TaxTMI 
TaxTMI 
2019 (5) TMI 1369
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....d 99.98% of equity capital was held by holding company viz. M/s.Gujarat Fluorochemicals Ltd.(GFL). According to the assessee, it has acquired wind energy division of GFL during the accounting year relevant to this assessment year. It claimed depreciation. However, its claim was rejected by the AO on the ground that transaction was materialized during the accounting period relevant to the Asstt.Year 2013-14. Dissatisfied with the action of the AO, the assessee carried the matter in appeal before the ld.CIT(A). The ld.CIT(A) upheld the action of the AO by following directions of DRP given in the case of vendor i.e. GFL. The discussion made by the ld.CIT(A) reads as under: "5.2. During the course of the appellate proceedings, the appellant's AR has made detailed submissions. Thereafter, he has filed a copy of the directions dated 30.12.2010 issued u/s 144C (5) of the IT Act, 1961 by the Dispute Resolution Panel of Mumbai, in respect of the draft assessment order for the AY 2012-13 in the case of M/s. GFL Ltd. 5.2.1. A perusal of these directions shows that the DRP has made a detailed discussion regarding the alleged sale of wind energy business by GFL to IRL and ....
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.... > The letter to banks intimating the slum sale transactions and seeking approval to transfer of loan liability was written on 21.04.2012 by GFL. > The revised agreement (novation agreement) between the bank, GFL &, IRL transferring the bank loan was entered on 17.10.2012. > The RBI approval to transfer foreign currency loan was obtained on 18.03,2013. > The letter written by M/s Ernst &, Young (F) Ltd mentions that, "it is intended that the entire 230 MW shall be transferred from GFL to IRL as slump sale in F. Y. 2012-13". > The application for issue of REC w.r.t. power generated in March, 2012 was applied for by GFL on 20.05.2012. GFL sold 2800 REC i.e.1000 REC on 25.04.2012 and 1800 REC on for Rs. 65.24 lakhs. > The ownership of free hold land on which windmills are erected was transferred from GFL to IRL m the F.Y. 2012-13. For example, sale deed for land pertaining to Gudhe Panchgani, Maharashtra project was registered on January 2013 and sale deed for land pertaining to hoothukudi, Tamil Nadu project was registered on October 2012. > The regulatory permission to transfer the registration of wind energy projects in Rajasth....
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....ppellate forum. 63. With regard to year of taxability, the AO has narrated various circumstances and on cumulative settings of those circumstances, he harboured a belief that transaction has taken in the assessment year 2013-14 and not in assessment year 2012-13. During the course of hearing, we have confronted the assessee with regard to those circumstances as summarised by the ld.DRP, and on our direction, the assessee has compiled the details in tabular form showing reasons considered by the AO as well as DRP for treating the transactions taken place in the accounting year relevant to the assessment year 2013-14 vis-à-vis explanation given by the assessee as to why this transaction should be taken in the assessment year 2013-14. Such details have been filed in tabular form. It reads as under: DRP 'Order extract Assesse's submission and Argument Reference 1 The slump sale agreement has been drawn on 30.03.2012 at the head office and the signatories are Sh. Vivek Jam, Managing Director for GFL and Sh. Deepak Asher, Director for IRL. Both these persons as mentioned above are the main persons behind the Inox group This is factually correct....
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....y cost of the transferred employees. Similarly, credit note is in respect of allocation of sales revenue of wind energy business for one day i.e. 31/03/2012 i.e. after the business was transferred to IRL and hence the income belongs to IRL. This being a broken period and income and expenses pertaining to a period after transfer belong to transferee as per clause 7 of BTA, such debit and credit notes were raised to account income and expenditure correctly. This cannot be a basis for not acceptance of the date of transfer contractually agreed, which is 30/03/2012. On the contrary, this actually confirms that the transfer took place on 30/03/2012 since income and expenditure after that date belonged to IRL and was transferred by GFL to IRL, accordingly. The transferred employees continued to run the business. Page no 56 -57 from DRP Order 4 The payment of Rs. 1 crore towards sale has been credited in the bank account of GFL on 03.04.2012. As stated above the consideration of Rs. 1 crore was received by cheque dated 30.03.2012 and was also deposited in bank on the same date as per the pay-in-slip duly acknowledge by bank and cheque was cleared on 03.04.2012. Thus the consid....
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....ver be a single date of transfer since different permissions will be received on different dates, and it will be impossible to determine a date of transferfor the purpose of computing capital gains. Para 6 (e) and (f) of submission dated 19.10.2016 Para 11 of the Submission dated 19.10.2019 6 The intimation dated 30.03.2012 to the Stock Exchange Mumbai was received by Bombay Stock Exchange Ltd, Mumbai on 12.04.2012 and by National Stock Exchange Ltd. Mumbai on 02.04.2012. It will be observe that this letter and intimation are very important documents and intimation to stock exchanges under SEBI act and rule and are statutory intimations. Giving wrong information can lead to serious repercussion involving penalty and even delisting on the stock exchange. The letters are dated 30-03-2012 and submitted by email and fax on 30 March, 2012, and in hard copy on 2nd April, 2012 itself and not on 12th April, 2012 as observed by AO and clearly state that the wind energy business is transferred on 30- 03-2012. Further, the stock exchanges have displayed on their website on 30 March itself about the transfer having taken place, and a copy of the said web-page is on record. We ha....
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....mphasis provided). Thus, this clause makes it clear that the approval of ICICI Bank is required only in the case of default. In the instant case, there was no default and hence no approval was required. Further, in the sanction letters in respect of other two loans (both dated December 29, 2011) specific reference is made to transfer of assets to the GFLs subsidiary IRL as a part of re-organization. Further, in the loan agreements dated 25.1.2012 and 29.2.2012 for these two loans, there is a specific and clear permission to transfer the assets to Inox Renewables Limited as a part of restructuring process. From the above, it is clear that at the time of sanction of these two loans itself, ICICI Bank had permitted the said transfer of assets. Hence, there was no need for seeking a separate and prior approval. In accordance with the obligations assumed by GFL (as the Seller) under the BTA, after Closing, GFL made an application to ICICI Bank on 21st April, 2012 requesting the bank to transfer of above Transferred Facilities to IRL. GFL's letter to ICICI Bank stated that that pursuant to Board and shareholder resolutions, GFL has transferred its wind energy business on 30th....
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...., Reserve bank of India, Bandra-kurla Complex, and Mumbai-400051. In respect of LRN 201202101, your constituent may submit a revised form 83 for reduction in the amount of ECB from USD 40 million to USD 16.5 million and Inox Renewables Limited (IRL) may submit a new form 83 for availing ECB of USD 23.5 million from ICIC Bank Singapore subject to AD to ensure that the ECB continues to adhere the extent ECB guidelines. This communication is issued from the foreign exchange angle under the provisions of FEMA and should not be construed to convey the approval by any other statutory authority of Government under any other laws / regulations." On 18thMarch, 2013, the RBI conveyed to ICICI Bank Limited that pursuant to the request made by ICICI Bank Limited for transfer of the Facilities to IRL, the RBI had made changes to its records and allotted new loan registration numbers ("LRN") in relation to the same. The aforesaid letter of the RBI ("RBI Letter") is enclosed herewith. Thus no document or Bank communication suggests that prior permission was required for this transaction. RBI and ICICI bank have not objected at all for the transfer of loan and also have not raised any ....
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....efore the transaction actually happens. But the said discussions or consultations are not indicative of the dates of legally enforceable contract date and agreements. It will be observed that the process for transfer of wind energy business was even started much before earlier in 2011, and got completed on 30/03/2012. If this letter would have been dated after the actual date of BTA, then it would have been a different situation. The intention of doing slump sale transfer in a particular year has no relevance after the execution and action on BTA for slump sale. The date of transfer has to be ascertained on the basis of BTA and actual conduct of both the parties and not on the basis of the intentions stated in any other documents. . The AO is drawing conclusion that this letter suggest that this transaction was intended to be done in FY 2012-13. The AO is also observing that except BTA the assessee has not furnished any documentary evidence. As stated above the assessee has submitted all the document pertaining to the transaction like BTA, possession letter, copy of cheque of consideration, pay in slip for deposited in the bank, letters dated 30-03-12 intimating the transaction ....
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.... no 57-58 from DRP Order. 11 The regulatory permission to transfer the registration of wind energy projects in Rajasthan was obtained from Rajasthan Renewable Energy Corporation on 12.09.2012 Permission to transfer wind energy projects - From the chart, it will be observed that there was no such requirement in case of projects in Maharashtra and Tamil Nadu. In case of Rajasthan projects also, the request letters dated 9th February, 2011 and 24th April, 2012 were submitted. They have issued letter dated 12th September, 2012. The request for transfer of project registration was filed on 9th February, 2011. As per the letter dated 12th September, 2012 from Rajasthan Renewable Energy Corporation Limited, they have confirmed the BTA and accepted the request for transfer of ownership from GFL to IRL and agreement referred is the same BTA agreement. In any case, these are post-closing activities as per BTA. Page no 58 from DRP Order. 12 Application to transfer the PPA was filed in F.Y. 2012-13 and the mandatory approval for the transfer of PPA from Rajasthan projects was obtained on 08.012013 from Jodhpur Discom, RDPPC and for Maharashtra project on 12.12.2012. From t....
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.... happened on different dates and not on the same date. In view of this, they were made as a part of post-closing activities and not preconditions of transfers. It will also be appreciated that in such a case of slump sale, it is always a running business and hence position of various assets and liabilities continue to change on day-to-day basis and in such case, unless single date is agreed for the transfer of the undertaking, it will not be possible to transfer business undertaking under slump sale basis. Therefore, there has to be a single contractually agreed date on which slump sale lakes place and procedural aspects are taken care thereafter. But that does not affect the date of transfer. This is the exact position in our case. Contractually as per the BTA and possession letter dated 30/03/2012, the business got transferred on 30/03/2012 only and hence there cannot be any other date of transfer of the business dependent on the procedural permissions mentioned above and fair value of assets etc." 64. Expression "transfer" has been defined in section 2(47) of the Income Tax Act. For the purpose of controversy in hand, we would like to make reference to sub-clauses (i) t....
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....owledge of the conditions of business and business, assets, employees etc. There was no requirement as such physical verification of these assets. The representatives of both the assessee have put signatures and executed agreement. Therefore, there could not be any justification for doubting the genuineness of the agreement at the end of the AO by making reference that assets were spread over throughout the country and could not be physically verified. Similarly, other objections made by the AO is that intimation given to Stock Exchange, Mumbai was received on 12.4.2012 and by National Stock Exchange, Mumbai on 2.4.2012. Habouring this opinion at the end of DRP as well as the AO has been refuted by the assessee in its explanation. The assessee pointed out that intended transfer was intimated to the stock exchange well in advance according to the guidelines of the SEBI Act. BSE website had displayed this intended transfer on 30.3.2012 itself. 66. The next objection assigned by the AO against non-completion of transfer is that the prior approval from the banks from whom loans were taken by the vendor have not been taken. To this assessee has given a detailed explana....
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....with such transfer and the cost of acquisition of the asset and the cost of any improvement thereto. Main thrust of section 48 of the Act, therefore, is the full value of consideration received or accruing as a result of the transfer of the capital asset as reduced by expenditure mentioned therein and the cost of acquisition of the asset. Section 55 A, as we have noticed, refers to the reference to DVO for ascertaining the fair market value of a capital asset. Such ascertainment of fair market value with the aid of the DVO's report would have no relevance for the purpose of determining full value of consideration received or accruing as a result of the transfer of the capital asset for the purposes of section 48 of the Act. 12. In that view of the matter, the reference to DVO for ascertaining the fair market value of the capital asset as on the date of the sale in the present case would be wholly redundant." 67. We have made reference to the decision of Hon'ble Bombay high Court explaining the meaning of section 50D and conditions in which it could be applied. Thus, conditions are missing in the present case. Therefore, neither under section 50B nor section 50....