2019 (2) TMI 1197 - AT - Income Tax

Tribunal rules on slump sale claim, directs re-evaluation of Section 50C for leasehold property

The Tribunal partly allowed the appeal, upholding the rejection of the slump sale claim under Section 50B due to insufficient evidence. However, it ... Slump sale u/s 50B on sale - transfer of lease hold rights - HELD THAT:- The claim of the assessee that it was a slump sale has been rightly rejected by the authorities below. Now coming to another submission of the assessee that what is transfer is the lease hold rights. The revenue has not disputed the fact that the property in question was on the basis of lease hold rights. Question as dismissed on the ground that the revenue had not preferred any appeal against the order of the Tribunal rendered in the case of Atul G. Puranik Vs. ITO [2011 (5) TMI 576 - ITAT, MUMBAI] on the question of law by following the judgement of the Hon'ble Apex Court in the case of Union of India Vs. Satish P. Shah [2000 (12) TMI 5 - SUPREME COURT]. The Ld. Counsel for the assessee has also relied upon the decision of the coordinate bench rendered in the case of Atul G. Puranik Vs. ITO (supra). The facts in that case as noted by the Tribunal that the assessee was allotted rights in the plot on 16th August, 2004 as compensation for the acquisition of lands acquired by the Special Land Acquisition Officer way back in the year 1970/1972. It is noted that the lease hold rights were for 60 years. We find that before the authorities below no such submissions were made. Merely it was stated that the A.O. ought to have referred the valuation to the Valuation Officer. However, this being the legal issue the assessee has relied upon the decision of coordinate bench. We therefore, set aside this issue to the file of the Ld. CIT(A) for his decision. Ground Nos.1 to 2.6 are partly allowed for statistical purposes. Deduction u/s 43B in respect of interest actually paid to financial institution during the year - HELD THAT:- As perused the materials available on record and gone through the orders of the authorities below. CIT(A) has not rejected the claim on the ground of allowability. The same has been rejected on the basis of evidence being not produced. We find before the A.O. it was categorically stated that the assessee has paid interest to the M.P. Finance Corporation being a state entity. A.O. ought to have verified from the M.P. Finance Corporation. Under the facts disbelieving the assessee was not called for. Therefore, we direct the A.O. to delete this addition. This ground of the assessee is allowed. Issues Involved:1. Whether the transaction qualifies as a slump sale under Section 50B of the Income Tax Act.2. Applicability of Section 50C to the transaction.3. Entitlement to deduction under Section 43B for interest payments.Issue-Wise Detailed Analysis:1. Whether the transaction qualifies as a slump sale under Section 50B of the Income Tax Act:The assessee contended that the transaction was a slump sale and thus should be covered under Section 50B, which would exclude the applicability of Section 50C. The assessee argued that the sale included the entire undertaking, including land, building, plant, machinery, and furniture. The sale deed and subsequent possession letter were cited as evidence. However, the Tribunal found that the sale deed only mentioned land and building, with no reference to other assets like machinery or furniture. Therefore, the Tribunal upheld the lower authorities' decision that the transaction did not qualify as a slump sale under Section 50B.2. Applicability of Section 50C to the transaction:The assessee argued that Section 50C should not apply as the property was leasehold and not freehold. The Tribunal noted that the property was indeed leasehold, as described in the sale deed. Citing the Bombay High Court's decision in CIT Vs. Green Field Hotels and Estates Pvt. Ltd. and other relevant judgments, the Tribunal concluded that Section 50C does not apply to leasehold properties. Consequently, the Tribunal set aside this issue to the CIT(A) for further decision, directing that the value of the leasehold rights should be reconsidered.3. Entitlement to deduction under Section 43B for interest payments:The assessee claimed a deduction under Section 43B for interest paid to a financial institution, which was previously disallowed due to non-payment. The CIT(A) had rejected this claim for lack of evidence. However, the Tribunal found that the assessee had provided proof of payment and that the AO should have verified this from the MP Finance Corporation. The Tribunal directed the AO to allow the deduction, thereby accepting the assessee's claim.Conclusion:The appeal was partly allowed for statistical purposes. The Tribunal upheld the rejection of the slump sale claim under Section 50B but directed a re-evaluation of the applicability of Section 50C concerning the leasehold property. Additionally, the Tribunal allowed the deduction under Section 43B for interest payments, subject to verification by the AO.