TaxTMI 
TaxTMI 
2019 (8) TMI 659
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....he transfer of the assessee of its fertilizer unit and fibre unit was a slump sale? (ii) If the answer to question No.(i) is in the affirmative, whether such sale was not assessable to capital gains under the Income Tax Act, 1961? A short point of some legal importance is involved in this appeal. This sub-section of the said Act defines slump sale and is set out below:- "2.(42C). "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. "Explanation 1.- For the purposes of this clause, "undertaking" shall have the meaning assigned to it in Explanation 1 to clause (19AA). Explanation 2.-....
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....bmits that this amendment of the law has only codified the meaning of slump sale which was understood in the trade and interpreted by the courts of our country. During the financial year in question, 1993-1994 the respondent assessee sold its fertilizer unit for Rs. 70 crores and a fibre unit for Rs. 15 crores. In its return of income, it claimed long term capital loss under Section 48 of the Income Tax Act, 1961. The assessing officer thought otherwise. He treated the assets as depreciable and thought that Section 50 of the said Act as it stood at that point of time was applicable. He treated the transaction as a short term capital gain amounting to Rs. 8,13,92,981/- under that section. On appeal, the CIT (Appeals) took an extreme view ....
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....ut assets were bank balance and the outstanding insurance claim. It opined: "Merely because these two assets have been excluded from the assets transferred, it cannot be said that it is not the transfer of the undertaking as a going concern Land, building, plant and machinery, raw material, industrial licences, technology, trade mark have been transferred to CCFC. The employees of the assess working in fertilizer business have also been taken over by the CCFC. All current liabilities relating to fertilizer business has been taken over by CCFC. The sale consideration of the undertaking as a whole has been fixed at a "slump price" of Rs. 70.00 Crores without specifying any specific value to any asset. The assets transferred includes tangibl....
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....me Court ruled that if the value of the individual assets could not be determined, then the value of all the assets together should be taken. In that case, the profit or gain made would be taxed as capital gain. In other cases, it would be taxed as business income. The entire matter was referred to the tribunal for a decision. In that decision the Income Tax Act, 1922 was under consideration. Mr. Bajoria, learned Senior Advocate appearing for the respondent assessee cited PNB Finance Ltd. Vs. Commissioner of Income-Tax reported in (2008) 307 ITR 75(SC). In that case the assessment year 1970-71 was involved. The case related to the nationalization of the Punjab National Bank Ltd. Punjab Finance Ltd., on nationalization of the bank in 1969 ....
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....ement of transfer was a genuine one or an eyewash. The second issue was whether the transaction in question was a slump sale. The Revenue contended that it was not so because the entire undertaking was not sold. Some assets like cash in the bank and the insurance claim had been left out. The third issue was if it was determined that the transaction was indeed a slump sale, whether the gain or profit would be computed as a short term capital gain or a long term capital gain or something else. The first issue was purely a question of fact. The tribunal analysed the terms of the transfer agreement in detail and came to the conclusion that it was a bona fide agreement of transfer for a consideration. We are not minded to interfere wit....
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....e assets within the meaning of Section 50 of the Income Tax Act." Taking everything into account, the conclusion reached by the tribunal is a plausible one. It does not call for any interference. The learned tribunal also held that since the collection of assets of the undertaking included intangibles like goodwill, intellectual property etc. their cost of acquisition could not be determined. This was also a finding of fact which is a plausible one. We do not wish to interfere with the same. Now I come to the law points. Section 45 of the said Act provides that profits or gains from the transfer of a capital asset would be chargeable to income tax as capital gains. This gain is deemed to be the income in the financial year in which the t....