TaxTMI 
TaxTMI 
2014 (1) TMI 1600
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder section 148 of the Act. In the course of assessment proceedings, the Assessing Officer noticed that during the year under dispute, the assessee had transferred its manufacturing division to M/s. Novapan Industries Limited under a scheme of amalgamation approved by the Hon'ble High Court of A.P. w.e.f. 01.04.2006. It was further noticed that as on 31.03.2006 the assessee-company had total assets of Rs.3219.89 lakhs and total liabilities of Rs.2538.67 lakhs. Hence, the net worth of the assessee-company was Rs.681.22 lakhs. The Assessing Officer further noted that as per the scheme of amalgamation both the assets and the liabilities were transferred by the assessee company to M/s. Novapan Industries Limited. As a consideration for the transfer of the division the amalgamated company M/s. Novapan Industries Limited allotted 38 shares for every 100 shares of the amalgamated company. Besides allotment of shares, the amalgamated company M/s. Novapan Industries Limited also transferred certain investments held by it amounting to Rs.25,24,05,000/- to the assessee company. The balance-sheet of the assessee company as on 31.03.2007 shows share capital of Rs.6,28,07,500/- and reserve amou....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... duly approved by the Hon'ble High Court of A.P. by an Order dated 27.12.2006, all the assets and liabilities of the assessee were vested with M/s. Novapan Industries Limited against which, the assessee was given investments valued at Rs.25,24,05,000/- held by M/s. Novapan Industries Limited besides allotment of 68,12,200 equity shares of Rs.10/- each of the face value to Rs.6,81,22,000/- to the share holders of the assessee. It was submitted by the assessee that the provisions of section 50B were applicable only in the case of sale of an undertaking and not in the case of an arrangement between two companies under section 391/394 of the Companies Act, 1956. In this context, learned A.R. relied upon certain judicial precedents including the decision of Hon'ble Supreme Court in the case of CIT vs. Motors and General Stores Pvt. Ltd. 66 ITR 692 (S.C.) wherein the Hon'ble Supreme Court held that the term 'sale' connotes a transfer of property in goods or of the ownership in immovable property for a money consideration and the presence of money consideration is an essential element in a transaction of sale. It was further held that if the consideration was not money but some other valu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reference to demerger. It is also admitted by the Assessing Officer that there is no money consideration involved for transfer of the assets. It was submitted that the assessee has never claimed it as demerger. Under these circumstances, the grounds raised cannot be entertained. It was further contended by the learned A.R. that if these grounds are allowed to be adjudicated, it would amount to confirming the addition on an item in respect of which no reasons were recorded under section 148 of the Act as no addition has been made on that account. 7. So far as the merit of the case is concerned, the learned A.R. submitted that the transaction cannot be treated as slump sale under section 2(42C) of the Act as the amalgamation of the assessee with M/s. Novapan Industries Limited is by operation of Law as a result of a scheme of arrangement approved by the Hon'ble High Court of A.P. in a proceeding under section 391 and 394 of the Companies Act, 1956. It was submitted that the amalgamation was not contractual. It was submitted that the scheme of amalgamation would make it clear that there was no flow of money consideration for transferring the manufacturing division to M/s. Novapan ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 38 equity shares of Rs.10/- each to the shareholders of the assessee-company for every 100 equity shares held in the assessee company. From the aforesaid facts, it is very much clear that as per the scheme of amalgamation, there is no monetary consideration received by the assessee-company for transfer of the manufacturing division. Section 50B of the Act provides for computation of capital gains in the case of 'slump sale'. The definition of 'Slump Sale' under section 2(42C) reads as under : "Slump Sale" means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales." 9. A plain reading of the aforesaid provision makes it clear that to qualify as slump sale, two conditions have to be satisfied viz., (1) there must be transfer of one or more undertaking as a result of sale and (2) the sale should be for a lumpsum consideration without values being assigned to the individual assets and liabilities. In the case of the assessee it is not disputed that there is no monetary consideration received for transfer of the assets and liabilities of the m....