TaxTMI 
TaxTMI 
2020 (8) TMI 309
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....urchase and ignoring the valuation report obtained in the matter and which direction are kindly prayed to be reversed. Ground No. 2 - Actual cost of (i) Motor Vehicle and (ii) Furniture and Fixture acquired under Slump Purchase directed to be adopted at Written Down Value ('WDV') of the Seller instead of their fair value of acquisition by the Appellant (Purchaser) as per Valuation Report 2.1 On the facts and circumstances of the case and in law, the CIT(A) erred in directing the AO to adopt the acquisition cost of Motor Vehicle and Furniture and Fixture as per corresponding WDV of the Seller instead of their fair value as per the Valuation Report thereby resulting in reduction of tax depreciation claimed and which directions are completely erroneous, unwarranted and prayed to be reversed. 3. The grounds of appeal raised in revenues appeal read as under :- "1. Whether on the facts and circumstances of the case, the Ld.CIT(A) was justified in holding that the provisions of section 170 are not applicable in the present case ? 2. Whether on the facts and circumstances of the case, the Ld.CIT(A) was justified in holding that the assessee is....
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....he purchases amounted to succession and that the provisions of section 170(1) of the Act were applicable. In the course of the assessment proceedings, the AO called upon the appellant to show-cause why the fifth proviso to section 32(1) of the Act should not be applied in its case. In response the assessee submitted that it is not a case of succession within the meaning of section 170(1) of the Act. The AR of the assessee, therefore, contended that the fifth proviso to section 32(1) does not come into play. The AO rejected the assessee's contention and applied the fifth proviso to section 32(1) of the Act. This resulted in disallowance of Rs. 17,12,88,410/-. 6. In arriving at the aforesaid disallowance of depreciation the assessing officer called for information from the transferor-company of the WDV of assets transferred in its books. From the said information of the assessing officer noted the following :- Sr. No. Block of Asset Rate of Depreciation % WDV as on 31.3.2013 of block of asset Transferred 1. Furniture & Fixture 10% 55,60,753 2. Office Equipment 15% Nil 3. Computers (including computer software) 60% 55,81,962 4. ....
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.... observed that the cost of the assets belonging to each of the blocks are to be treated taken as the FMV. He however found that the value of the following assets as per the valuation report was less than the corresponding closing WDV in the books of the transferor at the time of transfer: (i) motor vehicle and (ii) furniture and fixture He noted that the basis for valueing these assets below the WDV could not be explained by the appellant. Therefore, he directed the AO to take the value of WDV of (i) motor vehicles & (ii) furniture & fixtures as per corresponding the WDV in books of the seller at the time of sale. He held that the value of goodwill, which is the balancing figure, .will be reduced accordingly. 10. As regards ground No. 2 he held as under :- In the assessment order the AO treated the cost of Customer Distribution Network as nil. While deciding ground of appeal number 1, I have held that provisions of section 170 is not attracted in this case. Therefore, the difference between the cost of acquisition of the business and the cost of individual assets (tangible and intangible) excluding goodwill will be treated as cost of goodwill. I als....
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....el further relied upon several case laws in support of his proposition 15. Per contra learned Departmental Representative relied upon the orders of the authorities below. In support thereof learned DR also relied upon several case laws. 16. Upon careful consideration we note that in the present case assessee has acquired the assets under a slump sale. The income tax act under section 2(42)(C) defines slump sale as under: "slump sale means the transfer of one or more undertakings as a result of the sale for a lump-sum consideration without value being assigned to the individual assets and liabilities in such sales." From the above it is clear that slump sale is a specie of transfer by way of sale. The provision of section 50B reads as under :- 50B. (1) Any profits or gains arising from the slump sale effected in the previous year shall be chargeable to income-tax as capital gains arising from the transfer of long-term capital assets and shall be deemed to be the income of the previous year in which the transfer took place : Provided that any profits or gains arising from the transfer under the slump sale of any capital asset being one or more underta....
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....cquired under slump sale under section 5OB the natural, corollary is that the depreciation on assets acquired under slump sale is to be governed by the general provisions given in the income tax act for the depreciation on assets. In this regard we may refer to the 5th proviso to section 32(1). The said proviso is as under :- Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets or know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the successor in the case of succession referred to in clause (xiii), clause (xiiib) and clause (xiv) of section 47 or section 170 or to the amalgamating company and the amalgamated company in the case of amalgamation, or to the demerged company and the resulting company in the case of demerger, as the case may be, shall not exceed in any previous year the deduction calculated at the prescribed rates as if the succession or the amalgamation or the demerger, as the case may be, had not taken place, and such deduction shall be apportio....
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....provisions for dealing with slump sale is not sustainable with regard to the depreciation on assets obtained under slump sale. As we have already noted above the concerned sections that is section 2(42)c and section 50B referred by the learned counsel of the assessee do not deal with the issue of depreciation on assets acquired under slump sale. As submitted by learned Counsel of the assessee the Assessing Officer has accepted the value of goodwill attributed by the assessee as a balancing figure in the value of sump sale and value attributed to specific asset taken over. 22. The distinction between the case of the assessee and succession envisaged u/s. 170 as submitted by learned Counsel of the assessee also fails on the touchstone of Hon'ble Supreme Court decision in the case of CIT Vs. K.H. Chambers [1965] 55 ITR 674 . In this view of the matter other decisions referred by learned Counsel of the assessee cannot take precedence. Moreover, an obiter decta in the case of Tribunal decision in Saipem Triune Engineering Pvt. Ltd. (supra) cannot be said to be a conclusive law that slump sale does not come under the realm of section 170. 23. We can consider the present issue f....