TaxTMI 
TaxTMI 
2020 (9) TMI 542
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....igh Court under Sections 391 and 393 of the Companies Act, 1956 is a slump sale and exigible to capital gain tax under Section 50B of the Income Tax Act, 1961 ? and ii. Whether, in the facts and circumstances of the present case, the finding of the Tribunal is clearly in teeth with law declared by the Bombay High Court in CIT Vs. Bharat Bijlee Ltd. [reported in (2014) 365 ITR 258]? " 3. We have elaborately heard Mr.Tushar Jarwal, learned counsel appearing on behalf of Mr.Karthik Sundaram, learned counsel appearing for the appellant - assessee and Mrs.R.Hemalatha, learned Senior Standing Counsel appearing for the respondent - Revenue. 4. The assessee filed its return of income for the assessment year under consideration namely 2006-07 on 29.11.2006 declaring a total income of Rs. 100,84,51,266/-. Subsequently, the assessee filed a revised return of income on 31.3.2008 declaring a total income of Rs. 100,35,99,280/-. The returns were processed as per the provisions of Sub-Section (1) of Section 143 of the Act. The case was selected for scrutiny and a notice under Section 143(2) of the Act was issued on 05.10.2007. The case was transferred to the Large Taxpayer Unit (LT....
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.... agreed that the transfer of the non T & D business to its subsidiary was a transfer as per the provisions of Section 50B of the Act, that the assessee approached the relevant Bond Issuing Authorities for the purpose of Section 54EC of the Act in order to claim deduction on the same and that since the bond required by the assessee was not allocated to the assessee as per the amendment to Section 54EC of the Act, the assessee had not invested the said amount during the current year. It has been further stated that challenging the Notification of the Government dated 22.12.2006, before this Court, the assessee filed a writ petition, which was dismissed and the special leave petition filed before the Hon'ble Supreme Court was also dismissed on 04.5.2009 vide SLP.No.9694 of 2009. 10. Thus, the Assessing Officer concluded that the assessee themselves having agreed that the transfer fell under the provisions of Section 50B of the Act, the claim of the assessee that the same should not be regarded as transfer as per the said decision of the Mumbai Bench of the Tribunal in the case of Avaya Global Connect Ltd., could not be accepted. The Assessing Officer stated that the assessee had no....
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.... perusal of the scheme of arrangement showed that the term used was 'consideration for the transfer' and the word 'exchange' was not used and that there was no error in the finding of the Assessing Officer or even the CIT(A). 13. The issue, which falls for consideration, is as to whether the transfer of the non T & D business of the assessee to its subsidiary by a scheme of arrangement as approved by the High Court of Calcutta in C.P.No.164 of 2006 dated 22.3.2006 could be brought under Section 50B of the Act. This provision is a special provision for computation of capital gains in case of slump sale. The assessee was non-suited primarily on the ground that they had accepted the transfer to be a sale falling within the provisions of Section 50B of the Act, as the assessee approached the Bond Issuing Authorities for investment in certain bonds in terms of Section 54EC of the Act to avoid payment of capital gains tax. 14. The first aspect, which we need to consider, is as to whether the assessee was estopped from raising the contention by way of an alternate plea. The fundamental legal principle is that there is no estoppel in Taxation Law. It is beneficial to refer to the dec....
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.... and obligations of the assessee comprised therein and/or relating thereto, should be transferred to the transferee company as a going concern in accordance with and subject to the modalities for transfer and vesting stipulated in the scheme. Paragraph 4(l) would be relevant for this appeal, which reads as follows : "Upon the scheme becoming effective and in consideration of transfer of the non T & D business, AIPL shall, without further application, issue and allot to ATDIL 39,00,000 equity shares of Rs. 10/- each in AIPL, at a premium of Rs. 96/- per share, credited as fully paid up. Such new equity shares issued and allotted by AIPL to ATDIL under the scheme shall rank pari passu in all respects with the existing equity shares of AIPL." 17. In terms of the above clause, the consideration of transfer was to issue and allot to the assessee 39,00,000 equity shares of Rs. 10/- each in the transferee company at a premium of Rs. 96/- per share. The value of the share worked out to Rs. 106/- multiplied by 39,00,000 equity shares, which, in turn, again worked out to Rs. 413 million (Rs. 41.3 crores). Clause 8 of the statement filed under Section 393 of the Companies Act furt....
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.... no impact on the present assessment. This is so because the assessee took a stand that they did not pay capital gains tax because they were to invest the same in the tax saving bonds as notified under Section 54EC of the Act. However, on account of the monetary restrictions, the assessee was not issued with the requisite bonds. Further, in the submissions before the Assessing Officer, the assessee took an alternate plea. We have held that such an alternate plea can be raised and it can be even a plea, which is mutually contradictory to the earlier plea, as it is a question of law, which requires to be considered. 21. It appears that an alternate submission was raised by the assessee during the course of assessment proceedings largely influenced by the decision of the Mumbai Bench of the Tribunal in the case of Avaya Global Connect Ltd. They have contended that the transfer of non T & D business was by way of a scheme of arrangement approved by the High Court of Calcutta under Sections 391 and 394 of the Companies Act and therefore, it could not be considered as a sale of business and would not qualify as a slump sale because what were issued were equity shares and no monetary c....
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....e, but an exchange would also be covered within the definition of the expression 'transfer of capital asset' because it is an inclusive definition and transfer includes exchange. Therefore, it is submitted that it will fall within the definition of the expression 'slump sale' as defined under Section 2(42C) of the Act and consequently, Section 50B of the Act would stand attracted. 28. Admittedly, the word 'sale' is not defined under the Act. Therefore, necessarily one has to rely upon the definitions in the other Statutes, which define the word 'sale'. 29. Section 54 of the Transfer of Property Act, 1882 defines the word 'sale' to mean a transfer of ownership in exchange for a price paid or promised or part paid and part promised. The word 'price' is not defined either under the Income Tax Act, 1961 or under the Transfer of Property Act, 1882, but is defined under Section 2(10) of the Sale of Goods Act, 1930 to mean money consideration for the sale of goods. 30. Therefore, to bring the transaction within the definition of Section 2(42C) of the Act as a slump sale, there should be a transfer of an undertaking as a result of the sale for lump sum consideration. Therefo....
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....CIT Vs. Motors and General Stores (P.) Ltd. [reported in (1967) 66 ITR 692] and in the case of Commissioners of Inland Revenue Vs. Wesleyan and General Assurance Society [reported in (1948) 16 ITR (Supp) 101 (HL)], held as follows : "16. In answering this question, the hon'ble Supreme Court held that, it is only if there is a sale of the cinema house and the other assets that the taxable profits and gains are to be computed under section 10(2)(vii) as the amount by which the written down value exceeds the amount for which the assets are actually sold. The Supreme Court held that the word "sale" or "sold" have not been defined in the Indian Income-tax Act, 1922. These words, therefore, have to be construed by reference to other enactments. The Supreme Court then referred to the definition of the term "sale" as appearing in the Transfer of Property Act, 1882, and the Sale of Goods Act, 1930. The hon'ble Supreme Court then referred to the definition of the term "exchange" as appearing in the Transfer of Property Act, 1882. It then rejected the contention of the Revenue that the transaction of February 20, 1956, was a sale. The hon'ble Supreme Court held that it wa....
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....e's service, would receive respectively sums equivalent to their wages and salaries. If they left the service of the Duke the pay ments would still have been due, but it was in nearly all instances explained to the employee that so long as the service continued, while the deed did not prevent his claiming ordinary wages in addition, it was expected that he would not do so. It was argued for the Crown that though in form a grant of an annuity, the transaction was in substance merely one whereby the annuitant was to continue to serve the Duke at his existing salary, so that the annuity must be treated as salary. Neither the Court of Appeal nor the House of Lords agreed with this contention. To regard the payments under the deed as in effect payments of salary would be to treat a transaction of one legal character as if it were a transaction of a different legal character. With regard to the supposed contrast between the form and substance of the arrangement, Lord Russell of Killowen stated at page 524 as follows : 'If all that is meant by the doctrine is that having once ascertained the legal rights of the parties you may disregard mere nomenclature and decide the qu....
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....s discharge was only by way of issue of bonds/preference shares. In other words, the Tribunal held and as a fact that this is not a case where the consideration was determined and decided by parties in terms of money but its disbursement was to be in terms of allotment or issue of bonds/preference shares. In fact, all the clauses read together and the entire scheme of arrangement envisages transfer of the lift division not for any monetary consideration. The scheme does not refer to any monetary consideration for the transfer. The parties were agreed that the assessee was to transfer the undertaking and take bonds/preference shares as consideration. Thus, it was a case of exchange and not a sale. Therefore, the Tribunal held that section 2(42C) of the Act was inapplicable. If that was not applicable and was not attracted, then, section 50B was also inapplicable. 19. We are of the opinion that the findings of fact rendered by the Tribunal from paragraph 40 and in relation to ground No. 2 are thus rendered by applying the legal principles to the facts and circumstances of the assessee's transaction. In the given facts and circumstances and goin....
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....questions which are raised in the writ petition. In the writ petition, the only aspect was that of taxability of Rs. 375 lakhs under section 50B of the Income-tax Act as capital gains on "slump sale" paid under the scheme of arrangement to the petitioner by its subsidiary. The Settlement Commission held that the amount of Rs. 375 lakhs received by the petitioner from its subsidiary on transfer of its project finance business and assets based on financing business including its shareholding in SREI Insurance Broking Pvt. Ltd. was taxable under section 50B of the Act as a slump sale. 25. The argument of the petitioner was that this is a transfer under the scheme of arrangement but is not a sale. The scheme of arrangement was sanctioned by the High Court of Calcutta. The argument was that this is a transfer of a statutory interest and character. Section 50B, therefore, had no application as the scheme of arrangement is not a slump sale. 26. It is in dealing with that argument and in the peculiar facts that the Delhi High Court held that the petitioner's contentions cannot be accepted. The petitioner before the Delhi High Court had admitted that there was....
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....ngement, the word 'consideration' has been used and that therefore, it is a transfer and the provisions of Section 50B of the Act would stand attracted. 36. An identical question was considered by the Hon'ble Supreme Court in the case of Motors and General Stores (P.) Ltd. In that case also, the agreement contained the expression 'consideration of the transfer'. After considering the documents in its entirety, the Hon'ble Supreme Court observed that the operative part of the document showed that there was an exchange of properties described in schedule I for 5% tax free cumulative preference shares of the company and the valuation was done for the purpose of stamp duty and in essence, the transaction was one of exchange and there was no sale of the properties described in schedule I for any monetary consideration. That apart, the Hon'ble Supreme Court noted that there was no suggestion on behalf of the Revenue of bad faith on the part of the assessee company nor it was alleged that particular form of the transaction was adopted as a cloak to conceal a different transaction. In the case before us also, there is no such allegation made by the Revenue against the assessee compan....
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.... it clear that the issue in the said case was limited to the power of the Assessing Authority and did not impinge the power of the Tribunal under Section 254 of the Act. Hence, the CIT(A) as well as the Tribunal fell in error in non-suiting the assessee on the ground that they had not raised such a plea in the return nor in the revised return. 41. The Constitution Bench of the Hon'ble Supreme Court in the case of Devi Das Gopal Krishnan Vs. State of Punjab [reported in (1967) 20 STC 430], while interpreting the provision of the Punjab General Sales Tax Act, 1948, considered the definition of the word 'purchase', which was inserted in the said Act as Section (ff) by way of amendment, which defined it with all its grammatical and cognate expressions to mean the acquisition of goods specified in schedule C for use in the manufacture of goods for sale for cash or deferred payment or other valuable consideration otherwise than under a mortgage, hypothecation, charge or pledge. It was argued that the definition of the word 'purchase' is more comprehensive within the definition of the word 'sale' under the Indian Sale of Goods Act and therefore, the State Legislature was incompetent....
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....eject the argument of the Revenue in this regard. The Revenue largely rested their argument based on the decision of the Delhi High Court in the case of SREI Infrastructure Finance Ltd., which, we have already held to be not applicable to the facts and we refer to the decision in the case of the Bombay High Court in the case of Bharat Bijlee Ltd., which had noted the factual position in the decision of the Delhi High Court in the case of SREI Infrastructure Finance Ltd., where, admittedly, there was a monetary consideration, which is conspicuously absent in the assessee's case. Therefore, the said decision can be of no assistance to the case of the Revenue. 46. The Revenue has also placed reliance on the decision of the Hon'ble Supreme Court in the case of Hindustan Lever Ltd. Vs. State of Maharashtra [reported in AIR 2004 SC 326], which pertains to levy of stamp duty on the order of amalgamation passed under Section 394 of the Companies Act and while considering the said issue, the Court analyzed as to what was the effect of the scheme of amalgamation and the entire discussion proceeded with regard to the effect of the order of the High Court approving the scheme of amalgamatio....