TaxTMI 
TaxTMI 
TaxTMI 
2003 (6) TMI 10
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....w in holding that the consideration of Rs. 2 crores shown in the agreement is not the real consideration unless liability towards payment of gratuity is spread over the consideration shown?" Pursuant to the agreement between the parties, the undertaking was taken over by the assessee. The agreement dated March 24, 1988, contains the following clauses: "1. (A) The vendor shall sell and the purchaser shall purchase the said industrial undertaking with effect from 26th day of March, one thousand nine hundred and eighty-eight hereinafter called 'the date of sale' as a going concern and full benefit of industrial licences, permits, entitlements, tenancies including tenancy of Jute Corporation of India in respect of Carpet Backing Shed and all ....
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....ed Tribunal had held that in addition to the amount of Rs. 2 crores, the assessee-company had taken over the liability towards gratuity in respect of the existing employees accrued till the date of the transfer of the mill and this liability as on that date was arrived at on actuarial valuation at Rs. 3,44,58,852. There is no dispute with regard to the amount of the liability as calculated. Neither is there any dispute with regard to the continuation of the employees nor was there any dispute with regard to the taking over of the liability for payment of gratuity. It is not a case of inflated amount shown as consideration. In this background, it is to be considered whether this amount would be added to the cost of acquisition for being di....
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....lity on that date when the property was acquired. It was a liability that accrued to the vendor after the property was sold. Therefore, such amount cannot form part of the consideration. Therefore, these three cases do not help learned counsel for the Revenue. On the other hand, Mr. Khaitan had relied on the decisions in CIT v. Plasmac Machine Mfg. Co. Ltd. [1993] 201 ITR 650 of the Bombay High Court and Puspa Perfumery Products (P.) Ltd. v. CIT [1992] 194 ITR 248 of this High Court. In these two cases, the liabilities for payment of income-tax were taken over by the purchaser in respect of which deduction was claimed as revenue expenditure. In both these two cases, the Bombay High Court and the Calcutta High Court had held that these were....
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....the undertaking, were entitled to claim gratuity from the transferor on account of cessation of employment under him. But for their continuation under the assessee, it was not payable till the occurrence of any of the conditions mentioned in section 4(1)(a), (b) and (c) of the Payment of Gratuity Act. The payment of gratuity to these employees till the date of transfer was deferred by reason of the terms of the agreement and the liability accrued till that date and payable by the transferor was taken over by the assessee. Thus, this liability became part of the consideration paid for the assets transferred and is liable to be added to the consideration mentioned in the agreement. It cannot be construed otherwise. This is to be treated as ca....