TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1673
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....r on the alleged ground that the slum sale under section 50B does not qualify for the condition mentioned in the section 54EC. 3. Lt. PCIT should have appreciated that as the assessment order under Section 143(3) was passed after due examination of all relevant facts, including the claim under Section 54EC. 4. The Assessing Unit had duly considered and allowed the claim of deduction under Section 54EC during the original assessment under Section 143(3), after verifying all necessary details, and therefore, revision under Section 263 is unjustified merely on change of opinion. 5. Lt. PCIT should have appreciated that sale of the SEZ unit as a slump sale included land of Rs. 7,00,10,000. which was transferred through a registered sale deed and subjected to TDS under Section 194-IA. Therefore, the claim under Section 54EC was correctly made as per the provisions of the Act. The condition for claiming deduction under Section 54EC was fully met, as the capital gain attributable to the sale of land was invested in eligible bonds within six months. 6. Lt. PCIT should have appreciated that the Income Tax Return (ITR-6) itself provided for the disclosure of deduction under Sec....
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....e Act, therefore, it was not entitled to claim deduction u/s 54EC of the Act. The Pr. CIT, based on his aforesaid observation, called upon the assessee company to put forth its explanation regarding its claim of deduction u/s 54EC of the Act. In reply, it was the claim of the assessee company that as it had sold the SEZ unit as a slump sale, which included land of Rs. 7,00,10,000/-, on which sale consideration tax was deducted at source, therefore, its claim for deduction u/s 54EC of the Act was in order. It was further stated by the assessee company that there was no restriction under the provisions of Section 54EC or Section 50B of the Act for raising a claim under Section 54EC against the sale consideration received under slump sale. Apart from that, the assessee company to fortify its aforesaid contention, had drawn support from its return of income filed in ITR-6, wherein at Column No. 2(d), there was a provision for raising a claim for deduction under Section 54EC against the full value of consideration received from the slump sale. 4. However, the aforesaid explanation of the assessee company did not find favour with the Pr. CIT, who was of the view that, as in the case of ....
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....Malabar Industrial Co Ltd. Vs. CIT (SC) 243 ITR 83. (3) Swarup Vegetable Products Inds Ltd. Vs. CIT (All) 187 ITR 412 (4) Gee Vee Enterprises Vs. Addl. CIT & Ors (Del) 99 ITR 375 (5) Rajalakshmi Mills Ltd. Vs. ITO (ITAT, SB Chennai) 121 ITD 343 (6) SRM Systems & Software P Ltd. Vs. ACIT (2010-TIOL-646-HC-MAD-IT (7) Deloitte Haskins & Sells, Chennal Vs. DCIT ITA No. 1164/Mad/12 8. Considering the facts, issues and circumstances of the case, the AO is directed to pass a fresh assessment order, after affording opportunity to the assessee of being heard in the matter. 5. Accordingly, the Pr. CIT vide his order under Section 263 of the Act, dated 10.02.2025, held the order passed by the A.O. under Section 143(3) of the Act, dated 12.09.2022, as erroneous insofar as it was prejudicial to the interest of the revenue, and directed him to pass a fresh assessment order after affording opportunity to the assessee of being heard. 6. The assessee company, being aggrieved with the order of the Pr. CIT under Section 263 of the Act, dated 10.02.2025, has carried the matter in appeal before us. 7. We have heard the learned Authorized Representatives of both parties, perused the order....
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....section. Explanation 1.-For the purposes of this section, "net worth" shall be the aggregate value of total assets of the undertaking or division as reduced by the value of liabilities of such undertaking or division as appearing in its books of account : Provided that any change in the value of assets on account of revaluation of assets shall be ignored for the purposes of computing the net worth. Explanation 2.-For computing the net worth, the aggregate value of total assets shall be,- (a) in the case of depreciable assets, the written down value of the block of assets determined in accordance with the provisions contained in sub-item (c) of item (i) of sub-clause (c) of clause (6) of section 43; (aa) in the case of capital asset being goodwill of a business or profession, which has not been acquired by the assessee by purchase from a previous owner, nil; (b) in the case of capital assets in respect of which the whole of the expenditure has been allowed or is allowable as a deduction under section 35AD, nil; and (c) in the case of other assets, the book value of such assets. (emphasis supplied by us) (B) Section 54EC: Capital gain not to be charged on investmen....
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....ing after sub-section (3), this sub-section shall have effect as if for the words "three years", the words "five years" had been substituted. Explanation.-In a case where the original asset is transferred and the assessee invests the whole or any part of the capital gain received or accrued as a result of transfer of the original asset in any long-term specified asset and such assessee takes any loan or advance on the security of such specified asset, he shall be deemed to have converted (otherwise than by transfer) such specified asset into money on the date on which such loan or advance is taken. (3) Where the cost of the long-term specified asset has been taken into account for the purposes of clause (a) or clause (b) of sub- section (1),- (a) 57[***] (b) a deduction from the income with reference to such cost shall not be allowed under section 80C for any assessment year beginning on or after the 1st day of April, 2006. Explanation.-For the purposes of this section,- (a) "cost", in relation to any long-term specified asset, means the amount invested in such specified asset out of capital gains received or accruing as a result of the transfer of the original asset; ....
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....in such transfer. 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. Explanation 3.-For the purposes of this clause, "transfer" shall have the meaning assigned to it in clause (47);]" 10. We find on a careful perusal of Sub-section (1) of Section 54EC of the Act, the same contemplates that where the capital gain arises from the transfer of a long-term capital asset, ["being land or building or both"], and the assessee has, at any time, within a period of six months after the date of such transfer, has invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in the manner therein specified, viz. (a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole....
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....in Section 54EC of the Act that the capital gain arises from the transfer of long term capital asset ["being land or building or both"], is satisfied to the extent the sale consideration so received on the said slump sale is linked to the "book value" of the said long-term capital asset i.e. the land or building or both. Although, the Pr. CIT has observed that, in the case of a slump sale, the entire business undertaking is to be considered as an asset for the transfer of capital except instead of considering the individual assets within the undertakings deduction, which thus, disentitled the assessee company from claiming deduction u/s 54EC of the Act, i.e., only when there is transfer of long term capital asset ["being land or building or both"], but we are unable to concur with the same. 14. Ostensibly, the claim for deduction under Section 54EC pre- supposes the capital gain arising from a transfer of a long-term capital asset ["being land or building or both"]. On the other hand, the profits/gains arising from the slump sale are chargeable to income tax as capital gains arising from the long-term capital asset, except for in a case where the capital asset, i.e., undertaking, ....