TaxTMI 
TaxTMI 
2014 (12) TMI 93
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....tries, is in the business of manufacture of garments on job work basis vide three proprietary concerns viz. M/s. Bombay Fashions, M/s. Design Creations and M/s. Apparel Industries. The garments are manufactured primarily for the group concern, Design Creations (Mumbai) Pvt. Ltd. ('DCPL' for short). Vide three separate agreements dated 29.03.2005, the assessee agreed to sell her said business, on a going concern basis, effective 01.04.2005, to the said company DCPL (name subsequently changed to M/s. Leela Scottish Lace (P.) Ltd.), a company incorporated under the Companies Act, 1956, with its registered office at Andheri (E), Mumbai. Clause 3 of the relevant agreements, identically worded, is in respect of consideration for the transfer, and reads as under: '3. Consideration 3.1 The Consideration for the purchase of Business shall amount to Rs. 10,000/- subject to paragraph 3.3 below. 3.2 The Consideration shall be discharged by DCPL in cash within 7 (seven) days from the Completion Date or within such time as may be mutually agreed upon between the parties. 3.3 The Consideration shall be adjusted as follows: (a) If the Final Net Assets exceeds the Consideration, the ....
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....subject to transfer. Nor it is in fact the A.O.'s case that it is so. The assessee's case was thus covered u/s.50B. Further, the sale consideration for all the three undertakings transferred being their respective net worths, no addition was called for in-as-much as the transaction did not give rise to any capital gains. The entire addition made being deleted thus; aggrieved, the Revenue is in appeal. 4. We have heard the parties, and perused the material on record. 4.1 The transfer of the Undertakings vide separate agreements is not denied by it. The principal issue raised by the A.O. is with regard to the 'consideration'. The same is not Rs. 10,000/-, subject to a further increase or decrease by the amount of final net assets (net worth) of the transferor-entity, as construed by the A.O., but its' net worth itself. In fact, as it appears to us, the consideration clause in the Agreements has been stated in the manner it has been, i.e., rather than simply stating it to be the book value of the final net assets, in view of the same being in the negative for two of the three concerns being transferred. Be that as it may, the A.O.'s confusion, as it would appear to us, is as to ....
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....ere a negative cost or net worth is considered as the cost of acquisition and/or improvement, it considered to arise out a mathematical jugglery, with no basis in facts. How could, it questioned, the cost of an asset be negative? The value of a capital asset or property could, therefore, at best be 'nil', and there is no concept of negativity with reference to the expressions 'net worth' or 'cost of acquisition'. Surprisingly; more so, as it obtained despite our direct query in the matter, neither the ld. AR nor the ld. DR adverted to this decision, placed in the file folder, during hearing. The tribunal in the said case considered the issue from both the common law and tax law perspective, as well as, in fact, a mathematical one. The said decision being also rendered in the context of section 50B, which stood also considered, the matter would require being referred to a larger bench, i.e., where the view expressed by the tribunal in Zuari Industries Ltd. (supra) was to be not adopted or followed by us, stating our reason/s for the same. The ld. DR, however, relied before us on the decision in the case of Dy. CIT vs. Summit Securities Ltd. [2012] 15 ITR (Trib) 1 (Mum) (SB), whic....
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....their value exceeds that of its assets. That is, while what is being transferred is a property and, thus, a capital asset by definition, its' net worth, which its' cost of acquisition and/or improvement is deemed as (section 50B(2)), could be negative, i.e., where the value of the liabilities exceeds that of the assets. This is as section 50B entails a species of capital assets, an undertaking, which is an amalgam of assets and liabilities, which cannot be segregated, constitute as they do an integral part of the undertaking or a business activity as a whole. Section 2(14), defining capital asset, does not override section 50B, which prescribes the mode and manner of computing the capital gain in a defined set of circumstances, i.e., slump sale of an undertaking/s. Further, consideration, by definition, cannot be negative. A negative consideration implies transfer of an obligation, which cannot be said to be an asset, much less in the capital field, or a capital asset by definition; we having clarified property to be something positive, i.e., of value. An undertaking is and, thus, has to be seen as a concept or entity, distinct and apart from its' cost of acquisition and/or impr....
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....at the non-transfer of the cash and bank balances of the three firms (Rs.5.45 lacs), admitted before us by the ld. AR, would not, in the facts and circumstances of the case, remove the assessee's case from the purview of section 50B, which envisages the transfers of all the assets and liabilities, so that exclusion of even one may operate to preclude the same. We state so as the consideration in the present case is in cash. The cash/bank balance with the assessee can thus be considered as having been given by her to and received back from the transferee, so that it continues to remain in her possession and, thus, of no consequence. We may also refer to the decision by the apex court in the case of CIT vs. Attili N. Rao [2001] 252 ITR 880 (SC), distinguished by the tribunal in the case of Zuari Industries Ltd. (supra). We consider this as incumbent upon us, as the tribunal on an earlier occasion, i.e., vide order sheet entry dated 25.04.2011, specifically sought clarification on the applicability or otherwise of the said decision in the facts and circumstances of the instant case. The parties again did not refer thereto during hearing. So, however, in our view, the said decision ....