TaxTMI 
TaxTMI 
2025 (10) TMI 1482
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....tire receipts of the assessee IS a capital receipts for a sale of undertaking as a going: concern and it is a slump sale. 4. The facts of the case in brief is that the assessee had entered into an agreement dated 19.09.1997, to sell its entire bottling and marketing business to M/S. Bharat Coca Cola Bottling South East Private Limited for a total sale consideration of Rs.56.23 Crores. The net consideration after deducing the liabilities amounted to Rs.40.31 crores. However, the assessee is involved in obtaining concentrate or base from the Coca Cola Company, bottling the product, and selling it under the Coca Cola brand name through its own established marketing network. Over the course of its operations, the assessee had established significant infrastructure including plant and machinery for bottling operations and an extensive distribution network for marketing the products to retail sellers. The sale agreement encompassed the transfer of the entire business as a going concern, including all assets, the marketing network, goodwill, and included a non-compete clause that prevented the assessee from engaging in similar business activities in the future. 5. During the assessm....
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....ssessee's cross-appeal challenged the Commissioner of Income Tax's direction to bifurcate the proceeds and tax portions as long-term and short-term capital gains, maintaining that the entire transaction was a slump sale with no individual asset valuations. The ITAT after hearing t 0th the appeals together, vide common order dated 24.08.2007 allowed the assessee l s appeal and dismissed the Revenue's ap j 2al, conclusively holding that the entire receipt was a capital receive for sale of the undertaking as a going concern qualifying as a slump sale. 8. Learned Senior Standing Counsel for the Income Tax Department primarily contended that the provision of Section 28(ii) of the Act were applicable to the trans action and the compensation received by the assessee and should be treated as a revenue receipt rather than a capital receipt. She further contended that the assessee had lost only income and no the source of income upon termination of the agreement with Coco Cola Company. She further contended that since assessee was merely bottling and marketing products under the Coca Cola brand using concentrate supplied by the principal com E any, where the assessee was essen....
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....her, she emphasized that the assessee was entirely depend on Coca Cola Company for the concentrate and operated under the Coca Cola brand, and therefore, any goodwill associated with the business belonged to the principal company rather than the assessee. 11. Lastly, regarding the non-compete fee component, the learned Senior Standing Counsel contended that the assessee being merely a bottler and distributor in the local market, could not effectively compete with Coca Cola Company in any meaningful way, and therefore, the amount attributed to non-compete arrangements should not be treated as capital receipt. She argued that the entire consideration of Rs.56.23 crores should be bifurcated based on the valuations provided with appropriate portions taxed as revenue receipts under Section 28(ii) of the Act and as capital gains under Section 50Bof the Act and regular capital gains provisions rather than being accorded the favourable treatment of capital receipt from slump sale. 12. Per contra, the learned counsel for the respondent / assessee contended that the transaction in question constitutes a slump sale of its business as a going concern, wherein the entire undertaking inclu....
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....ire business undertaking, including termination of existing contracts, acceptance of non-compete obligations, restricting future business activities, and even change of the company's name from Spectra Bottling Ltd. to Spectra Shares & Scrips Ltd. This constituted a complete loss of the business structure and source of income. Therefore, the learned counsel for the respondent submits that none of the question raised by the Revenue in the in the present appeal constitute substantial questions of law. The findings of both the Commissioner of Income Tax and ITAT are based on proper appreciation of facts and correct application of law as established by binding precedents of the Supreme Court. The Revenue has also failed to demonstrate any perversity in the findings or point to any material that was overlooked by the appellate authorities. The questions raised are mere attempts to re-argue questions of fact already determined by concurrent findings of two appellate authorities 16. Having heard the contentions put forth on - --her side and on perusal of records, what is reflected from the dings is that the appeal was admitted on the following three substantial questions of law: ....
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....set, includes,- (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment;] [(iva) the maturity or redemption of a zero coupon bond; or] [(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882); or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property." If we read the sub-clause (ii) of the aforesaid definition, it clearly spells out extinguishment of the right of the seller over the subject property ....
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....o 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." 21. Section 54E of the Act also deals with the provision where in certain cases the capital gain on transfer of capital assets would not be charged. 22. The assessee in the instant case is M/s.Spectra Shares & Scripts Limited. The assessee was having a business agreement with M/s.Coca Cola Company Limited. It was agreed that the assessee company shall be provided with concentrate or base by Coca Cola company for bottling purpose and after bottling, the assessee company would be selling in the market in the brand name of Coca Cola. Subsequently, there was an agreement of sale of business between the two companies i.e., the assessee M/s.Spectra Shares & Scripts Limited and M/s.Coca Cola Company Limited. It was agreed to transfer entire soft drink beverage business. An undertaking of the assessee as a going concern to the buyer, while transferring the undertaking it was agreed to transfer as a going concern on a slump basis including all liabilities, past arrears, taxes, charges, levies, outstanding dues or claims. The buyer M/s.Coca Cola Comp....
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.... section there is no scheme of computation for quantifying it. The legislative pattern discernible in the Act is against such a conclusion. It must be borne in mind that the legislative intent is presumed to run uniformly through the entire conspectus of provisions pertaining to each head of income. No doubt there is a qualitative difference between the charging provision and a computation provision. And ordinarily the operation of the charging provision cannot be affected by the construction of a particular computation provision. But the question here is whether it is possible to apply the computation provision at all if a certain interpretation is pressed on the charging provision. That pertains to the fundamental integrity of the statutory scheme provided for each head." However, in the present case, the Revenue's attempt was to artificially allocate values to individual assets and merely bring some portion of consideration within the ambit of taxable transfer would amount to doing violence to the intent of the Act and is impermissible in law. 24. So far as the first question of law is concerned; it is revealed that there is concurrent finding given by the Commissioner....
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....ld that the Licensing Agreement was on a principal-to-principal basis and the assessee was not acting as an agent of Coca Cola. Therefore, the consideration received by the assessee would not fall within the scope of Section 28(ii)(c) of the Act. Section 28(11)(e) relied upon by the Revenue was inserted with effect from 01.04.2019 and is not relevant for the purposes of the present appeal. The Revenue had neither raised any grounds nor placed any material even at the time of arguments as to the material which ought to have been considered but not done so by the appellate authorities. 26. Dealing with the third question of law, in the course of deciding whether the consideration received by the assessee would amount to a capital gain or revenue receipt, the ITAT after appreciating all the relevant factual matrix of the case held that the transfer in fact resulted in the loss of source of income as also a business loss and, therefore, leading to loss and capital gain of asset and the consideration so received for such a transfer would amount to capital receipt. The entire business of the assessee company, including its fixed and movable assets, marketing & distribution network, tr....