TaxTMI 
TaxTMI 
2023 (12) TMI 884
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....d rejecting the Appeal filed by the Revenue. 2. Respondent hereinafter referred to as 'assessee' is engaged in the business of manufacturing of PVC coated leather cloth and trades in PVC vinyl flooring. Assessee, for Assessment Year 2013-14, filed its return of income at Rs. 4,68,76,231/-. During the assessment, the Assessing Officer ("AO") treated the capital gain on transfer of business undertaking returned as long term capital gain under Section 50B of the Act as business income amounting to Rs. 71,79,88,311/-. The AO also made an addition on account of disallowance of trade debts written off at Rs. 33,90,29,284/- towards advances made pertaining to one Royal Cushion Vinyl Products Ltd. ("RCVPL") a group Company and addition of Rs. 28....
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....t reads as under: "A. Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT erred in not appreciating the fact that the transaction does not satisfy the condition prescribed u/s. 50B of the Income Tax Act and therefore income is not taxable under head capital gain and that the Ld. CIT (A) had erred in not holding that the income is taxable u/s. 28 (1) of the Act if not taxable u/s. 28(iv) which he was empowered to do so? B. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT failed to appreciate that the Ld. CIT (A) erred in disallowing of write off of the business/trade advances receivable from RCPVL, a sick company despite the fact that the Ld. CIT (A) ....
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....eration that for the transfer, the consideration paid was at 11 times Appellant's Earning Before Interest, Depreciation, Tax and Amortization ("EBIDTA") for Financial Year 2011-12. The CIT(A) also noted that the corresponding debtors, inventory and creditors were also transferred. 8. The CIT(A), referring to the provisions of Section 28(iv) of the Act, which the AO felt the transaction was covered under, correctly came to a conclusion that the consideration is received in terms of money whereas Section 28(iv) of the Act refers to the value of any benefit or perquisite whether convertible in money or not and Courts have held that where the consideration is monetary, Section 28(iv) of the Act will not apply. The CIT(A) also relied upon var....
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....ade advance only to reduce its tax liability arising out of capital gains in the slump sale during the same year was correct, the trade advance was not shown as its income and there was no necessity to enter into any agreement between assessee and RCVPL. 12. Factually, there is no dispute with regard to the fact that the advance was a trade advance given by assessee during the course of carrying on its business. It is not the case of Revenue that the advance was given on capital account. Assessee has claimed deduction write off of trade advance under Section 37(1) read with Section 28(i) of the Act. 13. Having considered the documents and evidence before it, the ITAT has noted that even though the agreement provided for adjustment of ....
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.... the tax liability. 15. It is evident from the explanation of the assessee that the decision taken by it to write off the trade deposit was based on commercial sense and cogent reasoning since RCVPL was already declared as sick Company. Furthermore, RCVPL did not adjust the trade deposit against the trade deposit as per the terms of the agreement and was asking for payments against the bills. The assessee was thus compelled to make the payment in order to ensure future supplies and thus the assessee is justified in making a decision to write off the trade advance. This is perfectly probable and acceptable. Moreover, even the Hon'ble Supreme Court in its decision into the case of Mysore Sugar Company Ltd. (supra), has observed that the mo....