10,80,069 3,12,84,886 TOTAL CAPITAL & LIABILITIES 3,02,82,52,293 1,61,84,40,330 1 Tangible Assets ....
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....ted Castr Flow Method for valuation of impugned shares are more or less at parity with the fair market value, if determined by adopting Net Asset Value Method as the variance between both of the valuations are less than 5% which is below tolerable limit prescribed u/s 50C of the act, which could be reasonably adopted as benchmark in impugned matter. Ld. AR submits that in the light of these facts Fair Market Value of impugned shares computed by the Ld. AO in the impugned assessment order is incorrect in facts of the matter and accordingly, impugned additions to the tune of Rs. 44,95,23,926/- made u/s 56(2)(viib) of the IT Act deserve to be deleted 6.16 From the facts of the case, it has been found that the appellant company has issued 7587 preference shares @65000 per share (FV Rs. 100 per share) on 04.04.2016 and 19.04.2016 for total consideration of Rs. 49,31,55,000/-. For the valuation the appellant has adopted value as per valuation report dt. 01.04.2016 obtained from M/s. VR Associates, Chartered Accountants, wherein valuation has been determined at Rs. 65,000 per share as per DCF method. Further the appellant company has issued 7067 equity shares @84,904 per....
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....& 19.04.2016 and new 7067 equity shares which were issued on 24.03.2017 together. Ld. AO has taken all these shares together. Since 7587 preference shares were issued on 04.04.2016 and 19.04.2016 therefore for valuation of these preference shares by taking asset (A) and liabilities (L) and paid up capital (PE) and paid up value (PV) o available audited financial statements as on these dates i.e. financials of FY 2014-15 would have been more appropriate. Further since 7067 equity shares were issued 24.03.2017, therefore for valuation of these equity shares by taking asset (A) and Rabilities (L) and paid up capital (PE) and paid up value (PV) of available audited financial statements as on these dates ie financials of FY 2015-16, would have been more appropriate. Therefore the issues raised by Ld. AR questioning methodology of Ld. AO for valuation of both of these shares (7587 preference shares and 7087 equity shares) by adopting Net Asset Value Method need due consideration 6.18 In various judicial pronouncements this choice of the assessee has been allowed and it has been declared that the assessee is free to adopt any valuation method In this particular case, the appellan....
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.... 1. Ninecube Technologies Pvt. Ltd. 177 taxmnan.com 71 (Del-Trib) 2. Autope Payment Solution (P) Ltd. 170 taxmnan.com 333 (Del-Trib) 3. Ipsaa Holding Pvt. Ltd. 176 Taxmann.com 71 (Del- Trib) 17. Thus, we see no infirmity in the order of the Ld. CIT(A) in accepting the DCF method adopted by the assessee in valuing the shares. Thus, we sustain the order of the Ld. CIT(A) and reject ground No.1 of grounds of appeal of the revenue. 18. Coming to ground no.2 of grounds of appeal which is in respect of disallowance made u/s. 40(a)(ia) of the Act for non deduction of TDS u/s. 194 of the Act in respect of commission paid to M/s. Ventura Commodities Lmt-NCX, we observed that the AO made disallowance under section 40(a)(ia) of the Act on the payment of brokerage to M/s.Venutra Commodities Lmt- NCX on account of trading commodity derivatives on exchanges. The assessee furnished copies of contract ledger accounts etc, before the ld. CIT(A) and contended no TDS is required to be made u/s. 194H on brokerage income on securities. Considering the submissions of the assessee and the provision of Section 194H of the Act the Ld. CIT(A) deleted the addition holding the....
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....anchar Nigam Lented or Mahanagar Telephone Nigam Limited to their public call office franchisees/ Explanation-For the purposes of this section, (i) commission or brokerage includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities; Whereas, as per the definition of term Securities prescribed under Explanation 2 to section 2(14) of the act read with section 2(h) of the Securities Contracts (Regulation) Act, 1956 secunties include derivatives Relevant extract of provisions of Securities Contracts (Regulation) Act, 1956 is reproduced hereunder for your ready reference "(h) securities" include- (1) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate, (ia) derivative, 7.3 From these provisions it can be seen that Explanation (1) of section 194H o....
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....d assessment proceeding is purely bad in law and may please be quashed. 2. That the Ld. Commissioner of Income Tax (Appeals) (hereinafter referred CIT(A)') has erred in law and facts of the case while upholding the Assessment Orders, without appreciating that the online assessment order, uploaded on the ITBA portal, was incomplete, thus, the same is illegal and bad in law, whereas, the physical order issued without mentioning Document Identification Number (DIN) in the body of the assessment order has no sanctity in the eyes of law. Therefore, the Assessment Order passed online as well as physically are bad in law and may please be quashed. 3. That the Ld. CIT(A) has erred in law and facts of the case while upholding the Assessment Orders without appreciating that the same is barred by limitation u/s 153B of the Income Tax Act, 1961 (hereinafter referred as 'the act') as the online order have not been uploaded entirely within the limitation prescribed under section 153B of the Act whereas the physical order have not been dispatched within said time limit. As such, the Assessment Orders passed online as well as dispatched in physical are barred by limit....
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....dditions have been made without providing adequate opportunity of being heard to the Appellant and without furnishing copy of satisfaction note prepared u/s 153C of the act, despite of the multiple requests made in such regard. As such, the Assessment Order passed in violation of the principle of natural justice is illegal and may please be quashed. 10. That the Ld. CIT(A) has erred in law and facts of the case while sustaining the addition made by the Ld. AO amounting to Rs. 50,00,000/- u/s 68 of the Act on account of alleged accommodation entry in form of unsecured loan availed from M/s. CEA Consultants Pvt. Ltd. without appreciating the submissions of the Appellant. As such, the addition of Rs. 50,00,000/- is bad in law and may please be deleted. 11. That the Ld. CIT(A). has erred in law and facts of the case while confirming the addition of Rs. 50,00,000/- u/s 68 of the Act on account of alleged accommodation entry in form of unsecured loan availed from M/s. CEA Consultants Pvt. Ltd. in violation of the principle of natural justice being made on the basis of ex-parte material and statement of third parties without confronting said material and statements with ....
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....al High Court in the case of PCIT Vs. Anuj Bansal (65 taxmann.com 2) and the Hon'ble Allahabad High court in the cases of PCIT Vs. Siddharth Gupta (450 ITR 534), PCIT Vs. Subodh Aggarwal (149 taxmann.com 373), PCIT Vs. Sapna Gupta (147 taxmann.com 288). Following the said decision the coordinate Bench of this Tribunal to which both of us are parties held such a common approval granted u/s. 153D is in violation of provisions of section 153D of the Act and is granted in a mechanical manner without due application of mind, in the case of Tish Consultants Pvt. Ltd. vs. DCIT in ITA Nos. 2310 and 2311/Del/2025 dated 16.06.2025 holding as under :- 3. We have heard the rival submissions and perused the materials available on record. A search and seizure operation under section 132(1) of the Act was carried out in the case of Samtel Group on 18-01- 2018. Various residential and business premises of the directors and group companies were covered under the search and survey operations. Warrant was issued in the name of M/s Tish Consultants Pvt. Ltd i.e assessee herein. In view of the search operation, the group case was centralized to Central Circle II, Noida. vide order passed by th....
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....fore us filed detailed written submissions supporting the approval granted by the Learned Additional CIT under Section 153D of the Act to be a valid approval and accordingly all the decisions relied upon by the Learned AR cannot be made applicable to the facts of the instant case. But on perusal of the entire written submissions of the Learned DR, we find that what has been sought to be addressed by the Learned DR is only to drive home the point that the approval proceedings of Learned Additional CIT is merely an administrative act and not a quasi-judicial act and hence such administrative approvals cannot be subjected to challenge. But the moot point to be noted in the instant case is the Learned Additional CIT has given consolidated approval for 11 assessee's for Assessment Years 2012-13 to 2018-19 on a single day which is in violation of provisions of Section 153D of the Act itself as the said section mandates approval to be given for each assessee for each assessment year separately. Hence the entire written submissions of the Learned DR would not advance the case of the revenue in any manner. 5.The Learned DR vehemently argued that very existence of high presumption o....
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....he entire material has been examined by the Assessing Authority before preparing the draft assessment order. It is trite in law that the approval must be granted only on the basis of material available on record and the approval must reflect the application of mind to the facts of the case. The requirement of approval under section 153D is pre-requisite to pass an order of assessment or re-assessment. 17. Section 153D requires that the Assessing Officer shall obtain prior approval of the Joint Commissioner in respect of "each assessment year" referred to in clause (b) of sub-section (1) of section 153A which provides for assessment in case of search under section 132. Section 153A(1)(a) requires that the assessee on a notice issued to him by the Assessing Officer would be required to furnish the return of income in respect of "each assessment year" falling within six assessment years (and for the relevant assessment year or years), referred to in clause (b) of sub-section (1) of section 153A. The proviso to section 153A further provides for assessment of the total income in respect of each assessment year falling within such six assessment years (and for the relevant asses....
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....ions and respectfully following the judicial precedents relied upon herein above, we have no hesitation in holding that the approval under section 153D of the Act has not been granted for each of the assessment year which is in violation of provisions of Section 153D of the Act itself thereby making the approval being granted in a mechanical manner without due application of mind. Hence, the Ground No. B raised by the assessee is hereby allowed. Consequentially the assessment framed for Assessment Years 2016-17 and 2018-19 are hereby quashed. Since, the assessments are quashed based on Ground No. B, the other grounds raised by the assessee need not be gone into and they are left open. 26. Thus, respectfully following the decision of various High Courts and the coordinate Bench of Tribunal referred to above, we hold that the common approval granted u/s. 153D of the Act dated 30.09.2021 in Assessee's case is not in accordance with provisions of section 153D of the Act as it is granted in a mechanical manner and without due application of mind and therefore, the same is bad in law and consequently the assessment framed u/s. 153C for the A.Y.2018-19 pursuant to such illegal approval....