TaxTMI 
TaxTMI 
TaxTMI 
2018 (11) TMI 113
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....e Income Tax Act, 1961 (Act). 'slump sale' is nothing but transfer of a whole or part of business concern as a going concern; lock, stock and barrel. As per section 2(42C) of Income -tax Act 1961, '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. 'Undertaking' has the same meaning as in Explanation 1 to section 2(19AA) defining 'demerger'. As per Explanation 1 to section 2(19AA), 'undertaking' shall include any part of an undertaking or a unit or division of an undertaking or a business activity taken as a whole, but does not include individual assets or liabilities or any combination thereof not constituting a business activity. 3. Section 50B of the Income-tax Act, 1961 provides the mechanism for computation of capital gains arising on slump sale: 1. Capital gains arising on transfer of an undertaking are deemed to be long-term capital gains. However, if the undertaking is 'owned and held' for not more than 36 months immediately before the date of transfer, gains shall be treated as short-term capital gains. In the present case th....
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....l outstanding liability of the Kochi Terminal Undertaking of KSSPL with respect to each Secured Lender, in accordance with the terms of OTS. Similarly, KCPL shall also discharge the unsecured liability of Kochi Terminal Undertaking which is payable to Aegis Logistics Limited, of an amount not exceeding Rs. 75,00,000. In respect of these direct payments, KCPL shall stand discharged of its obligations to pay the Purchase Consideration of Rs. 19,90,00,000 to KSSPL. 3.2.2 Out of the total consideration of 25,50,00,000, KCPL shall withhold / retain a sum of Rs. 5,60,00,000 or balance Purchase Consideration, whichever is higher, payable to KSSPL, within fifteen days after such time all the following conditions are satisfactorily fulfilled and accomplished: (i) KCPL receives from Cochin Port Trust an unconditional waiver of Minimum Guarantee Throughput condition without any financial obligation on KCPL; (ii) upon KSSPL ensuring emptying and cleaning up of the storage tanks containing molasses to the full satisfaction of the third party Quality Surveyor; (iii) KSSPL paying off all its past outstanding dues as well as the dues, if any; demanded by Cochin Port Trust or any other ....
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.....2.2 except Clause 3.2.2(i) has been satisfactorily fulfilled or accomplished by KSSPL. 3.3 KSSPL shall be deemed to have waived its right to recover the balance amount of debt from KCPL to the extent of the amount withheld by KCPL and KCPL shall automatically stand exonerated and discharged for ever from its liability for the said amount withheld in pursuance of this agreement in the event, KSSPL does not comply with any of the conditions stated in clause 3.2.2 on or before 3r December or the application of KCPL for waiver of MGT is rejected by CPT whichever earlier; 3.4 Any outstanding liability or any other claim of Kochi Terminal Undertaking Yards MGT payable, if any, to Cochin Port Trust as well as any payment for the waiver of the MGT Clause by Cochin Port Trust and/or any one time premium payable towards the waiver of the MGT shall be borne and paid by KSSPL alone. In the alternative, if KCPL is required to pay such amount to Cochin Port Trust, it shall be deducted from the retention amount withheld by KCPL pursuant to clause 3.2 above and KCPL shall claim from KSSPL any amount paid by KCPL to Cochin Port Trust on account of MGT or premium for waiver of MGT Clause limi....
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....erated submission that the sale consideration agreed under the agreement dated 16.3.2007 was provisional subject to performance of certain conditions and since the condition of getting waiver from Cochin Port Trust was not complied with by the Assessee KCPL was obliged to pay only Rs. 20,50,00,000 and not Rs. 25,50,00,000. The Assessee in support of its contention that Cochin Port Trust refused to waive accumulated MGT upto date of transfer by it to KCPL filed a letter dated 20.4.2010 by Cochin Port Trust whereby Cochin Port Trust refused request of KCPL to waive accumulated MGT upto date of transfer by Assessee to KSCL. In the course of hearing before CIT(A) on 17.3.2017, the Assessee was called upon by the CIT(A) to produce a confirmation from KCPL that they have not paid and are not obliged to pay the balance sum of Rs. 5 Crores to the Assessee. In reply to the same the Assessee filed submission dated 23.3.2017 pointing out that the transfer of the Kochi terminal undertaking by the Assessee to KCPL which was its subsidiary was ultimately to transfer the said undertaking to M/s. Aegis Logistics Ltd. The Assessee expressed its inability to produce confirmation from M/s. Aegis Logi....
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....rformance of the conditions in the agreement would result in reduction of sale consideration receivable or accruing to the Assessee. The CIT(A) also held that the non-filing of confirmation by the Assessee from KCPL or M/s. Aegis Logistics Ltd., showed that the actual sale consideration for the slump sale was only Rs. 25.50 Crores and not Rs. 20.50 Crores. He also referred to the fact that there was nothing brought on record by the Assessee to show that there was rejection of request for waiver of MGT made by the Assessee by Cochin Port Trust. He therefore confirmed the order of the AO. 11. Aggrieved by the order of the CIT(A), the Assessee is in appeal before the Tribunal. We have heard the rival submissions. The learned counsel for the Assessee reiterated submissions made before the CIT(A). It was further submitted by him that M/s. Aegis Logistics Ltd., who is now the owner of the Kochi Terminal undertaking which was subject matter of slum sale, would be in a position to explain the correct facts. Since the Assessee does not have power to compel them to divulge information on the position with regard to Assessee's liability towards MGT, the AO who has powers u/s.133(6) of the Ac....
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.... or accruing as a result of transfer. In this regard he also pointed out that as per the valuation report of the registered valuer the value of the undertaking was Rs. 24.40 Crores and therefore the Assessee cannot plead that the sale consideration on slum sale payable was only Rs. 20.50 crores. We may at this stage repel this argument by pointing out the provisions of Sec.50B of the Act, read with Sec.48 of the Act, does not contemplate adopting valuation of the registered valuer and therefore the methodology of computation prescribed by the Act of capital gain on slum sale cannot be altered. His next argument was that the agreement dated 16.2.2010 between the Assessee KCPL and M/s. Aegis Logistics Ltd., is later in point of time to the order of the AO and though this was filed before CIT(A) and relied upon before CIT(A), the same should be ignored as it could be an afterthought to fill in the gaps in the case of the Assessee. 13. We have given a very careful consideration to the rival submissions. As we have already observed, Section 50B of the Income-tax Act, 1961 provides the mechanism for computation of capital gains arising on slump sale. Capital gains arising on slump sale ....