TaxTMI 
TaxTMI 
2021 (11) TMI 418
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....the Act would attract. (d) The Ld. CIT(A) ought to have appreciated that the sale of assets of "Passengers Car Business" of the assessee is not in the nature of "Slump Sale" . (e) The Ld. CIT(A) ought to have appreciated that the impugned sale of assets is an itemized sale and that it cannot be treated as a "slump sale" within the meaning of section 2(42C) of the Act. 3 (a) The Ld. CIT(A) erred in confirming the disallowance 0 expenditure to the extent of Rs. 12,14,253/- (b) The ld. CIT (A) ought to have appreciated that the agreement of the assessee's AR for the disallowance of Rs. 12,14,253/-, during the course of assessment proceedings, has not been authorised by the appellant. 4. The appellant may, add or alter or amend or modify or substitute or delete and / or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal." 2. We notice at the outset that assessee's instant appeals suffer from 753 days delay in filing before the ITAT. To this effect, the assessee filed a petition along with an affidavit for condonation of delay wherein it was inter-alia, affirmed that due to the papers relating to appeal misplaced by one ....
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....ny and, therefore. the same is in the nature of loss of profit to the company. Thus, the same is not taxable. 2. The sale of assets of the company to JAPL is not in the nature of slump sale since there are still some assets continuing in the balance sheet of the company generating income. Accordingly, the provisions of section 5OB of the Act are not applicable. 3.2 After having considered the objections of the assessee, the AO did not accept the same on the ground that the assessee sold the business for a lump sum consideration without there being any itemized sale of assets and, therefore, the provisions of section 50B of the Act are squarely applicable. Accordingly, the AO brought the difference amount of Rs. 3,68,33,000/-- to tax as LTCG. 4. Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A). 5. During the course of the appellate proceedings, it was contended by the assessee that the sale of assets of passenger car business of the assessee is not in the nature of slump sale as all the assets were not transferred and there was an itemized sale of assets. 6. After considering the submissions of the assessee, referring to the provisions of se....
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....ismissed. 7.7 TAXABILITY OF CONSIDERATION RECEIVED TOWARDS SALE OF GOODWILL AS INCOME: Alternatively, if the difference between sale consideration and net worth of the company is considered as consideration received towards the sale of goodwill, whether such goodwill is taxable as per the provisions of the Act? 7.7.1 Coming to the second contention raised by the assessee before the AO i.e., the difference between the sale consideration and net worth of the company of Rs. 3,68,33,000/- is received towards transfer of goodwill of the company and, therefore, the same is in the nature of loss of profit to the company and not taxable as per the provisions of the Act. Further in the grounds of appeal and the statement of facts, the assessee has once again reiterated the said argument that Rs. 3,68,33,000/- is received towards transfer of goodwill of the company and, therefore, the same is in the nature of loss of profit to the company. In view of this, I would like to adjudicate the same as under. 7.7.2 As contended by the assessee, the assessee has received Rs. 3,68,33,000/- towards transfer of goodwill of the company. As such, there is no dispute that the difference amount of R....
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....f goodwill is liable to tax under the head capital gains. In view of this, the alternative contention of the assessee that the difference amount between the lump sum consideration received of Rs. 14,00,00,000/- and net worth of the company quantified at Rs. 3,68,33,000/- is in the nature of consideration received towards transfer of self generated goodwill and, therefore, the same is not taxable is untenable and liable for dismissal. Thus, the grounds of appeal raised by the assessee on the issue are dismissed. 7. Aggrieved by the order of CIT(A), the assessee is in appeal before the ITAT. 8. Before us, the ld. AR of the assessee drew our attention to the agreement for transfer of business, which is placed at pages 39 to 48 to submit that the details of individual assets have been described in Annexure - A at page 48 of the paper book, the details of which are as under: Accordingly, the net considerations have been worked out as cited supra. Therefore it is outside the purview of U/s 50B of the Income Tax Act.1961. 8.1 In support of assessee's case, the ld. AR relied on the following case law: 1. Vatsala Shenoy Vs. JCIT, [2017] 80 Taxmann.com 351(SC) 2. Shiva Distilleries L....
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....cerned, it has always been described as 'the dissolved partnership firm'. Thus, the assets which were sold ultimately were of a dissolved partnership firm, though as a going concern. [Para 22] At this stage, one more factual aspect needs to be clarified. During the pendency of the winding up petition before the High Court, the High Court had passed various orders which included an order for valuation of the assets of the firm. This valuation was done to enable the Court to fix the reserve price for the purpose of inter se bidding between the erstwhile partners and/or association of erstwhile partners. The Chartered Accountants had done the valuation and submitted reports on the basis of which base price was fixed at Rs. 30 crores taking into account the value of various assets. These assets valued at Rs. 30 crores are sold for Rs. 92 crores. Thereafter, AOP-3, the successful bidder, deposited the amount of bid in respect of the share of nine other partners and a settlement was also prepared recording the value of the assets of the firm after deducting the liability of the said nine partners. The net value of the assets so arrived at was distributed among the nine partners....
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....a 26] In the aforesaid scenario, when the Official Liquidator has distributed the amount among the nine partners, including the assessees hereinafter deducting the liability of each of the partners, the High Court has rightly held that the amount received by them is the value of net asset of the firm which would attract capital gain. Scope of section 45 was explained in CIT v. Ghanshyam (HUF) [2009] 315 ITR 1/182 Taxman 368 (SC) wherein the Court stated that capital gains under section 45 are not income accruing from day-to-day. It is deemed income which arises at a fixed point of time, viz. on the date of transfer. [Para 27] On applying the said legal principle to the facts of the instant case, it is found that the partnership firm had dissolved and thereafter winding up proceedings were taken up in the High Court. The result of those proceedings was to sell the assets of the firm and distribute the share thereof to the erstwhile partners. Thus, the 'transfer' of the assets triggered the provisions of section 45 and making the capital gain subject to the payment of tax under the Act. [Para 28] Insofar as argument of the assessees that tax, if at all, should have been....
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....e net amount was to be paid, the finding is unassailable. The aforesaid discussion of the High Court deals how the business income/revenue income is to be treated/calculated, but the question of taxability at the hands of the assessees has not been touched upon at all. [Para 33] The upshot of the aforesaid discussion is that the appeals are allowed partly only to the extent that business income/revenue income in the assessment year in question is to be assessed at the hands of AOP-3, in terms of the orders of the High Court, as AOP-3 retained the tax amount from the consideration which was payable to the assessees herein and it is AOP-3 which was supposed to file the return in that behalf and pay tax on the said revenue income. [Para 34] 10.1 As per the definition of section 2(42C), sale in question could be treated as slump sale only if there was no value assigned to the individual assets and liabilities in such sale. This has obviously not happened. It is stated that at the cost of repetition the value was assigned to individual assets, as per Annexure A, which is placed at page No. 48 of the paper book and liabilities were taken over by the purchaser. It is important to refer....
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....ts has been clearly mentioned as per Annexure - A and the assets which have not been taken over is mentioned as above at para No. 3.2. Therefore, considering the facts of the present case, it is held that the sale in question is not slump sale, obviously, section 50B also does not get attracted as this section contains special provision for computation of capital gains in case of slump sale. Respectfully following the above judgement of the Hon'ble Supreme Court, we set aside the order of the CIT(A) and direct the AO to delete the addition of Rs. 3,68,33,000/- made by the AO treating the same as long term capital gains. Accordingly, the ground Nos. 2(a) to (e) are allowed. 11. As regards ground No. 3 (a) & (b) relating to the disallowance of expenditure of Rs. 12,14,253/-, during the course of assessment proceedings, the AO asked the assessee to produce bills and vouchers in support of administrative and selling expenses debited to the P&L Account. Accordingly, the assessee produced the same for verification. After having examined the bills and vouchers produced by the assessee, the AO found that the assessee could not furnish bills and vouchers to the extent of . Rs. 12,14,253/-t....