2013 (5) TMI 48 - HC - Income Tax

High Court Remands Case for Lack of Evidence in Slump Sale Classification

COMMISSIONER OF INCOME TAX Versus MAHABALESWARA ENTERPRISES

The High Court remanded the case back to the Assessing Authority for further examination as it found insufficient evidence to confirm whether other ... Slump sale - whether Section 50 is not attracted as per Tribunal - Held that:- The mere execution of a conveyance of immovable property by itself, do not constitute sale of itemized assets. If the assets transferred constitute running business, then it would be a case of slump sale. Mere conveyance of land and building would not take away the case from a case of slump sale. If the land and building, plant and machinery and other accessories are sold, it would constitute a slump sale. In the instant case, the recitals in the sale deed make it clear that what is sold is land and Hotel Pentagon Commercial Building and other appurtenances thereto with all easement appurtenances to the said property. The valuation report prepared, after the sale also gives description of the particulars of the properties, which are sold and the value thereof. Still from the aforesaid materials, it is not possible to make out whether any other movable assets, which were used by the transferor or the assessee was also the subject matter of sale. The said material could not be produced because such a contention was not taken before the Assessing Authority as well as the First Appellate Authority. Though the Tribunal was justified in considering the case from that angle, it committed an error in recording a finding of fact without there being sufficient material to arrive at such conclusion. Thus the finding recorded by the Tribunal, that it is a slump sale is not supported by legal evidence on record. Thus set-aside the matter and remand the matter back to the Assessing Authority to enable the assessee to produce such material in support of his contention that it is a slump sale. Issues:1. Whether the sale in question is a slump saleRs.2. Whether the provisions of Section 50 are attracted in the computation of capital gainRs.Analysis:1. The appeals arose from the Income Tax Appellate Tribunal's order determining the nature of the sale as a slump sale. The appellant, the Revenue, contested this classification. The firm had sold its Hotel Pentagon and land without specifying separate prices for the assets in the sale deed. The Assessing Authority disputed the written down value (w.d.v.) calculated by the assessee's valuer and estimated the market price of the land, resulting in a demand. The Appellate Authority partially allowed the appeal, directing set-off of unabsorbed business losses. The Tribunal concluded it was a slump sale, dismissing the Revenue's appeal. The High Court noted that if assets constituting a running business are sold, it is a slump sale. However, insufficient evidence was presented to confirm whether other movable assets were included in the sale. The Tribunal's finding was deemed unsupported by legal evidence, leading to the matter being remanded to the Assessing Authority for further examination.2. The Revenue argued that the case of a slump sale was not raised before the lower authorities, only being brought up before the Tribunal. The High Court emphasized the importance of substantial evidence in determining a slump sale. It was noted that the mere conveyance of land and building does not preclude a slump sale if other assets are included. The Court set aside the Tribunal's finding, directing the Assessing Authority to allow the assessee to present material supporting the contention of a slump sale. The Assessing Authority was instructed to assess the situation based on the evidence provided and make appropriate decisions in accordance with the law. The appeals were partly allowed, and the matter was remitted back for further proceedings.