TaxTMI 
TaxTMI 
2014 (12) TMI 856
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....of law which was framed vide order dated 15.09.2003 in these appeals is as under:- 'Whether on the facts and in the circumstances of the case the Tribunal was correct in law in placing reliance on surveyor's report for the purpose of determining the actual cost of the asset acquired by the assessee from M/s Wimco Ltd.?' 3. The relevant facts necessary for the disposal of these appeals are that the appellant company was incorporated on 07.06.1989 for establishment of an industrial undertaking for manufacture of coated metal electrodes, cathodic protection systems and chloralkali cells. The appellant company on 30.11.1989 entered into an agreement with M/s Wimco Ltd. to purchase its metal anode division, a going concern, with all its assets, liabilities and obligation specified in the agreement of even date. The purchase price agreed and paid by the appellant assessee to M/s Wimco Ltd. was Rs. 6,03,21,910/- to be paid in cash; the purchase price fixed was for acquisition of a running undertaking with all assets and liabilities. The first assessment year of the appellant company was assessment year 1990-91. The actual cost of fixed assets acquired was not examined by the Assessing O....
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....n of fixed assets at Rs. 6,10,02,641/-. In the alternative it was submitted that Rs. 4,60,99,228/- be treated as 'actual cost' of fixed assets. The said figure was computed by assessee after reducing net current assests, loss for the period 01.12.1989 to 30.3.1990, capital work-in-progress and addition to plant and machinery between 01.12.1989 to 30.3.1990. Assessee had also submitted that there was no dispute in respect of various obligations amounting to Rs. 1,49,03,413/- as these were revenue expenditure in the years when actually paid. 6. In order to appreciate the controversy, we will like to reproduce the computation made on the question of 'actual costs' enclosed by the appellant assessee with the present appeal as Annexure-B. It is stated that the said computation was also filed before the Tribunal. The same is as under:- 'CASE AS PLEADED BEFORE ASSESSING OFFICER AND COMMISSIONER (APPEALS) PARTICULARS AMOUNT (Rs.)AMOUNT (Rs.) TOTAL CASH CONSIDERATION PAID 6,03,21,910/- ADD: OBLIGATIONS NRDC ROYALTY 75,00,000/- WARRANTIES 72,96,000/- GRATUITY 1,07,413/- LESS:OTHERALLOCATIONS LOSS FOR THE PERIOD 1.12.89 TO 30.3.90 11,57,339/- CAPITAL WORK-IN-PROGRESS NEW PROJEC....
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....all benefits attached thereto or occurring to the said business including rights, title, benefits, interests and advantages under the industrial licence, import licences and other licenses, quotas whether registered or otherwise, import and export entitlements. In addition, the assessee had also taken over rights, title, benefits and advantages, duties, liabilities and obligations under various agreements, arrangements and understandings pertaining or relating to business with customers, suppliers and others including the goodwill. Thus, the consideration paid of Rs. 6,03,21,910 was for a running and going concern and to acquire an undertaking. Rs. 6,03,21,910/- was not sub-divided or bifurcated under the said agreement under different heads. Value of the fixed assets, which were transferred and on which depreciation was earlier claimed by Wimco Ltd. and after acquisition by the assessee was not specified or so stated in the agreement itself. It was lump sum payment. 9. The appellant had however filed before us details of final purchase consideration paid to Wimco Ltd., which is as under:- "PARTICULARS AMOUNT (in Indian Rupees) Basic purchase, consideration based on Net Operati....
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....f no bifurcation or division being made by the assessee or by the purchaser. But in the facts of the present case, there is evidence that the appellant assessee and the seller had evaluated the plant and machinery on the date of the sale. Therefore, the authorities and the Tribunal deemed it appropriate to rely upon the surveyor's report for computing actual cost and we agree with the said conclusion. 13. CIT vs. Artex Manufacturing Co. (1997) 227 ITR 260, was a case of slump sale on lump-sum price, but the Supreme court held that the balancing charge under Section 41(2) of the Act could be computed, inspite of the fact what was payable by the assessee was the difference between written down value and the actual cost of the depreciable asset on sale. This, it was held, was possible in the said case, as necessary information was furnished by the assessee before the Assessing Officer. The Supreme Court rejected the contention of the assessee that the value of the plant, machinery and dead stock was not mentioned in the agreement for slump sale and therefore no value could be attributed to different items, observing that the assessee had himself furnished the information to the Asses....
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....ce and interest to bring the asset into existence and put them into working condition. Interest on monies borrowed for purchase of fixed asset prior to asset coming into production i.e., till the erection stage should be capitalised. It was held as under:- '15. It would appear from the above that the accepted accountancy rule for determining the cost of fixed assets is to include all expenditure necessary to bring such assets into existence and to put them in working condition. In case money is borrowed by a newly started company which is in the process of constructing and erecting its plant, the inte-rest incurred before the commencement of production on such borrowed money can be capitalised and added to the cost of the fixed assets which have been created as a result of such expenditure. The above rule of accountancy should, in our view, be adopted for determining the actual cost of the assets in the absence of any statutory definition or other indication to the contrary'. 16. The aforesaid decision does not help or assist the assessee in the present case, for we are not concerned with what should be capitalised, but we have to answer what was the actual cost of the fixed asse....