Balancing charge under section 41(2) applies to attributed plant and machinery consideration, despite slump sale or cessation arguments.

Section 41(2) applies where consideration can be attributed to plant and machinery sold as part of a business transfer, and the excess over written down value is chargeable as balancing charge. The transfer deed here specifically identified consideration for the relevant assets, so the whole price could not be treated as an undifferentiated slump consideration. The note also states that a sale for this purpose may include an exchange, and that business cessation does not defeat the charge where the statutory explanation deems the business to continue for applying the provision. On interest, no appeal lies against levy of interest under section 215.

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Issues: (i) Whether any part of the consideration received on transfer of the business as a going concern was attributable to plant and machinery so as to attract section 41(2) of the Income-tax Act, 1961; (ii) Whether profit under section 41(2) was rightly assessed despite the contention that the transfer was a slump sale or an exchange and that the business had ceased before the relevant previous year; (iii) Whether the assessee had a right of appeal against levy of interest under section 215 of the Income-tax Act, 1961.

Issue (i): Whether any part of the consideration received on transfer of the business as a going concern was attributable to plant and machinery so as to attract section 41(2) of the Income-tax Act, 1961

Analysis: Section 41(2) applies where plant, machinery, building or furniture owned and used for business is sold and the moneys payable exceed the written down value. The Court found that the transfer deed specifically disclosed the consideration for the plant and machinery, the book value exceeded the written down value, and there was no basis to treat the entire consideration as an undifferentiated slump price. The transaction was a completed sale of the relevant assets and the excess over the written down value was recoverable as balancing charge.

Conclusion: In favour of the Revenue. A part of the consideration was rightly attributed to plant and machinery and was taxable under section 41(2).

Issue (ii): Whether profit under section 41(2) was rightly assessed despite the contention that the transfer was a slump sale or an exchange and that the business had ceased before the relevant previous year

Analysis: The Court held that the term "sold" in the statutory scheme includes a transfer by way of exchange, and therefore the characterisation of the transaction did not defeat the charge if excess realisation over written down value resulted. It further held that the agreement to sell did not complete the transfer of immovable property; completion occurred only on execution of the registered sale deed within the relevant previous year. The Explanation to section 41(2) also deems the business to be in existence for the purpose of applying the provision where the asset becomes due in a year in which the business has ceased.

Conclusion: In favour of the Revenue. The balancing charge was validly assessed notwithstanding the slump-sale, exchange, or cessation arguments.

Issue (iii): Whether the assessee had a right of appeal against levy of interest under section 215 of the Income-tax Act, 1961

Analysis: The Court treated the point as covered by binding Full Bench authority holding that no appeal lay against levy of interest under section 215.

Conclusion: Against the assessee. No right of appeal against the levy of interest under section 215 was available.

Final Conclusion: The reference was answered wholly against the assessee, and the Revenue succeeded on all questions, including the balancing-charge issue and the appealability of interest.

Ratio Decidendi: For the purpose of section 41(2), a completed transfer of plant or machinery that yields excess realisation over written down value attracts balancing charge even where the transaction is structured as a transfer of the business as a whole, and the business's cessation does not prevent application of the provision.

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