V.Sabitamani v. The Assistant Commissioner of Income-tax Circle-II, Coimbatore
[Citation -2020-LL-0904-47]

Citation 2020-LL-0904-47
Appellant Name V.Sabitamani
Respondent Name The Assistant Commissioner of Income-tax Circle-II, Coimbatore
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 04/09/2020
Assessment Year 2009-10
Judgment View Judgment
Keyword Tags excess claim of depreciation • registered valuer • scientific basis • valuation report • approved valuer • enhanced value • tax liability
Bot Summary: Appellant in both the appeals Vs. The Assistant Commissioner of Income Tax Circle - II No.63, Race Course Road, Coimbatore 641 018.Respondent in both the appeals Tax Case Appeals filed under Section 260-A of the Income Tax Act, 1961, are directed against the Common Order passed by the Income Tax Appellate Tribunal A Bench in I.T.A Nos.2038/Mds/2016 and 1719/mds/2016 dated 03.02.2017 for the assessment year 2009-2010. Aggrieved by such order, the assessee filed appeal before the Commissioner of Income Tax Appeals 1, Coimbatore CIT(A) raising several contentions and laying stress upon the valuation report submitted by the Chartered Engineer cum Approved and Registered Valuer at the time of sanction of a term loan by the Canara Bank, Gandhipuram Branch, Coimbatore for the purchase of the windmill. The Commissioner of Income-Tax Appeals II by an order dated 30.03.2016 partly allowed the appeal filed by the assessee, faulted the valuation method adopted by the assessing officer to be unscientific and ultimately, determined the cost of the windmill at Rs.1,50,00,000/- and directed the assessing officer to grant depreciation on the said amount. Per contra, the leaned senior counsel for the Revenue had referred to the factual position which was recorded by the assessing officer as well as by the Tribunal and submitted that the Tribunal rightly dismissed the appeal filed by the assessee, as the cost of the windmill has been unduly inflated for the purpose of reducing the assessee's tax liability and the assessee has not made any ground to interfere with the order passed by the Tribunal. After considering the submissions made by the assessee, which were identical to that of the arguments advanced before us, which were recorded above, the assessing officer discussed the aspect as to how the real worth of the asset has to be computed and in doing so, how the diminution of the economic value of the asset over its period of views has to be determined and applied. The CITA, in our considered view, while partly allowing the assessee's appeal, proceeded to make a adopt estimations of the value and fixed the sum at Rs.1,50,00,000/-. With regard to the assessee's appeal, the Tribunal re-appreciated the factual position and in particular, noted that the manufacture of the windmill has certified that the windmill, which was sold to the assessee is no more in the market value and the technology has become obsolete.


T.C.A.Nos.368 and 369 of 2018 IN HIGH COURT OF JUDICATURE AT MADRAS Reserved on : 24.08.2020 Pronounced on : 04.09.2020 Coram HONOURABLE Mr. JUSTICE T.S.SIVAGNANAM AND HONOURABLE Mrs. JUSTICE V.BHAVANI SUBBAROYAN T.C.A.Nos.368 and 369 of 2018 and C.M.P.Nos.7404 and 7406 of 2018 V.Sabitamani C/o Pioneer Corporation, 358, Metupalayam Road, Coimbatore 641 043 .. Appellant in both appeals Vs. Assistant Commissioner of Income Tax Circle - II No.63, Race Course Road, Coimbatore 641 018 ..Respondent in both appeals Tax Case Appeals filed under Section 260-A of Income Tax Act, 1961, are directed against Common Order passed by Income Tax Appellate Tribunal Bench in I.T.A Nos.2038/Mds/2016 and 1719/mds/2016 dated 03.02.2017 for assessment year 2009-2010. 1/11 http://www.judis.nic.in T.C.A.Nos.368 and 369 of 2018 For Appellant : Mr.J.Balachandar For Respondent : Mr.T.R.Senthilkumar Sr.Standing Counsel and Mrs. K.G.Usharani C O M M ON J U D G M E N T T.S.SIVAGNANAM, J. These appeals filed by assessee under Section 260-A of Income Tax Act, 1961 [hereinafter referred to as 'Act'] are directed against common order dated 03.02.2017 in I.T.A.Nos.1719/Mds/2016 and I.T.A.Nos.2038/Mds/2016 for assessment year 2009-2010. 2. These appeals were admitted on 10.07.2018 to consider following substantial question of law. :- Whether actual purchase price of second-hand asset can be ignored by purported recourse to Explanation 3 to Section 43(1) of Income Tax Act, 1961 ? 3. assessee, individual filed for return of income for 2/11 http://www.judis.nic.in T.C.A.Nos.368 and 369 of 2018 assessment year under consideration, AY-2009-2010 admitting total income of Rs.12,92,820/-. assessment was selected for scrutiny and notice under Section 143(2) of Act was issued, after which, assessment was completed by order dated 09.11.2011. assessment was reopened under Section 147 of Act on ground that there was excess claim of depreciation in respect of purchase of windmill. After affording opportunity to assessee, assessment was completed under Section 143(3) read with Section 147 of Act by order dated 16.06.2014 disallowing depreciation to tune of Rs.77,12,645/-. 4. Aggrieved by such order, assessee filed appeal before Commissioner of Income Tax [Appeals] 1, Coimbatore [CIT(A)] raising several contentions and laying stress upon valuation report submitted by Chartered Engineer cum Approved and Registered Valuer at time of sanction of term loan by Canara Bank, Gandhipuram Branch, Coimbatore for purchase of windmill. It was contended that there is huge market for second-hand wind mills and assessing officer failed to note location of windmill, 3/11 http://www.judis.nic.in T.C.A.Nos.368 and 369 of 2018 make and capacity, it had more than 15 years of balance use life and past performance of mill in generating electricity. Thus, it was contended that owing to all these features, assessee had purchased windmill for sum of Rs.2,36,00,000/-. 5. Commissioner of Income-Tax [Appeals] II by order dated 30.03.2016 partly allowed appeal filed by assessee, faulted valuation method adopted by assessing officer to be unscientific and ultimately, determined cost of windmill at Rs.1,50,00,000/- and directed assessing officer to grant depreciation on said amount. Aggrieved by such order, assessee as well as Revenue filed appeals before Tribunal. By impugned order, appeal filed by Assessee has been dismissed and appeal filed by Revenue has been allowed. This is how assessee is before us by way of these two Tax Case Appeals challenging common order passed by Tribunal dated 03.02.2017. 6. We have elaborately heard Mr.J.Balachandar, learned counsel for appellant / assessee and Mr.T.R.Senthilkumar, Senior Standing 4/11 http://www.judis.nic.in T.C.A.Nos.368 and 369 of 2018 Counsel and Mrs.K.G.Usharani, Junior Standing Counsel for respondent / revenue. We have narrated factual background, those facts, which are relevant for purpose of deciding these appeals. 7. sheet anchor of submissions of learned counsel for appellant is by contending that Tribunal failed to take into consideration material facts, namely, valuation report given by approved government valuer of Canara Bank, who had valued windmill at Rs.2,95,00,000/- and Rs.2,55,34,000/- respectively, which has not been considered by Tribunal. 8. Tribunal ought to have considered that assessing officer has invoked Explanation 3 to Section 43(1) of Act on mere surmises and conjunctures by treating transaction as device to reduce tax liability. Further, Tribunal failed to note lifespan of windmill, i.e., more than 15 years, which is relevant material to determine market value. 9. Further, it is submitted that Revenue did not dispute 5/11 http://www.judis.nic.in T.C.A.Nos.368 and 369 of 2018 fact that assessee and vendor were unconnected persons. Consequently, genuinity of transaction was not questioned. Therefore, there was no reasons to disbelieve amount paid by assessee for purchase of second-hand windmill. It is also submitted that vendor not only sold one windmill to appellant, but to two other persons and appellant alone has been targeted. 10. Per contra, leaned senior counsel for Revenue had referred to factual position which was recorded by assessing officer as well as by Tribunal and submitted that Tribunal rightly dismissed appeal filed by assessee, as cost of windmill has been unduly inflated for purpose of reducing assessee's tax liability and assessee has not made any ground to interfere with order passed by Tribunal. 11. When assessment was re-opened under Section 147 of Act, assessee was given questionnaire calling for details with regard to claim for depreciation on acquisition of second- hand windmill on 29.03.2017. 6/11 http://www.judis.nic.in T.C.A.Nos.368 and 369 of 2018 12. After considering submissions made by assessee, which were identical to that of arguments advanced before us, which were recorded above, assessing officer discussed aspect as to how real worth of asset has to be computed and in doing so, how diminution of economic value of asset over its period of views has to be determined and applied. 13. After noting technical details, assessing officer observed that as far as taxation is considered under Income Tax Act, accelerated depreciation is incentive to increase installed capacity of windmill in country and person, who installs windmill gets benefit of such accelerated depreciation. 14. It was pointed out that original owner, assessee's vendor had claimed depreciation to extent of Rs.3 Crores within six years and when owner sells windmill to new purchaser, new purchaser cannot get same benefit for enhanced value, as there is no additional wind energy capacity installed. Ultimately, 7/11 http://www.judis.nic.in T.C.A.Nos.368 and 369 of 2018 assessing officer disagreed with assessee and disallowed claim of depreciation to tune of Rs.77,12,640/-. 15. CIT[A], in our considered view, while partly allowing assessee's appeal, proceeded to make adopt estimations of value and fixed sum at Rs.1,50,00,000/-. We find that there is no scientific basis for such fixation of value of second-hand windmill and such fixation has been done based on personal opinion of CIT[A]. Therefore, Tribunal was fully justified in allowing Revenue's appeal. With regard to assessee's appeal, Tribunal re-appreciated factual position and in particular, noted that manufacture of windmill has certified that windmill, which was sold to assessee is no more in market value and technology has become obsolete. Tribunal also considered as to what would be effect of report of government valuer and noted Explanation III to Section 43(1), which requires assessing officer to arrive at objective satisfaction. Further, Tribunal observed that valuations may be relevant in ordinary circumstances, but when cumulative depreciation claimed was far in excess of cost, valuation report 8/11 http://www.judis.nic.in T.C.A.Nos.368 and 369 of 2018 of approved valuer becomes insignificant. 16. Thus, in our considered view, Tribunal has reappreciated factual position and come to conclusion that order passed by assessing officer requires no interference. Thus, we conclude by observing that there is no question of law much less substantial question of law arising for consideration in these appeals. Accordingly, appeals fail and they are dismissed. Consequently, connected miscellaneous petitions are closed. No costs. (T.S.S.J.) (V.B.S.J.) 04.09.2020 Index :Yes / No Internet :Yes / No Speaking Judgment / Non Speaking Judgment ssd To 9/11 http://www.judis.nic.in T.C.A.Nos.368 and 369 of 2018 Income Tax Appellate Tribunal Bench Chennai 10/11 http://www.judis.nic.in T.C.A.Nos.368 and 369 of 2018 T.S.SIVAGNANAM,J., AND V.BHAVANI SUBBAROYAN, J., ssd Pre-delivery Common Judgment in T.C.A.Nos.368 and 369 of 2018 04.09.2020 11/11 http://www.judis.nic.in V.Sabitamani v. Assistant Commissioner of Income-tax Circle-II, Coimbatore
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