2022 (4) TMI 1176 - ITAT MUMBAI

Revision u/s 263 by CIT - slum sale - section 50B is applicable in the case of the assessee and order passed by the Assessing Officer is erroneous - As per CIT assessee has transferred all the assets to its wholly owned subsidiary TMFSPL as a going concern on a slump sale basis, while computing its business income, it has reduced the profit earned in the above said slump sales and considered the same under the head Capital Gains at the same time claimed exemption u/s 47(iv) - HELD THAT:- PCIT raised objections on treating the slump sales under the head Capital gains as well as treatment given by the assessee to compute the book profit u/s 115JB of the Act. After careful consideration, we observe that the assessee has transferred the whole business under slump sale basis and it is fact on record that it is transferred the business on going concern basis to its own subsidiary company. The transaction is covered u/s 47(iv) of the Act and accordingly it is not transfer within the provisions of the Act. Therefore, we are not incline to agree with the findings of Ld PCIT in this regard. Therefore, we are inclined to accept the submissions made by the assessee in this regard.

Adjustment of the above said profit in the book profit and the assessee has treated the same as capital profit without routing the transaction thru profit and loss account - On careful consideration, we observe that the assessee has to prepare the annual account by following the Accounting Policies, Accounting Standards as provided in the Act and prepare the accounts as per the Schedule III to the Companies Act, 2013 to determine the book profit. The provisions of section 115JB allows certain adjustments as given Explanation 1 in section 115JB(2) of the Act. We observe that the assessee has treated the above income as capital as the same is between the subsidiary company, which will not be part of book profit. However, we are in agreement with Ld.PCIT that the above adjustment made by the assessee is not the adjustment mentioned in the Explanation 1 to section 115JB. However, we observe that the courts have held that when the receipt or profit earned by the assessee are in the nature of capital receipt or capital profit, these profit has to excluded from the book profit for the purpose of section 115JB also - see M/S SHIVALIK VENTURE PVT. LTD. VERSUS DY. COMMISSIONER OF INCOME TAX-8 (3) , MUMBAI [2015 (8) TMI 979 - ITAT MUMBAI] - thus we are incline to accept the submissions of the assessee on merit.

Disallowance on section 14A - We observe that the assessee has made the investments at the end of the year i.e., 26.03.2015 and Ld PCIT of the view that irrespective of the earning of any exempt income, the AO was duty bound to make inquiries in view of CBDT Circular no 5/2014. After considering the detailed submissions of both the parties, it is fact on record that the assessee has made the investment at the fag end of the year and there is no chance of earning any exempt income out of the above said investment, hence the courts have held that where there is no exempt income, Assessing Officer cannot make any disallowance, the disallowance has to be relating to the earning of exempt income. Therefore, in the given case, there is no exempt income earned by the assessee out of the fresh investments, in our considered view, the assessee has a valid case on merit.

Thus the assessee has placed all the above facts before Assessing Officer and Assessing Officer has accepted the view and which is one of the possible view under this circumstances, the Ld PCIT cannot impose other possible view and moreover, the issues involved under consideration is in favour of the assessee on merit. Therefore, there is no prejudice caused to the interest of the revenue, therefore, the twin condition is not fulfilled to invoke the provisions of section 263 of the Act. Appeal of assessee allowed.