TaxTMI 
TaxTMI 
2018 (11) TMI 113
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....terminal was a slump sale u/s. 2(42C) of the 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....
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....eed upon by both KSSPL and the respective Secured Lender, as One Time Settlement ("OTS") of the total 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; (....
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....Rs. 60,00,000 (after deducting expenses/dues as per Clause 2.2 above and any payment made directly by KCPL on behalf of KSSPL) to KSSPL in event all the conditions under Clause 3.2.2 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 retentio....
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....agreed between the parties for slump sale of the Kochi terminal undertaking was Rs. 25,50,00,000 and that cannot be altered. The AO accordingly computed LTCL at Rs. 4,19,09,841. 9. Before CIT(A) the Assessee reiterated 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 unde....
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....as valuation of the Kochi Terminal Undertaking by a valuer at Rs. 24,44,00,000/- and the Agreement between the parties was to fix the slum sale consideration at Rs. 25,50,00,000/-. Therefore, the CIT(A) was of the view that nonperformance 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 ....
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....he Learned DR relied on the order of the CIT(A). He would contend that the sale consideration agreed between the parties for the slum sale was Rs. 25.50 crores and that figure should be adopted as full value of consideration received 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 ve....
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....e 2.1 lays down that the Assessee shall pay off all its outstanding dues to Cochin Port Trust (CPT) and obtain "No due certificate" from CPT for smooth operation of Kochi Terminal undertaking by KCPL. A reading of clause 3.2 of the Agreement dated 16.3.2007 in particular clause 3.4 would show that if on or before 31st December, 2007 if the Assessee does not get waiver of MGT from CPT then the Assessee will not be in a position to claim the sum equivalent to the amount due as MGT to CPT limited to a sum of Rs. 5 Crores. Therefore, there is an overriding title in so far as the receipt of Rs. 5 Crores is concerned by the Assessee from KCPL which is part of the sale consideration receivable or accruing on slum sale of Kochi Terminal Undertaking. In such circumstances it would not be correct to say that the sale consideration for the slump sale is a sum of Rs. 25.50 Crores by reading clause 3.1 of the Agreement dated 16.3.2007 in isolation. 16. We however are of the view that the evidence with regard to how much was the due to CPT towards MGT payable by the Assessee and how much was not waived by CPT have not been brought on record by the Assessee. The Assessee parted with the Kochi ....