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TMI Blog2025 (4) TMI 608X X X X Extracts X X X X X X X X Extracts X X X X ..... ead case. 3. The assessee has taken the following grounds. "Being aggrieved by the appellate order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeals Centre (NFAC), Delhi, this appeal petition is submitted on the following grounds, which it is prayed may be considered independently without prejudice to one another:- 1. On facts and circumstances of the case and in law, the order passed by Ld. CIT(A) stating that opportunity of personal hearing was granted through personal hearing but appellant did not attend is completely incorrect statement.as we had requested on 16-12-2024 to grant VC on either 19th or 20th of December, 2024. Thus, appellate order passed without granting VC is an arbitrary order and bad in law which needs to be quashed. 2. Eligibility of Claim of deduction u/s. 80IA of Rs. 6,15,01,555/- a. On facts and circumstances of the case and in law, Ld CIT(A) erred in confirming the disallowance of the deduction claimed u/s. 80IA of Rs. 6,15,01,555/-by holding that the appellant has failed to prove that the seller had treated ten windmills as an undertaking and offered the same under section 50B and Form 3CEA filed by the appellant of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited when it received a Commencement Certificate in respect of its power generating windmills (APB 22, 25, 28). The said undertaking was formed in compliance with conditions u/s. 80IA(3) of the Act and hence, Jaiprakash Associates Limited (in short JAL) was entitled for a deduction u/s. 80IA(4)(iv) of the Act in respect of its power generating undertaking for a period of ten years out of the first fifteen years of operation. 6. Thereafter, on 30.09.2015, JAL sold the entire undertaking by way of a slump sale to one M/s. Vision Finstock LLP, which is a group entity of the assessee. Pursuant to such slump sale, a tripartite agreement was entered into amongst JAL, Vision FinstockLLP and Maharashtra State Electricity Distribution Company on 21.01.2016. (APB 31) 7. Thereafter, the entire undertaking was gifted by Vision Finstock LLP to the assessee on a going concern basis on 31.03.2017 (APB 43). A No Objection Certificate was issued by the MSEDC for the transfer of the ten windmills in the name of the assessee (APB 55, 56). Pursuant to the said transfer, a tripartite agreement was entered into amongst Vision Finstock LLP, the assessee, and MSEDC on 04.07.2018 (PBP 57). 8. The case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaking and is not qua assessee. He held that if the assessee is a transferee of the undertaking and it has acquired such undertaking on a slump sale basis, it would be entitled for deduction. 11. However, the Ld. CIT(A) raised doubt as to whether the transfer of the undertaking from JAL to Vision Finstock LLP had occurred on a going concern basis, i.e., by way of a slump sale. According to the Ld. CIT(A), in order to determine the nature of the transaction, it is necessary to find out the manner in which JAL has offered capital gain tax on transfer of the assets. If the transfer is on a slump sale basis, it must have resulted a disclosure of capital gain in the computation of income of JAL u/s. S. 50B of the Act. Accordingly, the assessee was required to furnish computation of income, form 3CEA and other documents of JAL in support of the claim of slump sale. In response, the assessee furnished Annual Report, Form 3CEA and a confirmation certificate issued by JAL to demonstrate that the said company has offered the gain as income u/s. 50B of the Act. 12. The Ld. CIT(A), after going through the Form 3CEA of JAL, was of the view that the said form 3CEA was not reliable since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration for the entire undertaking and not separate considerations for each of the item of assets and liabilities. Therefore, if there is an itemised sale, the gain may not be offered u/s. 50B of the Act. Thus, there could be several reasons for offering the gain u/s. 50B or u/s. 45 of the Act. However, this is not determinative of nature of transaction. 17. It is submitted that the JAL has transferred the entire undertaking to Vision Finstock LLP on a slump sale basis as a going concern. This is evident from the Annual Report of JAL for F.Y. 2016-17 wherein, the said slump sale is expressly mentioned in note (e) of the Directors' Report (APB 38). It is respectfully submitted that the allegation of Ld. CIT(A) that the Annual Reports cannot be regarded as sacrosanct is completely unfounded. The Annual Report of the company, more particularly a listed company, is a statutory document and available to public at large. It serves as an official declaration of the company's accountability to its shareholders, regulators, and to the public at large. The information contained therein has to be treated as correct, more particularly when nothing adverse has been brought on record. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alculated the depreciation on windmill correctly and the Ld. AO and Ld. CIT(A) have misguided themselves in considering the book value of windmill as against the written down value of the previous owner. 24. It is an admitted fact that the assessee has received the windmill undertaking from Vision Finstock LLP by way of a gift. Under Section 32 of the Act, the depreciation is to be calculated at a prescribed rate on actual cost/written down value. The actual cost has been defined as u/s. 43(1) of the Act. As per Explanation 2 to the said clause, where the asset is acquired by the assessee by way of a gift, the actual cost of the asset to the assessee shall be the actual cost to the previous owner as reduced by the depreciation actually allowed. Therefore, the assessee has correctly calculated the depreciation on the actual cost, which is the cost as per the depreciation schedule of Vision Finstock LLP for A.Y. 2017-18. 25. In this regard, the attention is invited to APB 62, which is the calculation of depreciation of Vision Finstock LLP for A.Y. 2016-17. After claiming the depreciation of Rs. 34,20,48,570/-, the closing WIP is Rs. 8,55,12,143/-. The said figure has been taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's interpretation to the contrary is unsupported by the Act and precedent. 35. No procedural unfairness vitiated the first appellate proceedings, and the assessee's rights have been fully heard at this stage. Thus, there is no cause for remand on that ground. 36. The issue of government agreement is irrelevant for power undertakings, and we agree it does not affect eligibility under clause (iv). The denial of deduction is not for want of an agreement, but for failure to satisfy other statutory conditions. 37. Even if, arguendo, the undertaking were considered eligible, the quantum of deductible profit would be near-zero after mandatorily accounting for depreciation as per Plastiblends (SC). The assessee's attempt to claim deduction on inflated profits (by ignoring the majority of depreciation) cannot be permitted. In fact, after proper depreciation, the assessee's windmill unit likely had no positive profits in AY 2018-19, meaning no deduction could be allowed even on computation grounds. This further justifies the Revenue's disallowance. 38. In sum, what the assessee seeks is effectively a transferable tax holiday, which Parliament has consciously ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction between JAL and Vision Finstock LLP was a slump sale as defined under Section 50B of the Act. Nonetheless, JAL had issued a certificate (APB 42) confirming that the transfer was indeed a slump sale. This certificate was not challenged by the revenue authorities, nor was any contrary evidence presented. It was further observed that the transfer between the assessee and Vision Finstock LLP was in the nature of a gift, and the MSEDC had accepted the said transaction. The Ld. CIT(A) acknowledged that the transferee could be eligible for deduction, provided the transfer had occurred by way of a slump sale. Notably, the department has not filed an appeal before the ITAT challenging this specific finding of the Ld. CIT(A). Thus, the only issue requiring adjudication is whether the transfer between JAL and Vision Finstock LLP qualifies as a slump sale. On merits, it is submitted that the question of whether a transferee can claim deduction is now a settled legal position. Judicial precedents have recognized that the transaction between JAL and Vision Finstock LLP constitutes a slump sale. The transferee has offered the amount to tax in its computation, and Form 3CEA was duly file ..... X X X X Extracts X X X X X X X X Extracts X X X X
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