TaxTMI 
TaxTMI 
2007 (9) TMI 456
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....anufacturing unit at Navi Mumbai on slump sales basis as a going concern for a consideration of Rs. 75 lakhs whereas according to the Assessing Officer as per Form No. 3CEA the net worth of the assessee comes to negative figure of Rs. 2,11,27,260 because the amount of liability transferred exceeded the amount of assets transferred, so, after analyzing the provisions of section 45 under section 50B(2) and the case law and also taking into consideration the fact that the liabilities of Rs. 5,11,17,260 due to the buyer and the same gets extinguishment, as admitted by the assessee after this transaction because to that extent the seller had not received any amount from the purchaser who is the creditor and also taking into consideration the cost of assets as per provisions of section 50B the Assessing Officer worked out the long-term capital gains at Rs. 2,86,27,260 against Rs. 75 lakhs claimed by the assessee on account of slump sale because according to him the net worth of the undertaking was negative. 3. Aggrieved with the order of the Assessing Officer, the assessee filed an appeal before the CIT(A) and the CIT(A), after rejecting all the pleas of the assessee as detailed in hi....
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.... their order :- "A bare look at section 50B reveals that (i) these are special provisions for computing capital gains chargeable to tax in case of slump sale and, therefore, would prevail over the general provisions in case of any conflict, (ii) the provisions of sections 48 and 49 have been made applicable, subject to some modification, for computing capital gains in case of slump sale, (iii) net worth of the undertaking transferred shall be deemed to be the cost of acquisition and cost of improvement for the purpose of sections 48 and 49, and (iv) net worth shall be computed in accordance with the provisions of Explanations 1 and 2. As per Explanation 1, 'net worth' has been defined as aggregate value of total assets of the undertaking or division as reduced by the value of liabilities of such undertaking/division as appearing in the books of account. Explanation 2 provides that value of depreciable assets shall be taken as written down value determined under section 43(6)(c) of the Act, while value of non-depreciable assets shall be taken as per books. The net worth so computed is to be certified by the report of accountant as defined in section 288(2). The question for co....
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....n 48, thus, itself shows that it never intended negative cost of acquisition. Since "net worth" in section 50B is deemed to be the cost of acquisition as per sub-section (2) thereof, it must also have been intended by the Legislature in positive. Therefore, the expression 'reduced by' used by the Legislature in Explanation 1 to section 50B, has been used in the sense that net worth should be arrived at positive figure or at best be reduced to 'Nil'. Consequently, where the liabilities are more, than the value of assets as computed under section 50B, the net worth, would be considered as 'Nil' . In the present case, the value of assets as per books of account is much more than the value of liabilities. No prudent person would have acquired the unit unless the value of assets or benefits attached to the division is more than the liability. The division was purchased since value of assets was more than the liabilities. It is because of written down value of assets under section 43(6)(c) of the Act, that value of depreciable assets had to be computed at substantially low figure which resulted in the value of assets lesser than liabilities but on that account net worth cannot be redu....
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....line and consistency in the approach of the Bench, the judicial proprietary demands that we should respect and follow the orders of coordinate Benches deciding the identical issues on identical facts, which subsequently come up for consideration before the other Benches of the Tribunal in other cases. 7. In this view of the matter and respectfully following the decision (supra) of the Tribunal, in which the identical issue on identical facts has been dealt with by the Tribunal, as has also been conceded by the learned authorized representatives before us, we also set aside the orders of tax authorities below on the first issue involved in the grounds of instant appeal of the assessee under consideration before us and the same is decided against the revenue and in favour of the assessee and accordingly ground of appeal of the assessee in this regard pertaining to this issue are allowed. 8. The facts relating to the second issue regarding the disallowance of expenses claimed by the assessee are that the assessee-company was engaged in manufacturing and sale of stationery item and trading activities. It sold its main manufacturing unit at Navi Mumbai for a consideration of Rs. 7....
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....f their senior officials namely Deepa Nanda, DGM, Shri Sudhir Mathur, CGM/Shri Yogesh Agarwal, VP and B. Hariharan, GVP and CFO to foreign countries in the month of April and May which is prior to entering into agreement. The total expenditure on foreign visits by four officials of Ballarpur Industries Ltd. is at Rs. 3,42,380. How this expenditure on foreign could be related to the market study conducted? The appellant is not in position to answer. (iii)Bill for Rs. 8,17,318 dated 3-10-2000. The amount of Rs. 6,31,246, is in respect of TA Bill of senior officers of Ballarpur Industries for the month of August and September 2000. The balance amount of Rs. 1,86,072 was incurred by Mr. R.R. Vederah for visiting France and London for the purposes of business of Ballarpur Industries. These expenses are no way connected with the study conducted in four cities. (iv)Bill for Rs. 18,24,125 dated 3-12-2000 is in respect of travelling expenses of senior officers of Ballarpur Industries. The amount of Rs. 12,31,418 was incurred for travelling expenses for the month of October and November. The balance amount of Rs. 5,92,707 was incurred by Shri Yogesh Agarwal, Vice President on foreign v....
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....el of holding company associated with business promotion of the company. Ballarpur Industries Ltd. has diverted the salary of senior executive for alleged market study. The appellant has not given the basic details and no material has been given to prove that these persons have really contributed to market study alleged to have been conducted. From the further detail, it is seen that bills are in respect of business expenditure of Ballarpur Industries. 11. Thereafter the CIT(A) treated this expenditure claimed by the assessee as bogus by making following relevant observations :- "From the survey report, one can easily make out that if such type of surveys are conducted, the expenditure likely to be incurred may not be more than Rs. 50,000. The information obtained in cyclostyle proforma be obtained by engaging college students during the vacation or by employing four employees to collect data within a period of 5 to 7 days and compile the information. The expenditure of Rs. 3,22,30,015 has been diverted by Ballarpur Industries Ltd., the holding company to the subsidiary company's account to wipe out the capital gains arising on slump sale. The appellant has not given the name....
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....thorities below, fourth, because the copy of the agreement between the assessee and the holding company for conducting the survey was submitted before the tax authorities below, fifth, because the survey report was also furnished by the assessee before the tax authorities below and the same has not been doubted by them, lastly, because once the genuineness of the expenditure has not been doubted by the tax authorities the amount in question, in any case, has to be allowed either in the hands of the assessee or in the hands of the holding company, because the CIT(A) has not recorded any finding that the holding company has not incurred the expenditure on behalf of the assessee-company. In support of the contentions the learned AR for the assessee relied upon the case of CIT v. Dalmia Cement (Bharat) Ltd. [2002] 254 ITR 377 (Delhi) wherein their Lordships held that - "Once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the revenue cannot justifiably claim to put itself in the armchair of the businessman or in the position of the board of directors and assume the rol....
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....any for conducting a survey on behalf of the assessee, therefore, in these circumstances, it is all the more important for the assessee to not just file the details of the expenditure for covering the survey of 160 shops but the assessee was also required to show the commercial expediency and, since, the word 'commercial expediency' is one of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The assessee was required to explain as to how the expenditure claimed by the assessee was allowable as business expenditure incurred on the ground of commercial expenditure. It further means that even if the assessee has given the details of the expenditure the assessee was required to show that the expenditure was incurred on account of commercial expediency, but, from the order of CIT(A) it is clear that the assessee has failed to do so, hence, the disallowance of the entire expenditure by the CIT(A) was fully justified. In support of the contentions, the learned DR for the revenue placed reliance on the observations of the Apex Court in the case of S.A. Builders Ltd. (supra) wherein their Lordships observing that decisions relating to sec....