TaxTMI 
TaxTMI 
2017 (4) TMI 1640
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.... details of which was provided by the assessee vide his letter dated 10.02.2004. The assessee along with the original return of income filed a letter dated 24.02.2000, wherein the assessee itself has admitted that the tax liability if any would only be on account of long term capital gains. However, no working of this transaction was shown under any head in the computation of income. 2.1 Further, the assessee firm stopped production in its undertaking with effect from 27.10.1998. Further the assessee entered into a contract packing agreement on 15.11.1998 in terms of which the assessee agreed to sale its business assets relating to bottling business at Gangangar to M/s. Hindustan Coca Cola Bottling North West Pvt. Ltd., Gurgaon, Haryana and further the Coca Cola Company allowed the assessee to work as a Contract Packer for preparing and packaging the beverages. 3. This Court while admitting the appeal on 24.01.2006 has framed the following substantial questions of law: "1. Whether on the facts and circumstances of the case, the ITAT was right and justified in deleting the addition of Rs. 9,26,19,881/- by holding that the sale of business assets was not an itemised sa....
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....s deposits 57,05,494.96 Total (B) 57,05,495.96" 5. He has also taken us to para 17.1 of the assessment order which reads as under: "17.1 In para No. 4 of its letter dated 10-02- 2004 the assessee stated that the details of working of income of Rs. 9,28,96,979/- is enclosed. The assessee enclosed a copy of account of "Net amount of slump sales account" as appearing in its books of account. The assessee opened 'Net Amount of Slumps Sales Account' in its books of accounts which is reproduced as under: From To Sriganganagar Bottling Co. Net amount of Jaipur slump sales a/c Debit Credit" 6. He has also referred to Clause D of the agreement dated 15.11.1998 which reads as under: "Clause 'D' at page 1 of the agreement dated 15-11-1998 "The Contract Packer has entered into a memorandum of agreement dated August 31, 1998 with the Bottler (hereinafter the "MOA") in terms of which he has agreed to sell his business assets relating to the bottling business at Ganganagar including the bottling plant situated at Chack 7-Z Mirzawala Road Sriganganagar 335001, Rajasthan, India (hereinafter said "Plant") to the Bottler". ....
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....as contended that the view taken by the Tribunal is perverse and taking into consideration the law and more particularly Section 502B and subsequently amendment with effect from 01.04.2000, the judgment has been sought to be wrongly applicable. He has emphatically placed reliance on the Supreme Court decision in the case of Vatsala Shenoy vs. Joint Commissioner of Income Tax (Assessment), Mysore [2016] 389 ITR 519, wherein it has been held as under: 26. Section 2(42)C defines 'slump sale' and reads as under: "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. Explanation 1.-For the purposes of this clause, "undertaking" shall have the meaning assigned to it in Explanation 1 to Clause (19AA). Explanation 2.-For the removal of doubts, it is hereby declared that the determination of the value of an asset or liability for the sole purpose of payment of stamp duty, registration fees or other similar taxes or fees shall not be regarded as assignment of values to individual assets or liabilities. ....
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....s would become entitled to specific share in the assets of the firm which is proportionate to their share in sharing the profits of the firm and they are placed in the same position as the tenants in common and for the purpose of dissolution and Under Section 47 of the Indian Partnership Act, 1932, it is clear that even after the dissolution of the firm, the authority of each partner to bind the firm and the other mutual rights and obligations of the partners continue notwithstanding the dissolution so far as may be necessary to wind up the affair of the firm and to complete transactions begun but unfinished at the time of the dissolution. Therefore, for realisation of the assets, discharging the liability of the firm and settling the accounts of the partners, etc., the firm will continue to exist despite the dissolution and not for any other purpose. The material on record in the instant case would clearly show that after dissolution of the firm on 06.12.1987, the firm has never filed any return and in view of the order of this Court permitting the partners to carry on the business in the interest of employees, return was filed by AOP-13 consisting of erstwhile 13/12 partners for ....
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....undertaking as per the order of this Court and the MGBW as a going concern under the name and style MGBW and all trademarks used in the course of said business by the said firm and all tangible and intangible assets of the firm vested with the purchasers erstwhile 3 partners who paid the highest bid and the Appellants have received consideration of the conveyance and their respective share in the sale of net assets of the firm after their undertaking that they cannot interfere with the business of MGBW which is vested with all assets in favour of 3 partners have received the value of their net asset which has been distributed by the Official Liquidator and AOP 3 who have purchased the business of the old firm, succeeded to it and constituted a new firm in the same name (vide order Defendant (sic-dated) 14.06.1991 in the Company Petition) and therefore it is clear that the order passed by the Assessing Authority confirmed in the first appeal and by the Income Tax Appellate Tribunal (Special Bench) holding that the Appellants as erstwhile partners are liable to pay capital gain on the amount received by them towards the value of their share in the net assets of the firm are liable fo....
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.... if there is a transfer of a capital asset giving rise to a profit or gain. The expression "capital asset" is defined in Section 2(14) to mean "property of any kind held by an assessee". It is of the widest amplitude, and apparently covers all kinds of property except the property expressly excluded by Clauses (i) to (iv) of the sub-section which, it will be seen, do not include goodwill. But the definitions in Section 2 are subject to an overall restrictive clause. That is expressed in the opening words of the section : "unless the context otherwise requires". We must therefore enquire whether contextually Section 45, in which the expression "capital asset" is used, excludes goodwill. Section 45 charges the profits or gains arising from the transfer of a capital asset to income-tax. The asset must be one which falls within the contemplation of the section. It must bear that quality which brings Section 45 into play. To determine whether the goodwill of a new business is such an asset, it is permissible, as we shall presently show, to refer to certain other sections of the head, "Capital gains". Section 45 is a charging section. For the purpose of imposing the charge, Parl....
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.... no such formula existed during assessment year 1970-71. At that time, assessee had to deduct either cost of acquisition or fair market value as on 1.1.1954 from the sale price (compensation) of Rs. 10.20 cr. [see Section 55(2)(i)]. This option was conferred on the assessee solely for its benefit. However, Section 55(2) only triggered if there existed the figures of "cost of acquisition" and "fair market value" as on 1.1.1954 so that the choice could be exercised. At that time, it was open to the assessee to contend that he would exercise the option only after both the figures of original cost and fair market value of the asset as on 1.1.1954 was available. In short, it is only after 1.4.2000 that computation machinery came to be inserted in Section 48 which deals with mode of computation. 12. The question which arises for determination in this civil appeal is whether judgment of this Court in Artex Manufacturing Co. (supra) is applicable to the present case. In that case, the assessee, a partnership firm, entered into an agreement with the company to sell its business as a going concern for a consideration of Rs. 11,50,400. From the information supplied by the assessee to....
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....ains. In the circumstances, the judgment of this Court in the case of Artex Manufacturing Co. (supra) was not applicable to the present case. Further, this Court in the case of CIT v. Electric Control Gear Manufacturing Co. MANU/SC/1245/1997 : [1997]227 ITR 278(SC) has held that whether the business of the assessee stood transferred as a going concern for slump sale price, in the absence of evidence on record as to how the slump price stood arrived at, Section 41(2) had no application. It is interesting to note that the judgment in the case of Electric Control Gear Manufacturing Co. (supra) is given by the same Bench which decided the case of Artex Manufacturing Co. In fact, both the judgments are reported one after other in MANU/SC/0773/1997 : [1997]227ITR260(SC) respectively. In the present case, as can be seen from the impugned judgment of the Delhi High Court, the judgment of this Court in Electric Control Gear Manufacturing Co. (supra) is missed out. That judgment has not been considered by the High Court. As stated above, this Court has clarified its judgment in Artex Manufacturing Co. (supra) in its judgment in the case of Electric Control Gear Manufacturing Co.. Therefore, ....
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....nancy rights, man power and value of banking licence. On facts, we find that item-wise earmarking was not possible. On facts, we find that the compensation (sale consideration) of Rs. 10.20 cr. was not allocable item- wise as was the case in Artex Manufacturing Co. (supra). 18. For the aforestated reasons, we hold that on the facts and circumstances of this case, which concerns assessment year 1970-71, it was not possible to compute capital gains and, therefore, the said amount of Rs. 10.20 cr. was not taxable under Section 45 of the 1961 Act. Accordingly, the impugned judgment is set aside. 13. He has also taken us to the decision of Bombay High Court in the case of Commissioner of Income Tax vs. Polychem Ltd. [2012] 343 ITR 115 (Bom) and more particularly to the following paras: "6. In the present case, while we deal with the submissions which have been urged on behalf of the Revenue and the assessee it would, at the outset, be necessary to advert to the salient provisions of the agreement dated 24 March 1994 in pursuance of which the IMFL undertaking came to be transferred by the assessee. The agreement makes it clear both in its recitals and in clause 1.1 o....
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....was for the transfer of the business and undertaking as a whole comprising of but not limited to the land, building and fixed assets. Among the assets that were transferred included the benefit of the existing contracts, licenses which the assessee held entitling it to manufacture and sell Indian Made Foreign Liquor, intangibles including the right to utilize trade marks and the labor force which was being transferred to the purchaser. The transaction involved a slump sale. There was no itemized valuation of the fixed assets and other assets which formed part of the undertaking. What was sold comprised of the undertaking and the business as a whole. 10. It must be emphasized that in the present case the Court is dealing with the position as it existed prior to the insertion of the provisions of Section 50B by the Finance Act of 1999. As a result of the provisions of Section 50B which have been inserted with effect from 1 April 2000 any profits or gains arising on a slump sale effected in the previous year are to be chargeable to income tax as capital gains arising from the transfer of long term capital assets and are to be deemed to be the income of the previous year in wh....
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....essing Officer. In appeal the Delhi High Court sustained the judgment of the Tribunal relying upon the decision of the Supreme Court in CIT Vs. Artex Manufacturing Company. MANU/SC/0773/1997 : (1997) 227 ITR 260 (SC) The Supreme Court in appeal held that the decision in Artex dealt with the provisions of Section 41(2) and was, therefore, not applicable to the case at hand which dealt with the issue of capital gains. The Supreme Court enunciated that as regards the applicability of Section 45 three tests are required to be applied. First, both the charging Section and computation provisions are inextricably linked. Second, the test of allocation / attribution must be applied, the object being to determine whether the slump price was capable of being attributable to individual assets. Third, there is a conceptual difference between the undertaking and its components. In that context the Supreme Court held as follows: ...there is a conceptual difference " between an undertaking and its components. Plant, machinery and dead stock are individual items of an Undertaking. Business Undertaking can consist of not only tangible items but also intangible items like, goodwill, man pow....
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....High Court in the case of Commissioner of Income Tax vs. B.V. Reddy Marketing (P.) Ltd. [2014] 42 taxmann.com 311 (Karnatka), Commissioner of Income Tax vs. Nutrine Confectionery Co. (P.) Ltd. [2014] 45 taxmann.com 11, and the decision of Calcutta High Court in the case of Commissioner of Income Tax vs. Coats of India Ltd. [2009] 176 Taxman 438 (CAL.). He has also referred to the decision of the Supreme Court in the case of Commissioner of Income Tax, Ahmedabad vs. Equinox Solution Pvt. Ltd., wherein para 13 & 14 has observed as under: "13. Our view finds support with the law laid down by this Court in Commissioner of Income Tax, Gujarat v. Artex Manufacturing Co. [MANU/SC/0773/1997 : 1997(6) SCC 437 CIT]. 14. In Premier Automobiles Ltd. v. Income Tax Officer and Anr., MANU/MH/0314/2003 : 264 ITR 193 (Bombay) also, the Division Bench of the Bombay High Court examined this question in detail on somewhat similar facts and has taken the same view. The Learned Judge S.H. Kapadia - (as His Lordship then was as Judge of the Bombay High Court and later became CJI) speaking for the Bench aptly explained the legal position to which we concur as it correctly summarized the ....