TaxTMI 
TaxTMI 
2009 (9) TMI 235
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.... against the asses as the computation of income has been made under section 115JA of the Act? Whether the Tribunal was correct in taking into consideration irrelevant circumstances like 'bona fides of the assessee', 'whether the default was committed deliberately', in failing to pay advance tax under section 208 of the Act, when section 234B interest is levied automatically as there is no discretion?" 3. The assessee is a company, the assessment year is 1997-98 and the only dispute between the assessee and the Revenue is the levy of interest under sections 234B and 234C of the Act on the premise that the levy of interest under these two provisions was not justified in the case of the assessee for the assessment year in question as the tax liability of the assessee for the assessment year in question had been artificially boosted in view of the special deeming provisions of section 115JA of the Act ; that even as per the assessee's return filed for the assessment year in question the actual tax liability on normal computation was only Rs. 39,955, but in the wake of the provisions of sub-section (1) of section 115JA of the Act, this tax liability got itself converted to Rs. 87,....
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....f the Act in respect of the difference and therefore the assessee contrary to its own understanding had filed an appeal before the appellate authority and had made the question of justification for levy of interest under sections 234B and 234C of the Act as ground and issue before the appellate authority. 5. The first appellate authority allowed the appeal on this aspect of the matter purporting to follow the decision of this court in the case of Kwality Biscuits Ltd. v. CIT [2000] 243 ITR 519 and with the Income-tax Appellate Tribunal having dismissed the appeal of the Revenue being of the view that the decision of this court in Kwality Biscuits Ltd. [2000] 243 ITR 519 covered the issue, the Revenue is in appeal as against the order of the Appellate Tribunal only on this question. 6. In this appeal, Sri G. Sarangan, learned senior counsel has appeared for the assessee while Sri Seshachala, learned standing counsel has appeared for the appellant-Revenue. 7. The very question arises even in another appeal I.T.A. No. 320 of 2004 filed by the Revenue though the assessee is different and the order of the Tribunal is also different, nevertheless, the arguments addressed by Sri ....
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.... pari materia; that the Legislature has advisedly enacted section 115JA of the Act in the wake of the earlier judgments of the Supreme Court and this court in Kwality Biscuits Ltd. [2000] 243 ITR 519 and therefore the judgments rendered by this court and not taken up for examination by the Supreme Court in the case of CIT v. Kwality Biscuits Ltd. reported in [2000] 284 ITR 434 cannot govern or conclude the present appeal for answering the questions raised by the Revenue and submits that on the correct understanding and application of the provisions of section 115JA(1) of the Act, levy of interest under sections 234B and 234C of the Act is fully justified; that the Tribunal is in error in deciding the appeal taking the other view and merely by purporting to follow the law declared in Kwality Biscuits' case, allowing and applying the ratio of the judgment in Kwality Biscuits' case is an error in law and therefore the appeal is required to be allowed and the questions answered in favour the appellant-Revenue and in the negative. 10. In support of the submission that in the wake of changes brought about by the Legislature by the introduction of section 115JA of the Act by the Fin....
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....ment of the Karnataka High Court was made subject matter of appeal before the Supreme Court and with the Supreme Court having dismissed the appeal, the Bombay High Court having later chosen to apply the view taken by the Karnataka High Court in Kwality Biscuits' case [2000] 243 JTR 519 and as affirmed by the Supreme Court in the appeal of the Revenue even in a situation governed by the provisions of section 115JA of the Act, that line of reasoning should be followed here also and the questions answered against the Revenue and the appeal should be dismissed. 14. Sri Shankar, learned counsel appearing for the assessee in I. T. A. No. 320 of 2004 submitting on the very question of levy of interest under sections 234A, 234B and 234C of the Act in a situation where the tax liability is computed in terms of section 115JA of the Act has very vehemently urged that no interest is leviable under any one of these provisions, mainly for the reason that the determination of the total income and section 115JA of the Act being in an artificial manner and only because of the deeming provision of sub-section (1) of section 115JA of the Act and even such determination being poss....
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....sions like levy of interest under sections 234B and 234C of the Act to be within the realm of section 115JA(4) of the Act would be not only doing violence to the provisions of section 115JA(1) of the Act, but virtually amounts to enlarging the deeming provision in section 115JA(1) of the Act to other charging sections/provisions of the Act also. 17. Mr. Shankar has elaborated his submission in several hues and shades and has in this regard drawn sustenance from the following judgments. (a) Unreported judgment of this court rendered on January 31, 2006 in I, T. A. No. 2416 of 2005 in the case of CIT v. SKS Refineries Pvt. Ltd. (b) Snowcem India Ltd. v. Deputy CIT reported in [2009] 313 ITR 170 (Bom); (c) CIT v. Sedco Forex International Drilling Co. Ltd. [2003] 264 ITR 320 (Uttaranchal) (holding that the assessee was not liable to pay interest under section 234B of the Act as the assessee was unable to estimate its correct income as required under section 209(1) (a) of the Act in view of the bona fide dispute as to whether certain whether payment was in the nature of salary or otherwise and therefore the estimation was not possible consequently no interest under secti....
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....ty is to be ascertained under section 1l5JA(1) of the Act and such distinction consciously made by the Legislature cannot be and should not be lost sight of for the purpose of under standing the scope of sub-section (4) of section 115JA of the Act. 20. The circumstance that payment of advance tax by estimation and the rate of advance tax having been mentioned for the first time in section 2 of the Finance Act, 2000, read with Part III of Schedule I and the Finance Act providing for the rate of payment of advance tax only after the minimum alternative tax scheme had provided for positive ascertainment of tax liability under section 115JB of the Act by indicating that it is at 7½ per cent, of the book profits if it is found that the tax payable on the total income as assessed in the normal course is less than 7½ per cent. of the book profits and the minimum tax payable having been provided for in section 115JB of the Act itself. It is this logic which is employed to support the submission that there is no requirement of payment of advance tax or on self-estimation in terms of section 115JA of the Act also as was the case in section 115J of the Act and therefore the q....
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....e in the light of the various authorities relied upon by the learned counsel for the assessees. 24. There are no two opinions that but for the addition of sub-section (4) in section 115JA of the Act and which was conspicuously absent in section 1l5J of the Act, the ruling of this court and the reasoning and ratio mentioned in Kwality Biscuits' case (supra) would conclusively govern the question as the judgment of this court had come to be affirmed by the Supreme Court in an appeal preferred by the Revenue, though by simply dismissing the appeal without any reasons but granting leave and converting the special leave petition into an appeal. The Legislature having consciously brought about a change by introducing sub-section (4) in section 115JA of the Act while replacing the provisions of section 115J of the Act by the provisions of section 115JA of the Act, there is no escape from effectuating the provisions of sub-section (4) of section 115JA of the Act and it is only because learned counsel for the assessee are also aware of this change brought about by this legislation, vehement submissions are urged only in the wake of understanding and interpreting the provisions of sub-....
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....easonable to levy interest under sections 234B and 234C, for the reason that the payment of advance tax in any view of the matter, falls short of the requisite amount as contemplated in sections 207, 208 and 209 of the Act and in support of the submission, seeks to rely upon the ruling of the Uttaranchal High Court in the case of CIT v. Sedco Forex International Drilling Co. Ltd. [2003] 264 ITR 320. In that said case, the Uttaranchal High Court had opined that the levy of interest in terms of section 234B of the Act was not reasonable and therefore the Tribunal was justified in deleting the interest levied on the assessee under the provisions of section 234B of the Act and the same logic will hold good for relieving the assessee from the liability of payment of interest under the very provisions, i.e., section 234B, even in a situation where the advance payment of tax falls short of the requisite quantum of payment and the tax liability computed under the provisions of section 115JA of the Act. In that case, the Uttaranchal High Court had while agreeing with the conclusion reached by the Tribunal to delete the interest under section 234B, chosen to give its own reason in place of t....
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....ore importantly, if we look into the provisions of section 115JA of the Act, it starts with a non obstante clause that "notwithstanding anything contained in any other provision of this Act ..." the total income of the assessee, which is a company, being deemed to be an amount equal to 30 per cent. of the book profit. It is well within the knowledge of the assessee that the liability of the assessee may be either it is only tax liability when the total income computed in the normal course is more than 30 per cent., of the book profit, attracting other provisions, and if so, in a situation, where that total income as offered to tax by the assessee is less than 30 per cent. of the book profit, then the minimum total income that has to be subjected to tax should be 30 per cent., is also a possibility which can be arrived in the same manner as computing the normal total income of the assessee and a difficulty or impossibility as pleaded by the learned counsel for the assessee cannot be accepted only because it is only a liability under the provisions of section 115JA of the Act. 29. These aspects apart, we also notice that accepting the argument on behalf of the assessee that in a s....
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.... of tax, whereas in terms of the provisions of section 115JA of the Act, as it prevailed earlier, the rate at which the tax is to be paid being in turn linked to the liability to rate of tax as provided for in the Finance Act 2000, and also having linked to the rate of tax at which the company had offered its total income to tax, the computation of instalment of advance tax was almost an impossibility earlier, even in the wake of the circular having clarified this position, it should be taken that in the absence of any such earlier period, there is no way of the assessee to know the probable income and in turn probable tax liability and also the possible advance payment of tax. 32. This argument does not help the assessee, for the simple reason that the circular had been issued in the context of introduction of the provisions of section 115JB of the Act by the Finance Act 2000 (Central Act No.10 of 2000) with effect from April 1, 2001, that circular cannot have any bearing on the earlier statutory provision in terms of section 115JA of the Act and at any rate cannot regulate or even use for understanding the scope of the provision. 33. Secondly, the estimation of total income....
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....., of the book profits is artificially deemed to be the total income of the assessee for the year in question. All other things remain the same. When once the total income is known, the tax liability also can very well be computed and it cannot be lost sight of that for the payment of instalments of advance tax which is well within the completion of the year during which an assessee earns profits and which in turn becomes income and assessable to tax, there is an element of estimation and projection of income and it is not as though such elements of estimation or projection are brought about only by the provisions of sub section (1) of section 115JA of the Act. If it is a question of ascertaining the possible total income of the year either by projection or on an estimation even in respect of cases not covered by section 115JA of the Act, it is not logical to say that such projection or estimation fails only for the purpose of computation under section 115JA of the Act. In either situation, it is only guess work and projection and not based on actuals. 35. We find one another reason as to why the submissions made by the learned counsel for the assessees do not commend our accept....
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....tion tax and facing the consequence for not complying with the requirement vis-a-vis the assessees who pay taxes in terms of section 115JA of the Act, who nevertheless escape from the consequence of non-adherence to the very requirements which they would have to otherwise conform in respect of their liability assessed in the normal course. It is a well settled canon of interpretation that any interpretation of a provision which can lead to rendering the provision unconstitutional by attributing an element of discrimination should be avoided and it is for this reason that, we reject the submissions of the learned counsel for the assessees to interpret the provisions of sub-section (4) of section 115JA of the Act so as to understand that it can operate only in situations where regulatory procedures are provided for under the Act and not in respect of other provisions of the Act which may have an effect of creating a burden or liability or in the sense can be described as a charging section. 37. When once sub-section (4) to section 115JA of the Act cannot be ignored and has to be interpreted as discussed above, there is no escape from understanding that sub-section (4) of section 1....
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....on tax within the stipulated date does not result in Loss to the Revenue. While interpreting the scope of provisions of sections 234B, 234C and 115JA of the Act, we have to look into and interpret the background of section 115J of the Act and if at all the legislative history behind the provisions of section 115JA of the Act. The object of introducing section 115JA or section 115J of the Act was to ensure that minimum tax liability is created on the company assessed for the year in question even when the company was not liable to pay any tax or tax up to the amount as computed on the deemed total income of the assessee and the entire exercise is to augment the revenue to the State. As long as the tax amount as envisaged under the provisions of section 115JA of the Act does not reach the coffers of the State, there is loss to the Revenue. 41. While interpreting or understanding the provisions which solely seeks to increase and enhance the revenue to the State even by employing the fiction and by deeming the minimum amount of 30 per cent. of book profit of the company as the total income of the company on which the company is liable to pay tax, no part of the very provision includ....
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....appeal in full and that having come to be rejected in terms of the order dated June 28, 2004, and that order is made the subject-matter of appeal in I.T.A. No.597 of 2004. In these two appeals by the assessee, the following further substantial questions of law are raised for examination: In I. T.A. No. 597 of 2004: (a) Whether the Tribunal was justified in law in holding that there are no mistakes apparent from the face of records on the facts and circumstances of the case and the application made by the appellant would amount to a review? (b) Whether the Tribunal was justified in taking that non-applying of the decision of the hon'ble Supreme Court in Apollo Tyres' case [2002] 255 ITR 273 would not constitute apparent mistake liable for rectification under section 254(2) of the Income-tax Act? (c) Whether the Tribunal is justified in holding that the surplus on the sale of the undertaking as a whole requires to be credited to the profit and loss account in accordance with Parts II and III of Schedule VI to the Companies Act when the case is not part and parcel of the working results and consequently whether such finding constitutes apparent mistake on the facts o....
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....ipt for transfer of this asset which was in a sum of Rs. 43,16,59,811.69, which was in the nature of capital receipt, had been credited to its capital reserve account as surplus of sate of soft drink undertaking and had not offered any part of the amount for tax, in the return filed by it for the assessment year in question. 47. The Income-tax Department took up the case of the assessee as a scrutiny case and therefore notice under section 143(2) of the Act was issued on December 22, 2000. The assessee came forward with material information and the Income-tax Department as a follow-up measure, collected information from the buyer M/s. Hindustan Coca-cola Bottling (Southwest) Private Limited to ascertain as to whether the sale price represented one slump amount or as to whether it represented the value of individual items and noticed that the transfer had been effected in favour of M/s. Hindustan Coca-cola Bottling (Southwest) Private Limited only after a valuer by name John Foord (Asia) Pvt. Ltd. of Singapore had at the instance of the buyer, examined different assets of the assessee-company and had valued it after elaborate discussion by a valuer with the officials of the asses....
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....is a transaction in the nature of slump sale, but was of the view that the book profits of the assessee were required to be ascertained for the purpose of computing the tax payable by the assessee in terms of the provisions of section 1I5JA of the Act and for such purpose, made necessary additions to the value as indicated by the assessee to be the assessee's book profits in terms of the provisions of section115JA(2) of the Act and finalized the assessment on the premise that the total income of the assessee was 30 per cent. of the book profit and quantified the tax liability at the relevant rates on such amount. The computation included interest levied under section 234B of the Act for the period April and May, 1999 at 2 per cent. (Rs.13,05,436), interest for the period from June, 1999 to May, 2001 at 1.5 per cent.. (Rs.1,17,89,236) and a further interest of Rs. 40,79,487 for the period from June, 2001 to March, 2002 at 125 per cent. The total tax liability thus arrived at was Rs.4,98,10,058 in terms of the assessment order dated March 28, 2002. 49. The assessee being aggrieved by this computation and the demand for payment of tax liability of Rs 4,98,10,058 appealed to the Com....
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....ourt in the case of Kwality Biscuits Ltd. v. CIT [2000] 243 ITR 529, directed deletion of interest charged under section 234B of the Act. 52. It is as against this order of the Tribunal, both the Revenue and the assessee are in appeal. Even against the order passed on the miscellaneous petition filed by the assessee for rectification of the earlier order on the premise that the Tribunal had committed a mistake in not following and applying the ratio in the decision of the Supreme Court in the case of Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273, the Tribunal has examined this question and noticing that though the assessee had cited this decision of the Supreme Court even earlier and the Tribunal had in fact examined the applicability of the same, and on noticing that the judgment of the Bombay High Court in the case of CIT v. Veekaylal Investment Co. (P) Ltd. [2001] 249 ITR 597; [2001] 166 CTR 96 was more apt to the facts of the case, having expressly rejected the claim of the assessee, it is not as though the judgment suffers from any mistake apparent on the face of record amenable for correction under section 254(2) of the Act, but may be an error of opinion and that cannot be ....
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....t is on such premise the substantial questions as indicated above have been raised for our answer in this appeal (T. A. No. 325 of 2004). 56. The other question relating to the levy of interest under section 234B or 234C of the Act to a situation of computation of tax liability in terms of the provision of section 115JA of the Act, which arises in the present appeals also at the instance of the Revenue, has already been discussed by us in the appeal of the Revenue (in I.T.A. No. 2971 of 2005) and it has been answered in the negative in favour of the Revenue and against the assessee, holding that the interest under section 234B of the Act and for that matter any other analogous provision is attracted to a situation of computation of tax under section 115JA of the Act also and that the circumstances which can be explained justifying the delay in payment of instalment of advance tax or payment of self-assessment tax are of no consideration and the interest is levied statutorily and is automatic on the non compliance with the requirement of the relevant provision of the Act and therefore answered so in the present appeals also, holding that the Tribunal could not have directed delet....
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....isclosing a surplus of Rs. 43,16,50,8111.69 attributable to the transaction of transfer of the bottling unit of the assessee to the buyer M/s. Hindustan Coca-cola Bottling (Southwest) Private Limited for a price of Rs. 54,44,19,899. 59. Appearing on behalf of the Revenue, Sri M.V. Seshachala has very vehemently urged that the exercise undertaken by the Assessing Officer is not to redetermine or recompute the book profits of the assessee, as had been determined in terms of the provisions of Parts II and III of Schedule- VI to the Companies Act, 1956, but is only an exercise for determining the book profits in terms of the Explanation occurring after the second proviso to sub-section (2) of section 115JA of the Act; that it is only adding back the amount carried to the reserve amount that had been disclosed by the assessee itself even in terms of its own profit and loss account and balance- sheet and as was required to be added under sub-clause (b) of the Explanation; that it was not an exercise for computing the book profits, as had been done by the assessee to conform to the requirement of sub-section (2) of section 115JA of the Act ; that the mere fact that the Assessing Office....
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.... only with effect from April 1, 2000, as inserted by the Finance Act 1999 and which reads as under: "2. (42C) 'slump sale' means the transfer of one or more under takings as a result of the sale for a lump sum consideration without values being assigned, to the individual assets and liabilities in such sales. Explanation1. For he purpose, of this clause, 'undertaking' shall have the meaning assigned to it in Explanation 1 in clause (I9AA) Explanation 2.For the removal of doubts, it is hereby declared that the determination of the value of an asset or liability for the sole purpose of payment of stamp duty, registration fees or other similar taxes or fees shall not be regarded as assignment of values to individual assets or liabilities." 63. For the assessment in question, we do not find any statutory definition of slump sale and even after going through a good number of judgments rendered by the High Courts and the Supreme Court on the question of what constitutes "slump sale", referred to above and relied upon by the learned counsel for the Revenue as well as the assessee, no clear, emphatic, precise mea....
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....rusal of various cases cited before us at the Bar, is only with an eye to get out of the clutches of section 45 of the Act and contending that under section 48 computation is not possible. 68. In this regard, we have to observe that it is merely a charging section like section 45 of the Act providing for levy of tax on capital gains, that fails if the machinery of section for computing the capital gains is inadequate and even a situation where it is impossible to compute the capital gains in terms of section 48 of the Act, but any other charging section also meets the same fate if the subject-matter of the charge is either not precise or is unascertainable, may be due to a variety of reasons. In the instant case, both the Assessing Officer and the first appellate authority, on examination of the facts and circumstances, have opined that the transaction is not in the nature of a slump sale. The Tribunal has reversed this finding not based on an examination of the facts and circumstances and on appreciation of the evidence available from the records, but more based on the discussion of various judgments holding as to what constitutes a slump sale and even the finding of the Tribun....
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....ied to a given case to arrive at an answer. 71. It is in this background, we have to answer the questions raised in the appeals of the Revenue and the assessee as to whether the transaction in question is a slump sale and even assuming that it is a slump sale as to whether the Tribunal is still in error in directing the Assessing Officer to compute the capital gains and remanding the matter to the Assessing Officer for such purpose. 72. The related question is as to whether the Tribunal has committed any error in affirming the manner of determination of book profits of the asses- see-company in terms of section 115JA of the Act. The answers to these issues would comprehensively cover all the questions raised for our answer in these appeals on the aspect of the assessee's liability under section 115JA of the Act. 73. The Revenue's appeal - I. T. A. No. 320 of 2004- though initially the Revenue had raised two substantial questions of law, relating to the question of justifiability of the levy of interest in terms of section 234B of the Act in a situation where the liability arises in terms of the provisions of section 115JA of the Act and we have already answered that questi....
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....as a whole was first required to be credited to the profit and loss account, even in terms of Parts II and II of Schedule VI to the Companies Act and as to whether the Tribunal was correct in holding that the decision of the Supreme Court in the case of Artex Manufacturing Co. [1997] 227 ITR 260 was not applicable to the case of the appellant. 76.We notice that the controversy itself arises in the context of the provisions of section 115JA of the Act, because the Assessing Officer has not accepted the computation of taxable amount for the purpose of section 115JA of the Act, as offered by the assessee and as determined by the Assessing Officer, 77. The assessee being conscious of the requirement of the provisions of section 115JA of the Act did compute its taxable income in terms of the said provisions and had indicated that to be at a sum of Rs.4,69,69,196, the Assessing Officer, on the other hand had computed the taxable income for the very purpose, i.e., for the purpose of section115JA at a sum of Rs.47,86,10,008 and had worked out the income-tax liability at 30 per cent.. of this amount. 78. The considerable difference between the two amounts as offered by the assessee....
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....ion 45 of the Act, for bringing it to tax for capital gain, fails in the present case, for the reason that the computation section, i.e., section 48 of the Act, is not workable for the reason that the sale price for the unit said to have been sold as a going concern, is inclusive of that part of the price attributable to the improved business potential of the unit, i.e., the assessee having put in an effort over a period of years to develop a sustained profit making soft drink production unit by its managerial skills and the value attributable to such value addition to the overall unit being unascertainable and it being not- possible to apportion as a definite per cent.age or fraction of the sale price to value of individual ascertained assets, land and building plant and machinery etc; the machinery section 48 fails, for the reason of unascertainability of the precise value/price attributable to the value addition to the unit by expansion and having a good networking system for the unit, which in turn results in inability to ascertain the sale price of individual definite capital assets and though the cost of acquisition of such individual capital assets is assumed, the precise co....
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....Snowcem India Ltd. [2009] 131 ITR 170 and to examine the case on hand on the touchstone of the residuary provision of section 115JA of the Act and for such purpose by looking into the legislative intent in enacting the law, the object and reasons for enacting the law as indicated in the Notes on Clauses and what is obvious is that the Legislature has consciously introduced section 115JA to make a difference with the existing section 115J and this definite purpose and intention on the part of the Legislature cannot be lost sight of by treating section 115JA on par with the provisions of section 115J. 81 In this background, when we examine the authorities relied upon by learned counsel for the Revenue as well as the assessee, we find as under. 82. "Slump sale" is not a phrase which at all has figured under the provisions of the Act in the definition section, but found a place for the first time in the year 2000, i.e. with effect from April 1, 2000 in terms of the Central Act No. 27 of 1999. The definition of "slump sale" as such reads as under: "2.(42C) 'slump sale' means the transfer of one or more under takings as a result of the sale for a lump sum consideration without v....
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....sold as a going concern and also includes consideration for many imponderables as good will or a networking business system etc. It may become not possible to ascertain the precise price at which an asset which had been acquired initially has now been sold. Section 48 of the Act computation mechanism if fails and therefore gains are not ascertainable, the charge under section 45 of the Act cannot be effectuated. Over a period of time, it has been found to be a very profitable exercise for the assessees to call in aid the failure mode in terms of section 48 of the Act to get out of the net of tax on capital gains as cast under section 45 of the Act. 87 The possibility of the computation section failing in the case of "slump sale" or transfer of a capital asset as a whole or as a going concern would therefore become an attractive proposition while effecting transfer of capital assets. While a compendious sale, also known as "slump sale" can result in a possibility of the computation provisions failing leading to the charging section also becoming ineffective, it is not necessarily the case always when even there is a slump sale. If an undertaking is sold as a whole and comprises s....
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.... value of individual assets was very much ascertainable in the present case whereas it was not possible in Mugneeram Bangur's case [1965] 57 ITR 299 (SC) and even in terms of the ratio in Mugneeram Bangur's case [1965] 57 ITR 299 (SC) the present transaction cannot be termed as a "slump sale" as even on the available facts it was possible to ascertain the sale price and individual assets such as land, building, office equipment, etc., though the source of information was the valuation report given by the valuers whose services had been availed of by the purchaser and who were internationally renowned valuers and such particulars per se did not enter the sale deed evidencing the sale transaction of the entire undertaking as one unit and the price was a lump price. The Assessing Officer also recorded the finding that if the unit or undertaking should have been transferred as one unit and all the assets and liabilities of the entire unit as such were taken over by the purchaser, perhaps it could have constituted a slump sale, but in the present case, the purchaser having not acquired or taken over all assets and liabilities of the running concern and as noticed by the Assessing Office....
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.... this case, the ratio of the judgment of the Bombay High Court in Premier Automobiles Ltd.; case [1994] 206 ITR1 as well as the judgment of the Karnataka High Court in Syndicate Bank Ltd.' s case [1985] 155 ITR 681 and the judgment of the Delhi High Court in P.N.B. Finance Ltd. 's case [2001]252 ITR 491 being attracted and there being possibility of computing the capital gain as a result of the transfer with reference to the cost of the business undertaking as a whole as that also constitutes an asset within the meaning of subsection (14) of section 2 of the Act and for such determination remanded the matter to the Assessing Officer. 94. The Tribunal in the process also rejected the claim of the assessee that the transaction is in the nature of a "slump sale. 95. In the light of the discussion above, what emerges is that while deciding as to whether a transaction is in the nature of "slump sale" or not though dependent on facts can also become a question of law as to whether the computation of capital gains for the purpose of section 45 of the Act and in the manner provided under section 48 of the Act does not get automatically defeated even if the sale is characterized as a ....
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....uld have been added back to the book profits of the assessee for the purpose of determining the deemed income of the assessee for the year under consideration in terms of the provisions of section 115JA of the Act. To put it in other words, whether this surplus amount was an amount which could have been added back to the book profits of the assessee for the purpose of determining the deemed income of the assessee for the year under consideration in terms of the provisions of section 115JA of the Act. 99. It is in the context of such examination Sri Shankar, learned counsel for the assessee has put in best efforts to educate us on the procedures of accountancy, book keeping etc., and has placed before us a wealth of material touching on these aspects. 100. We have been taken even to foreign judgments for understanding as to what exactly can constitute book profit of a company, particularly, in the context of the assessee having indicated in its books of account and also as part of its return this precise amount had been transferred to its capital reserve account. 101. While the transaction resulting to this extent of surplus and the entire amount having been transferred to ....
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....he asses- see and as has been accepted by the authorities under the Companies Act and in which event it is presumed to have been so computed only in terms of the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 and on the authority of a good number of judgments of the Supreme Court and the High Courts, it is not open to the Assessing Officer to sit in judgment over the ascertainment of book profits by the assessee and as recognized/approved by the corresponding authorities under the provisions of the Companies Act 1956, and on the facts the present situation being not one covered under any one of the clauses (a) to (f) of the Explanation to sub-section (2) of section 115JA of the Act, there was no way of the Assessing Officer redetermining the book profits for the purpose of section 115JA of the Act by adding the so called surplus as a result of the slump sale representing a sum of Rs.43,16,50,811.69 which had been directly taken to the capital reserve account without having been debited to the profit and loss account of the assessee in terms of clauses (a) and (b) of the Explanation. The Assessing Officer should have simply accepted the return filed by the ....
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....tion of the book profits of the assessee for the purpose of section 115JA of the Act by the Assessing Officer is not by way of any modification or alteration of the book profits of the assessee as computed or determined in terms of the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 but only by the working of the Explanation on the amount of book profit even as otherwise by the assessee in terms of these provisions. 106 While Sri Shankar, learned counsel for the assessee is very right that on the strength of the authority placed before us, on behalf of the assessee, there cannot be two opinions that the book profits as ascertained by the assessee and as certified by its auditors statutory or otherwise as had been accepted by the authorities under the Companies Act, 1956, cannot be in any way found fault with by the Assessing Officer or the authorities under the Income-tax Act, 1961, and the authorities under the Income-tax Act have to necessarily proceed on such premise, it is equally correct on the part of Sri Seshachala, learned counsel for the Revenue to submit that the very authorities do not in any way control or are responsible in the manner of com....
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.... VI to the Companies Act, 1956 (1 of 1956): Provided that while preparing profit and loss account, the depreciation shall be calculated on the same method and rates which have been adopted for calculating the depreciation for the purpose of pre paring the profit and loss account laid before the company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act, 1956 (1 of 1956): Provided further that where a company has adopted or adopts the financial year under the Companies Act, 1956 (1 of 1956), which is different from the previous year under the Act, the method and rates for calculation of depreciation shall correspond to the method, and rates which have been adopted for calculating the depreciation for such financial year or part of such financial year falling within the relevant previous year. Explanation - For the purposes of this section, 'book profit' means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by.- (a) the amount of income-tax paid or payable, and the provision therefore; or (b) the amounts carried to any reserves by wh....
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....sub-section (4) of section 80-IA and subject to fulfilling the conditions laid down in that sub-section; or (vii) the amount of profits of sick industrial company for the assessment year commencing from the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses; or Explanation-For the purposes of this clause, 'net worth' shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986). (viii) the amount of profits eligible for deduction under section 8OHHC, computed under clause (a), (b) or (c) of sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in sub-sections (4) and (4A) of that section; (ix) the amount of profits eligible for deduction under section 8OHHE, computed under sub-section (3) of that section." variou....
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....for such arrival of the surplus amount, the assessee would have quite naturally given deduction to the cost of the acquisition of various components which ultimately constituted the cost of the bottling plant and that amount having been reduced from the sale price of the bottling plant as a whole, i.e., from out of Rs.55,44,90,899 and therefore the difference of Rs.43,16,59,811.69 constitutes the capital gain even in terms of the provision of section 48 of the Act, if the assessee should claim that any part of the cost of acquisition, in respect of various components of the bottling unit, which was sold, had not figured at the time of the computation of the surplus and if such amount is in fact forming part of the actual cost of acquisition in respect of any component of the bottling unit, we reserve liberty to the assessee to put forth such a claim before the Assessing Officer, even now, after the remand and to make good this claim with supporting material and proof before the Assessing Officer. If the Assessing Officer should find that any such claim now put forth by the assessee for claiming further deduction from out of the total surplus amount of Rs.43,16,59,811.69 is justifie....
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....f identifying the individual assets such as land etc., and computing the capital gains vis-a-vis such limited assets and in turn, ascertaining the total income and on the Assessing Officer finding that such total income was in fact less than 30 per cent, of the book profits a computed by making additions as per the Explanation to section 115JA(2)(b) of the Act and such 30 per cent. being higher than the actual total income even otherwise as computed by the Assessing Officer, the provisions of section 115JA of the Act was required to be worked, it is on the working of the provisions of section 115JA of the Act by app clause (b) of the Explanation, in so arriving at the book profits for the purpose of section 115JA of the Act, Sri Shankar, learned counsel for the assessee has made elaborate submissions and also referred to the principles of accountancy etc. 115. We find in the present set of facts and circumstances, the entire exercise would have become relevant only if the Assessing Officer should have found that on a proper computation of the total income of the assessee, i.e., by accepting the surplus as indicated in the note to the return filed by the assessee to be the capita....
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....cated in the note to the return filed by the assessee in itself constituted capital gain and that capital gain being part of the total income, arrive at, the total income afresh and then compute the tax liability in terms of the provisions of section 115JA of the Act and to decide the cases on such premise. 117. It is therefore, we are of the view that it is wholly unnecessary to answer 117 all the questions raised in these appeals. 118. Accordingly, the substantial questions of law raised in these appeals are 118 answered as follows: In I T. A. No. 320 of 2004 Q. No. Question Answer (a) Whether the tribunal was correct in holding that interest under section 234B of the Act cannot be levied against the assessee as the computation of income has been made under section 115JA of the Act? Not correct. Wrong. Under section 234B, interest can be and has to be levied. Question answered in the negative, in favour of the Revenue and against the assessee. (b) Whether the Tribunal was correct in taking into consideration irrelevant circumstances like "bona fides of the assessee" "whether the default was committed deliberately" in falling to pay advance tax und....
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.... to the introduction of section 50B of the Act, introduced with effect from April 1,2000, in the light of our discussion above and therefore the question is answered in the affirmative, in favour of the Revenue and against the assessee. (b) Whether the Tribunal on facts of the case, is correct in law, in holding that the capital gain on the transfer of entire undertaking as a whole has to be computed? The Tribunal is correct in holding that the capital gain on the transfer of entire undertaking as a whole has to be computed and in the light of the further clarification made in this judgment, the computation is to be made by the Assessing officer, as we are remanding the matter to the Assessing Officer for such purpose. The question is answered in the affirmative, in favour of the Revenue and against the assessee. (c) Whether the slump sale amount received, on the facts and circum stance of the appellant's case constitute capital receipt? Answered in the affirmative in favour of the Revenue and against the asses see. (d) Whether, on facts and circumstances of the case, is the Tribunal, justified in law, in holding that recomputation by the Assessing Officer f....
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....questions in I. T. A. No. 320 of 2004, filed by the Revenue, and I. T. A. No. 325 of 2004, filed by the assessee the answer to these questions are academic and recede to the background. Hence, all the four questions are not answered, but for statistical purpose, the questions relating to the disposal of this appeal are answered in the affirmative in favour of the Revenue and against the assessee. (b) Whether the Tribunal was justified in taking that non-applying of the decision of the hon'ble Supreme Court in Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273 would not constitute apparent mistake liable for rectification under section 254(2) of the Income-tax Act? (c) Whether the Tribunal is justified in holding that the surplus on the sale of the undertaking as a whole requires to be credited to the profit and loss account in accordance with Parts II and II of Schedule-VI to the Companies Act, when the case is not part and parcel of the working results and consequently whether such finding constitutes apparent mistake on the facts of the case? (d) Whether the finding of the Tribunal that the transaction of slump sale is taxable for the assessment yea....