TaxTMI 
TaxTMI 
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2018 (7) TMI 42
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.... on account of provision for gratuity and Rs. 39. 80 lakhs on account of provision for leave wages transferred to Oriental Containers Ltd. (OCL) on account of transfer of packing divisions. During the re assessment proceedings, the AO observed that the assessee had submitted that due to transfer of packing divisions the liability of gratuity and leave wages transferred to OCL was no longer liability of the assessee company, that same was considered as paid /discharged. Before the AO the assessee stated that claim made by it u/s. 40A(7)and 43B of the Act should be allowed. However he rejected the claim made by the assessee. 3.1. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA) and made elaborate submissions. After considering the available material, he held that the assessee had not made actual payment of the statutory liabilities. Referring to the provisions of section 36(1)(v)of the Act, he held that the assessee had neither actually paid the amount nor had met the conditions stipulated in the said section, that case of the assessee did not fall under section 43B of the Act, that clauses b and f of the section deduction ....
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....res, that there was no cogent discussion in the order as to why the then AO had adopted the figure contrary to the figure furnished by the assessee. Before the AO, the assessee contended that rule 8D was applicable only from the assessment year 2008-09, that the paid-up capital and reserve of the assessee as on 31/03/2007 were 88. 73 crores, that the investments were to the tune of Rs. 2. 01 crores excluding the investment of Rs. 63. 27 crores received on amalgamation/demerger for consideration other than cash. However the AO did not agree with the assessee and held that for the purpose of disallowance u/s. 14A expenditure incurred by the assessee had to be considered, that reference to capital reserve had no meaning, that there was nothing wrong in following the guidelines prescribed in rule 8D of the rules. Accordingly he made disallowance u/s. 14A read with rule 8D of Rs. 51. 98 lakhs. He further observed that in the original assessment proceedings the then AO had made a disallowance of Rs. 18. 28 lakhs, that the difference of Rs. 33. 69 lakhs was to be added to the income of the assessee as per the provisions of rule 8D (2) (ii) of the Rules. 4. 1. During the appellate procee....
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....anically applied the formula without bringing the basic facts i. e. amount of expenditure incurred for earning exempt income. Therefore, we are of the opinion, that matter should be restored back to the file of the AO for fresh adjudication. Here, we would like to mention that a reasonable disallowance can be made if it is found that expenditure was incurred for earning tax free income. The disallowance should not be more than 2% of the exempt income. We order accordingly. Ground no. 3 is partly allowed. 5. Last ground of appeal is about computing and charging to tax Long-Term Capital Gain (LTCG), u/s. 50B of the Act, on transfer of packing division at Rs. 27. 35 crores as against Rs. 2. 95 crores. During the re-assessment proceedings, the AO observed that the assessee had entered into a Business Transfer Agreement (BTA), dated 25/02/2006 with OCL for sale of packing division in lieu of 29, 90, 000shares of Rs. 10/-each, that in the notes to accounts it was mentioned that the value of 29. 90 lakhs lakhs equity shares of OCL, received in consideration instead of its real value, was not ascertained and that there was no sale/loss from sale of packing divisions, that the assessee had....
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....2 crores, as against their face value of Rs. 2. 50 crores, which if sold at a later date might result in long-term capital loss in its books, that if the contention of the assessee was to be accepted it would escape tax in the year of slump sale and on the other hand it had got potential to book huge losses in its books. Vide its letter, dated 26/05/2014, the assessee filed an application to raise additional grounds before the FAA stating that it should be allowed to raise an additional grounds as same had not been raised inadvertently at the time of filing of appeal, that the additional ground raised was in relation to a question of law and did not involve fresh investigation of facts. The FAA forwarded the same to the AO to offer his comments. He afforded an opportunity to the assessee to file objections, if any, as regards to the remarks of the AO communicated through his letter dated 14/08/2014. In its reply, the assessee pointed out that the grounds were inadvertently left out to be raised while filing the grounds of appeal. It relied upon the judgment of the honorable Bombay High Court delivered in the case of Prithvi Brokers And Shareholders Private Ltd (349 ITR 336). Afte....
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....f sale on the transfer of its packaging division, that it involved investigation to new facts, that the case laws relied upon by the assessee were not applicable to the facts of the case, that it was not a simple case of a deduction being otherwise allowable inadvertently not claimed in the return of income. Finally, he held that the additional ground raised by the assessee could not be entertained. He further observed that the contention raised in the additional ground was based on the judgment pronounced by the honorable jurisdictional High Court in the case of Bharat Bijlee Ltd. (365 ITR 258), that the basic contention of the assessee was that its case was not covered by slump sale within the meaning of section 2(42C) of the Act that the assessee argued that it was a case of exchange and not of sale, that it was contended that the transfer of undertaking was not slump sale and that same was not liable to capital gains tax under the provisions of the Act, that the honorable Bombay High Court had, in the case of Bharat Bijalee Ltd had decided the applica -bility of the provisions of section 2(42C) and 50B of the Act, that the honorable court had held that transfer of an undertaki....
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..... 148 were only for the benefit of the revenue, that the proceedings had been reopened by the AO to bring to tax income that had escaped assessment, that it was not open for the assessee to claim a benefit or a deduction. The FAA referred to the cases of Sun Engineering Works Private Ltd. (198 ITR 297), K Sudhakar S Shanbhag (241 ITR 65)and Modi Industries Ltd. (216 ITR 759)and finally held that the transaction entered into by the assessee was a slump sale within the meaning of section 2(42C), that the provisions of section 50B were applicable, there was no infirmity in the order of the view in treating the transaction is a slump sale. 5. 2. Before us, the AR contended that no new facts were required to be investigated about the additional ground raised, that the FAA had to decide the issue whether the transfer, as per the BTA, was for money or for thing/things, that as per the agreement the concideration value was 29. 90 lakhs lakh shares, that the assessee was contesting addition of Rs. 24. 40 crores was made in the reassessment proceedings, that assessee was not challenging the income already offered i. e. Rs. 2. 95 crores in light of the judgment of the Sun Engineering (supra)....
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....of the honorable Bombay High Court delivered in the case of Bharat Bijalee Ltd (supra), that the FAA rejected the additional ground raised by the assessee and held that AO was justified in taxing Rs. 24. 40 crores, that he further held the transaction in question was sale and not an exchange, that he also held that the provisions of section 2(42C) and section 50B were applicable, that as per the FAA the assessee could not raise the issue of sale versus exchange in the re-assessment proceed - ings, that as per the assessee it was a case of exchange and not of slump sale considering the judgment of Bharat Bijalee Ltd (supra). 5. 3. 1. We are of the opinion that in the appeal before us, two basic questions have to be answered. The first issue to be addressed is as to whether the assessee could have raised the 'sale versus exchange'controversy in the reassessment proceedings at appellate stage-especially when it had made no such claim before the AO. Besides, it is also to be decided is as to what was the real nature of the transaction in question. 5. 4. To answer the first question, we would like to deliberate upon the basics of principle of Estopple and some of the cases dealing wit....
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....e, that once a provision is made for the benefit of an individual, such benefit can always be waived as there would be no public interest involved in waiving such right. (390 ITR 385) vi. The Government cannot claim immunity based on the doctrine of promissory estoppel. It is said that in a State, governed by rule of law, no one is above the law. There is, however, no estopple in law against a party in a taxation matter. If a particular income is not taxable under the Act, it cannot be taxed on the basis of estopple or any other equitable doctrine. Equity is out of place in tax law-a particular income is either exigible to tax under the taxing statute or it is not. If it is not, it cannot be subjected to tax. vii. If an assessees, being not very clear about the provisions under which they are exempted, made attempts to refer and rely on or other provisions then the mistake of law in pleading status or claiming a particular advantage under a provision is neither an admission nor will attract the principle of estopple or acquiescence. When law requires something and provides a particular status with particular description, it is to be treated accordingly. A mistaken claim will not ....
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....for the manufacture of synthetic fibre like nylon filament yarn, nylon staple fibre, etc. The company's accounting year used to end on June 30 each year. On 14/06/1971, it applied to the AO for permission to change the previous year so that it might end on December 31. He granted the permission in June, 1971, subject to certain conditions, one of which was that the previous year for the AY. 1972-73 would comprise of a period of 18 months commencing from 1/07/ 1970, and ending on 31/12/1971, to be assessed as one unit. Accordingly, the company filed its return for the AY. 1972-73 on 30/09/1972, for a period of 18 months. The company had started two more units from 15/11/1972 and 19/11/1971 for the production of nylon stable fibre and nylon tyre cord. Separate accounts were maintained for these two units, which accounts were closed on 31/12/1971. The profit and loss from these two units were also included in the return filed. On 16/04/1974, the company filed a revised return. On April 10/04/1975, the AO informed the petitioner that it would not be possible to accept the change of the previous year as granted already, for certain reasons, and allowed time till 14/04/1975, to file ....
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....y order dated 13/03/1987, withdrew the said deduction allowed by the AO, with a direction to redo the assessment in accordance with law after affording an opportunity to the applicant-company. Thererfore, it preferred an appeal before the Tribunal against the revisionary order of the CIT. The Tribunal, however, dismissed the appeal and confirmed the order of the CIT. In the fresh assessment proceeding which followed, the assessee objected to the withdrawal of the weighted deduction in respect of the warehouse charges. It argued that Rule 6AA was inserted with effect from August 1/08/1981, and was there -fore in operation as on the first day of the AY. 1982- 83, that the law in force on the first day of an AY. covers the assessment for the said year, that (iii) Rule 6AA of the Rules authorised grant of weighted deduction u/s. 35(1)(b)(ix) on expenditure incurred on maintenance outside India of a warehouse and it did not specify that such deduction could be allowed only on expenditure incurred after 1/08/1981. The AO in the fresh assessment rejected the contention of the assessee and refused the benefit of weighted deduction on warehouse charges as claimed by it. An appeal was prefer....
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....urged on behalf of the applicant-company that in terms of the judgment of this court reported in Assam Frontier Tea Ltd. (supra), it was entitled to the benefit of such allowance in respect of the warehouse charges u/s. 35B(1)(b)(iv) of the Act. The Tribunal after considering the rival submissions of the parties reversed the order of the FAA and upheld the order of the AO holding that rule 6AA of the Rules, incorporated with effect from 01/08/1981, did not have any retrospective effect and therefore would not apply to expenses incurred on or before 30/06/1981, that the said provision of the Rules would not be applicable in respect of assessments pending as on 01/08/1981. With regard to the contention of the assessee that the judgment of Assam Frontier Tea Ltd. (supra) could also be relied upon for holding that the expenses involved in the case were covered by section 35B(1)(b)(iv) of the Act, the Tribunal was of the opinion that such contention was not acceptable in the absence of any appeal or crossobjection by it. According to the Tribunal, the assessee not having contended before the FAA that the expenses in connection with the warehouse were eligible for weighted deduction u/s....
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....for the applicant-company to take up such a plea in the appeal before the Tribunal more particularly when it had confined its claim to one u/s. 35B(1)(b)(ix) of the Act right from the stage of the proceeding before the Assessing Officer, that it was only after this court had pronounced the judgment reported in Assam Frontier Tea Ltd. 's case (224 ITR 398)that the assessee thought it fit to take a chance by raising a plea claiming benefit u/s. 35B(1)(b)(ix) of the Act before the Tribunal, that keeping in view the subject-matter of the appeal it was clearly not permissible in law. Drawing the attention of this court to section 253(4) of the Act which provides for filing of objections by the respondent in an appeal before the Tribunal as well as rules 11 and 27 of the Income-tax (Appellate Tribunal) Rules, 1963, he justified the action of the Tribunal. He further urged that in the case in hand the assessee had neither preferred any appeal against the order of the FAA nor had filed any cross-objection though it was open for it to do so, that in terms of rule 11 of the Appellate Tribunal Rules, even the assessee could not urge or be heard in support of any ground not set forth in the me....
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....35B and rule 6AA may claim the benefit of weighted deduction under more than one of the heads of expenditure envisaged under the said provision of law. In other words, the activities contemplated in the different sub-clauses of section 35B(1)(b) and rule 6AA are not necessarily mutually exclusive of each other. The relevant consideration in a given case would however be as to whether there are evidentiary facts in support of the claim for weighted deduction under different heads of expenditure as set out u/s. 35B as well as rule 6AA. As a corollary, therefore, if the assessee claims the benefit of weighted deduction under any of the heads of expenditure contemplated u/s. 35B he is not debarred in a particular case to claim similar benefit under a different head of expenditure as well provided the facts and circumstances justify such a claim. Before we proceed further, it is advisable to turn to the authorities cited by learned counsel for the parties. This court in the decision reported in CIT v. Assam Frontier Tea Ltd. [1997] 224 ITR 398 was considering the issue as to whether the Tribunal was justified in holding that the assessee was entitled to weighted deduction u/s. 35B(1)....
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....rising from the facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. It observed that the power of the Tribunal in dealing with the appeals is expressed in widest possible terms and in the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. It further observed that the purpose of the assessment proceeding before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law and so long as the relevant facts are on record in respect of that item, and if as a result of a judicial decision given when the appeal is pending before the Tribunal, a non-taxable item is taxed or a permissible deduction is denied, there is no reason why an assessee should be prevented from raising that question before the Tribunal for the first time. In that case, the apex court remanded the proceeding to the Tribunal for consideration of the new grounds raised by the assessee on the m....
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....uation an assessee may be entitled to the benefit of weighted deduction under more than one sub-clause of section 35B(1)(b) of the Act. It would, however, depend on the primary evidentiary facts available in a given case. It therefore follows that only because the applicant-company had objected to the withdrawal of the benefit of weighted deduction by relying on sub-clause (ix) of section 35B(1)(b) of the Act it could not be decisively held, without reference to the entire gamut of facts on record, that the applicant-company under all circumstances could be precluded from raising a plea that it was entitled to the benefit of such deduction u/s. 35B(1)(b)(iv) of the Act as well. Whether or not the applicant-company can be permitted to raise that plea only on the ground that it had not preferred any appeal or cross-objection against the order of the Commissioner of Income-tax (Appeals) is the question which now engages the attention of this court. It need not be overemphasised that the Appellate Tribunal Rules framed by the Tribunal in exercise of its power u/s. 255(5) of the Act are wholly for the purpose of regulating its own procedure and the procedure of the Benches of the Tri....
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....t the observations of the Madras High Court and the Calcutta High Court made in the decisions relied upon by counsel for the Revenue but we are, in the facts and circumstances of the case, persuaded to accept the observations of the apex court made in this regard in the case of National Thermal Power Co. Ltd. [1998] 229 ITR 383. We are therefore of the view that it is permissible on the part of the Tribunal to entertain a ground beyond those incorporated in the memorandum of appeal though the party urging the said ground had neither appealed before it nor had filed a cross-objection in the appeal filed by the other party. We must however hasten to add that in order to enable either the assessee or the Department to urge a ground in the appeal filed by the other side, the relevant facts on which such ground is to be founded should be available on record. In the absence of such primary facts, in our opinion, neither the assessee nor the Department can be permitted to urge any ground other than those which are incorporated in the memorandum of appeal filed by the other party. In other words, if the assessee or the Department, without filing any appeal or a cross-objection seeks to urg....
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....or the law, can be agitated in the further proceedings before the higher forum or not and this court in the said decision, observed thus (page 30 of 113 ITR) : "The legal position about waiver of such a mandatory provision created in the wider public interest to operate as fetter on the juris diction of the authority is well settled that there could never be waiver, for the simple reason that in such cases jurisdiction could not be conferred on the authority by mere consent, but only on condi tions precedent for the exercise of jurisdiction being fulfilled. If the jurisdiction cannot be conferred by consent, there would be no ques tion of waiver, acquiescence or estopple or the bar of res judicata being attracted because the order in such cases would lack inherent jurisdiction unless the conditions precedent are fulfilled and it would be a void order or a nullity. The settled distinction between invalidity and nullity is now well brought out in the decision in Dhirendra Nath Gorai v. Sudhir Chandra Ghosh, AIR 1964 SC 1300, 1304, where their Lordships had gone into this material question as to whether the act in breach of the mandatory provision is per force a nullity. .... . E....
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....to why the receipts be not assessed u/s. 44BB of the Act. The assessee, in its reply, contended that the company has rendered, the service on cost-to-cost basis to EOGIL in terms of the production sharing contract entered into by EOGIL with Indian concerns duly approved by the Government of India and payments received through debit notes are only reimbursement of actual expenses. It was also claimed that the income of the assessee-company is not taxable in India in view of Article7(3)of the Double Taxation Avoid - ance Agreement(DTAA)with the USA. However, the AO did not agree with it. Matter travelled up to the Tribunal and it allowed the appeal of the assessee. While challenging the orders of the Tribunal, the counsel for the Revenue contended before the Hon'ble Court that the provisions of section 42 of the Act have no application in the case of assessees, that the AO had rightly held that the assessee had itself offered the gross contractual revenue at deemed profit rate of 10% u/s. section 44BB for the AY. 1997-98 and the income was assessed accordingly. that the income for the AY. 1998-99 was assessed under the provisions of section 44BB especially because profit element was....
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....ight otherwise admissible to the assessee in law. The chargeability is not dependent on the admission of or waiver by the assessee. Chargeability is dependent on the charging section, which needs to be strictly construed. " 5. 5. f. In the case of Ajit Chintaman Karve (311 ITR-AT-66)it was found that when the incometax authorities carried out survey operations, the assessee declared Rs. 18 lakhs in respect of a project. The assessee included this amount in the original return, but later in the revised return he withdrew this amount. The AO computed the income as declared in the original return. The FAA held that the revised return was an afterthought and sustained the addition made by the AO. The relevant portion of the order of the Tribunal reads as under: 11. The learned authorised representative has also discussed the law of estopple and argued that an admission which is contrary on law does not create any estopple against law. He has cited the Income-tax Appellate Tribunal " B" Bench, Pune, decision in the case of Madan Developer, I. T. A. No. 329/Pn/03, the assessment year 1999-2000, the order dated March 24, 2006 and the relevant portion from paragraph 12 is reproduced be....
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....f getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with the assessees on whom it is imposed by law, officers should- (a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other ; (b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs". The learned authorised representative has placed one more evidence on record, i. e., an assessment for the assessment year 2003-04 passed u/s. 143(3) dated February 28, 2006, wherein the returned loss of Rs. 63, 85, 038 was accepted by the Revenue Department. For two reasons, he has cited this assessment order, first, there was recession in the real estate business in the subsequent years, hence, there was no likelihood expected hypothetical income in future, hence, erroneously suggested to the assessee to make the alleged offer and, second, the accounting effect of enhanced work-in-progress further increases the loss, hence, no evasion of tax. We find force, in this argument and e....
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....As held by Hon'ble Delhi High Court in the case of Bharat General Reinsurance Co. Ltd. (supra), there is no estopple in the IT Act in raising a claim in accordance with law and the assessee can even resile from a position wrongly taken while filing the return. Explaining further, Hon'ble Delhi High Court also observed that merely because the assessee wrongly included the income in its return for a particular year, it cannot confer jurisdiction on the Department to tax that income in that year even though legally such income did not pertain to that year. In the case of Indo Java & Co. (supra), it was held by Delhi Special Bench of Tribunal that the Tribunal has the power to go into every point which has a bearing on the determination of the chargeable income and to permit the parties to take such points. It was also held that if the assessee is able to satisfy the Tribunal that the earlier admission made by him was the result of a mistake of law or fact or had been made due to ignorance or other factors, it might not come in his way of raising such claim. " Finally, the appeals were decided in favour of the assessee by the Tribunal on jurisdictional issue as well on merits....
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....AO. s to assist and aid the assessee in the matter of taxation. They are supposed to advise the assessee and guide them and not to take advantage of any error or mistake committed by the assessee or of their ignorance. The function of the AO is to administer the statute with solicitude for public exchequer with an in-built idea of fairness to taxpayers. 5. 7. In Nirmala L. Mehta (supra)the jurisdictional High Court has held that there cannot be any estopple against the statute. Article 265 of the Constitution of India in unmistakable terms provides that no tax shall be levied or collected except by authority of law. Acquiescence cannot take away from a party the relief that he is entitled to where the tax is levied or collected without authority of law. 5. 7. 1. In Pt. Sheo Nath Prasad Sharma (66 ITR 647)the Allahabad High Court, while determining the question, whether the assessee can, in revision question the taxability of particular amounts offered by him as income for assessment, observed as under: "It seems to me, however, that the order of the Commissioner rejecting the previous applications, on the mere ground that the petitioner had shown the income in his return, is er....
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....s due are collected. Considering the above cumulatively, it can safely be said that in the normal course, a party who makes a concession cannot be allowed to resile from it in the appellate court, but yet, under certain exceptional circumstances, when such concessions came to be made on a wrong apprecia - tion of law, the appellate court can permit in appropriate cases to resile from a concession on such exceptional grounds. The established legal position, however, remains that there can never be a concession made at the instance of counsel on a wrong appreciation of law on the principle that there can never be an estopple against the statute. 5. 8. Now, coming back to the fact of the case, it is clear that during the appellate proceedings, the assessee relying upon the judgment of Bharat Bijlee Ltd(supra)raised an additional ground about taxability of Rs. 24. 40 crores. As far as offering of income of Rs. 2. 95 crores is concerned, there is no doubt that the issue had attained finality, as the assessee could not challenge the taxability of said amount. But, the disputed amount of Rs. 24. 40 crores rests on different footings. The AO added the said amount during re-assessment pro....
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....of exchange and not of sale. The agreement clearly states that the assessee would be getting 29. 9 lakhs shares of OCL. There is no doubt that the BTA talks of seller and purchaser at so many places, but the terms used in any agreement has to be seen in the context. It is said that entries in books of accounts or agreements are not conclusive-what has to be seen is the real nature of the transaction. We find that there is no mention of any money, in the BTA, to be received or paid by the parties concerned. The BAT speaks of 'issue of 29, 90, 000 fully paid up shares'. Therefore, we have no hesitation in holding that shares cannot be termed cash and that until and unless money is paid a transaction cannot be termed a sale. In commercial and business worlds, it is a well recognised principle that one of the mode to transfer of assets is exchange and it is different from sale. In other words, both the terms cannot be equated. Section 2(42C)and section 50B talk of sale consideration. As the assessee had received shares and not money in lieu of the transferred packaging divisons, so, the disputed transaction cannot be termed a sale or slump sale. We also hold that it was legally justifi....
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....on "Exchange" cannot be arrived at since what has been exchanged is the entire undertaking comprising of the entire division of the Planet M retail. Consequently, since the computation provisions relating to capital gain are incapable of being applied, following the ratio of the decision of the Hon'ble Supreme Court in B. C. Srinivasa Shetty (128 ITR 294), the charging provisions of capital gains are not attracted. The said ratio has also been followed by the Hon'ble Mumbai Tribunal in Avaya Global Connect Ltd. ITA No. 832/Mum/07. " 10. During the assessment proceeding, the AO called for the detail working of income of Rs. 84, 26, 04, 286/- which was replied by the assessee by letter dated 27. 10. 10 submitting that the transaction of hiving off the business of Planet M Division was an exchange of the said division and not sale as contemplated under the provision of section 50B of the Act and as such the provisions of the said section are not applicable. The assessee also relied on the decision of Hon'ble Supreme Court in the case of B. C. Srinivasan Shetty 128 ITR 294 in defense of his argument and submitted that since the cost of acquisition of the said undertaking coul....
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....ied on number of decisions in defense of his arguments namely 1. CIT vs. Motor & General Stores (P) Ltd. 66 ITR 692 (SC) 2. CIT vs. Bharat Bijlee Ltd. 365 ITR 258 Bombay High Court 3. CIT vs. B. C. Srinivasa Setty (1981) 128 ITR 294 4. PNB Finance Ltd. vs. CIT (307 ITR 75) 14. Finally the Ld. A. R. submitted that since undertaking has been transferred under business transfer agreement the cost thereof is not possible to be arrived at or ascertained and therefore the charging of provisions of section 45 fail and consequently the capital gain of Rs. 84, 26, 04, 286/- could not be brought to tax. Therefore, the Ld. A. R. prayed for reversal of order of Ld. CIT(A) and issuing necessary direction to the AO to exclude the said amount from the computation of income. 15. The Ld. D. R., on the other hand, vehemently submitted that the amount of Rs. 84, 26, 04, 286/- has already been taxed as there has been transfer by hiving off Planet M. division consisting of leisure and retail products, on a going concern basis. The Ld. D. R. relied upon the orders of the authorities below. The Ld. D. R. relied on the decision of CIT vs. Artex Manufacturing Co. (1997) 227 ITR 260 (SC) and C....
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....d surplus was not chargeable to tax under the provision of the Income Tax Act. According to the assessee the transaction of hiving off a business of Planet M. division was not a sale but an exchange and consequently does not fall within the meaning of definition of slump sale under section 2(42C) of the Act. According to the assessee the said transfer of division on a going concern basis being a slump exchange, therefore no value could be arrived and ascribed to any assets that were transferred as going concern in a consolidated manner. Further, the contentions of the assessee are that the computation provisions qua capital gain are incapable of being applied and therefore the charging of provisions of capital gain cannot be applied. For the purpose of better understanding of provision 2(42C) is extracted below: "(42C) "slump sale"72 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. Explanation 1. -For the purposes of this clause, "undertaking" shall have the meaning assigned to it in Explanation 1 to clause (19AA). Explanation 2. -For the rem....
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....visions of section 50B were inapplicable to the transaction. In the case of CIT v. B. C. Srinivasa Setty reported in [1981] 128 ITR 294, the Hon'ble Supreme Court held that section 45 charges the profits or gains arising from the transfer of a capital asset to income-tax. In other words, it charges surplus which arises on the transfer of a capital asset in terms of appreciation of capital value of that asset. In the said judgment, the Hon'ble Supreme Court held that the "asset" must be one which falls within the contemplation of section 45. It is further held that the charging section and the computation provisions together constitute an integrated code and when in a case the computation provisions 21 cannot apply, such a case would not fall within section 45. In the present case, the banking undertaking, inter alia, included intangible assets like, goodwill, tenancy rights, man power and value of banking licence. On the facts, we find that item-wise earmarking was not possible. On the facts, we find that the compensation (sale consideration) of Rs. 10. 20 crores was not allocable item-wise as was the case in Artex Manufacturing Co. [1997] 227 ITR 260. For the aforesaid reasons, we....
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....ot applicable to the facts of the cases. 5. 11. Before deciding the issue of reopening, we would like to deal with the cases relied upon by the DR. In the case of Nagpur Electric Light and power company(supra), the issue before the Hon'ble Court was whether there was any sale within the meaning of section 41(2). In the matter of Anand Electric Co. Ltd. (supra)the main question raised was as whether the taking over of company was slump sale or sale of individual assets of the undertakings. In Wockhardt Hospital Limited(supra), the Hon'ble Court dealt with the issue of adjustment of negative net worth in slump sale cases. Thus, none of the cases deal with the issue we are dealing i. e. as to whether it is a case of exchange or of sale considering the peculiar facts of the matter. Considering the above, ground no. 4 is decided in favour of the assessee. We want to make it clear that the matter has been adjudicated considering the peculiar facts and circumstances of the case for the year under appeal. So, it should not be treated as a precedent. 6. Now, we would like to adjudicate the issue of reopening of the assessment. Referring to the reasons recorrded by the AO for reopening the....