TaxTMI 
TaxTMI 
2023 (3) TMI 140
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....pacitor business and component business 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 9....
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....t that was not claimed in the original return cannot prevent the learned Commissioner (A) to consider the claim which was genuine and had direct nexus to the slump sale of the business. 6. The learned Commissioner (A) erred in holding the disallowance 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 exc....
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....bmitted that amount claimed as deduction are as per the terms agreed with the purchaser. The ld AR further submitted that the bank guarantee invoked by the purchaser has to be settled by the assessee to the bank and therefore should be allowed to be claimed against the capital gains. 8. The learned D.R. submitted that 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 benc....
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....n the provisions of Sec.45(1) provides that any profit or gains arising from transfer of a capital asset effected in the previous year shall be chargeable to income tax under the head capital gains and shall be deemed to be the income of the previous year in which the transfer took place. The learned counsel for the Assessee referred 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) w....
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.... main issue for our consideration is whether expenses and deductions claimed by the assessee as a deduction / adjustment to the purchase price is allowable or not. It is noticed that the assessee has sold capacitor business and component business on slum sale basis. As per section 2(42C) of the Act, '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. 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 ....
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....case of other assets, the book value of such assets. 10. A reading of Sec.50B (1) of the Act read with Sec.2(42C) of the Act, it is clear that taxability of capital gain on slum sale arises in the year of transfer of the undertaking. Sec.50B of the Act is a special provision for computation of capital gain on slum sale and excludes other provisions of the Act, in so far as it relates to charge and computation of capital 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....
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....ld not be any further adjustments to the purchase price and net worth is the only deduction allowed. However on perusal of the purchase contract we notice that the assessee along with its directors stands as a warrantor providing warranties for certain events as per the agreement for a specified period of time and accordingly the assessee has executed a bank guarantee in this regard in favour of the purchaser. We also notice that according to clause 4(g) which reads as under the bank guarantee invoked is a reduction to the purchase 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 ....