AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 140
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....to M/s. Schneider Electric (I) Pvt. Ltd. on slump sale basis. The assessee had declared a capital gain of Rs.97,74,55,161/- under the provisions of Section 50B of the Act as per the detailed computation given below: - Provisional purchase price in respect of capacitors division 116,00,00,000 Less Adjustment in purchase price as given in Pg. No. 15 of the agreement 1,74,16,651 Final purchase price in respect of capacitors division 114,25,83,349 Add Purchase price in respect of components division 3,00,00,000 Total consideration received 117,25,83,349 Less Expenses and deductions claimed Expenses 2,45,41,438 Investment in REC Bonds 50,00,000 Purchase price adjustment & Bank guarantee invocation 1,91,49,675 Provision for other liabilities 1,41,75,477 6,28,66,590 Balance 110,97,16,598 Less Net worth of the company 13,22,61,598 Long Term Capital Gains 97,74,55,161 The AO concluded the assessment by making the following additions: - i. Rs.1,24,00,000/- as bank guarantee invocation ii. Rs....
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....isallowance of Rs.1,42,67,213/- without appreciating the appellant had to incur the liability out of the sale consideration arising out of the slump sale and thus liable for deduction while computing the capital gains. 7. The learned Commissioner (A) erred in upholding the disallowance of Rs. 51,00.881/- on account of recomputation by the assessing authority of the net worth of the depreciable assets transferred. 8. The learned Commissioner (A) erred in upholding the disallowance of Rs.70,000/- out of the environment expenses. 9. The learned Commissioner (A) erred in upholding the commission payment of Rs.13,00,153/- and without appreciating that the same were incidental to the business and accordingly was liable to be allowed. 10. Without prejudice the learned Commissioner (A) erred in upholding the levy of interest u/s.234C and 234D of the Act. 11. Without prejudice the disallowances are excessive, arbitrary and unreasonable and liable to be deleted. 4. The assessee has sold its capacitor business to Schneider Electric India Pvt limited 31.03.2009 whereby a provisional purchase price of Rs.116,00,00,000 was agreed which would be adjusted with the final value of f....
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....at though the assessee and the purchaser agreed only for a provisional price, the agreement also specifies what are the adjustments permitted to arrive at the final purchase price. (page 25 & 41 of paper book). The learned D.R. also submitted that the provisions of Section 50B of the Act are special provisions and accordingly no other expenses other than the net worth of the company can be claimed as deduction while arriving at the capital gains under Section 50B of the Act. The learned D.R. further submitted that the conditions preceding to the agreement as contained in pages 33 to 37 of the paper book do not contain any clauses to state that the purchase price is subject to the expenses claimed by the assessee in terms of bank guarantee, recover provision for expanses, bank guarantee, etc. In this regard the learned D.R. relied on the decision of the coordinate bench dated 16.08.2022 in the case of ACIT vs. Bhoruka Aluminium Ltd. ITA No. 2551/Bang/2019 wherein it has been held as under: - 11. We have given a very careful consideration to the rival submissions. As we have already noted, from a reading of the provisions of Sec.50B (1) of the Act read with Sec.2(42C) of the Act, i....
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....ed to the provisions of Sec.48 of the Act and submitted that income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :- (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement6 thereto: According to him the concept of receipt/accrual is relevant even for charge to tax of income in the form of capital gain. In this regard the learned counsel for the Assessee has placed reliance on the decision of the Hon'ble Bombay High Court in the case of Mrs.Hemal Raju Shete (supra). The decision rendered by the Hon'ble Bombay High Court in the case of Mrs.Hemal Raju Shete (supra) was a decision rendered in the context of provisions of Sec.45(1) of the Act and has to be read as a decision rendered on its peculiar facts. The ratio laid down therein cannot be extended to a case where computation of capital gain is made u/s.50B of the Act. As we have already explained the statutory provisions, are special provisions applicable to....
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....rtakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales. We will therefore first look at the provisions of section 50B of the Act which contain the special provision for computation of capital gains in case of slump sale. The provisions read 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 undertakings owned and held by an assessee for not more than thirty-six months immediately preceding the date of its transfer shall be deemed to be the capital gains arising from the transfer of short-term capital assets. [(2) In relation to capital assets being an undertaking or division transferred by way of such slump sale,- (i) the "net worth" of the undertaking or the division, as the case may be, shall be deemed to be the cost o....
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.... gain on slump sale. Capital gains arising on slump sale are calculated as the difference between sale consideration and the net worth of the undertaking. Net worth is defined in Explanation 1 to section 50B as the difference between 'the aggregate value of total assets of the undertaking or division' and 'the value of its liabilities as appearing in books of account'. The 'aggregate value of total assets of the undertaking or division' is the sum total of: WDV as determined u/s.43(6)(c)(i)(C) in case of depreciable assets, The book value in case of other assets. Net worth is deemed to be the cost of acquisition and cost of improvement for section 48 and section 49 of the Act. As per section 50B, no indexation benefit is available on cost of acquisition, i.e., net worth. 11. In the given case, it is the contention of the ld AR that though the amount of Rs.6,28,66,590 which is claimed as a deduction from the purchase price for the purpose of capital gain, the amount is an adjustment to the provisional purchase price as per the terms of the purchase agreement. We notice that page 15 of the agreement defines provisional purchase prices as under - Provisional Purchase Price means a ....
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....chase price Clause 4(g) Any payment made by the seller or setoff or adjusted against the Bank guarantee sum in respect of a breach of this agreement or arising under or pursuant to this agreement shall be deemed to pro tanto a reduction in the purchase price paid for the capacitators business and the components business respectively. 13. Therefore if the purchaser invokes bank guarantee the same can be reduced from the purchase price. We also notice that the purchaser has invoked bank guarantee to the extent of Rs.92,76,060 towards unrealised trade receivables and has assigned the list of such debtors in favour of the assessee vide letter dated 25.06.2010 which part of records submitted before the CIT(A). However the CIT(A) has upheld the disallowance on the ground that the assessee has not negated and had concurred with the disallowance. The AO has also done the disallowance on the premise that the assessee has concurred with the same. Both the CIT(A) and the AO have not looked into the details submitted by the assessee. 14. With regard to Rs.1,24,00,000 the assessee had submitted before the AO that the purchaser has invoked the bank guarantee towards the reduction in the ....