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2016 (5) TMI 264 - AT - Income TaxTaxing of capital gains u/s.50B r.w.s.2(42C) - transfer of the BOPP films undertaking to Xpro India Ltd. (XIL) - Held that - We had gone through the terms of BTA which clearly provides that sale of undertaking as a going concern for a lump sum consideration of 14 crores. With regard to the contention of ld. AR that individual values has been ascribed to net current asset we found that the AO has reproduced the individual items of assets/liabilities in para 3.6 and has held that most of the items have been taken over by the buyer at the book value with minor and negligible difference. Further the net current assets by nature are such that its value change from day-to-day and therefore its exact value on the date of actual transfer cannot be determined at the time of entering into contract which is usually much earlier than the date of conveyance. We found that even assignment of individual value to net current asset was only for the purpose of ascertaining the change in the value of such assets in the intervening period i.e. the date of agreement and the date of conveyance. The conclusion drawn by the AO and CIT(A) are as per material on record therefore did not require any interference on our part. Accordingly we uphold the addition made by the AO u/s.50B on account of gain arising from transfer of BOPP Films Undertaking. Computation of deduction u/s.80HHC - reducing 90% of receipt on account of sundry receipts including sale of empty bags cartons octroi/BPT/insurance premium and excise/sales-tax refunds from the business profits as contemplated in explanation (baa) to section 80HHC while calculating the deduction under section 80HHC - Held that - Similar issue was dealt with by the Tribunal in assessee s own case in the assessment year 1998-99 and restored the matter to the file of the Assessing Officer with the directions n the light of the following principles (1) Net income which is assessable under section 28 of the Income Tax Act will not be eligible for inclusion ill the profits of the business for computing the relief under section 80HHe. Therefore items like dividend income profit on sale of investments etc. which are not assessable under section 28 will have to be excluded while computing the profits of the business for computing the relief under section 80HHC. (2) Any receipt which has no element of export turnover should be treated as independent income ill terms of the judgment of the Hon ble Supreme Court in the case of Hero Exports (2007 (11) TMI 13 - Supreme Court of India ) and therefore 90% thereof should be excluded from the profits of the business. (3) The issue as to whether 90% if gross receipts or 90% of net receipts with reference to incomes falling under Explanation (baa)(1) should be considered. (4) Sales tax and excise duty would not form part of the total turnover in terms of the judgment of the Hon ble Supreme Court in the case of CIT vs. Lakshmi Machine Works reported in(2007 (4) TMI 202 - SUPREME Court ).
Issues Involved:
1. Taxation of capital gains arising from the transfer of BOPP Films undertaking. 2. Computation of deduction under Section 80HHC by reducing 90% of certain receipts from business profits. 3. Deduction in respect of corporate dividend tax. Issue-wise Detailed Analysis: 1. Taxation of Capital Gains: The primary grievance of the assessee was the taxation of capital gains amounting to ?10,30,06,590/- under Section 50B read with Section 2(42C) of the Income Tax Act, arising from the transfer of the BOPP Films undertaking to Xpro India Ltd. (XIL). The assessee initially reported this amount as short-term capital gains but later retracted, arguing that the transfer was not a slump sale as defined under Section 2(42C). The assessee contended that individual values were assigned to assets and liabilities, thus disqualifying the transaction as a slump sale. The Assessing Officer (AO) rejected this argument, stating that the Business Transfer Agreement (BTA) indicated a lump-sum consideration for the entire undertaking, and the assignment of individual values was merely for ascertaining changes in value during the interim period. The AO cited the Bombay High Court's decision in Premier Automobile Ltd. vs. ITO and the ITAT, Hyderabad Bench's decision in Coromandel Fertilisers Ltd., concluding that the transaction was indeed a slump sale. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, noting that the BOPP undertaking was sold for a lump-sum amount along with all its assets and liabilities, thus satisfying the criteria for a slump sale. The Tribunal affirmed the lower authorities' decisions, emphasizing that the assignment of individual values to net current assets was for practical reasons and did not alter the nature of the transaction as a slump sale. 2. Computation of Deduction under Section 80HHC: The second issue pertained to the computation of deduction under Section 80HHC by reducing 90% of sundry receipts, including the sale of empty bags, cartons, octroi/BPT/insurance premium, and excise/sales-tax refunds from business profits. The Tribunal referred to its decision in the assessee's own case for the assessment year 1998-99, where it was directed that net income not assessable under Section 28 should be excluded from business profits for Section 80HHC. The Tribunal instructed the AO to re-examine the issue, considering whether 90% of gross receipts or net receipts should be excluded and ensuring that sales tax and excise duty are not part of the total turnover. The matter was restored to the AO for fresh consideration in line with these principles. 3. Deduction in Respect of Corporate Dividend Tax: The third issue regarding the deduction in respect of corporate dividend tax was not pressed by the assessee's Authorized Representative (AR) and was dismissed in limine. Conclusion: The Tribunal upheld the AO's decision on the taxation of capital gains under Section 50B, confirming that the transfer of the BOPP Films undertaking was a slump sale. For the computation of deduction under Section 80HHC, the issue was remanded to the AO for re-examination as per the Tribunal's earlier directions. The appeal concerning corporate dividend tax was dismissed as it was not pursued by the assessee. The appeal was partly allowed in terms indicated above, with the order pronounced on 29/04/2016.
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