2016 (5) TMI 1262 - AT - Income Tax

Addition made u/s.50B holding the tea estate as slump sale - CIT(A) deleted the addition - Held that - We find that assessee has sold two tea estates as going concern but after assigning the value to the individual asset and without transferring all the liabilities. We find that similar issue was also decided by this Tribunal in the case of DCIT v. M/s Tongani Tea Co. Ltd. 2015 (11) TMI 925 - ITAT KOLKATA wherein Tribunal has decided the issue in favour of assessee wherein held that the items sold did not include liabilities. The sale agreement did not include investments and deposits. Accordingly, all the investments, deposits, receivables, stock and such other current assets in the form of financial and other assets remained with the assessee-company along with the liabilities. Only those assets which were enumerated in the Schedules and Annexures were sold to the vendee. Therefore, the instant case was one of split sale and not a case of slump sale. Folooe wing the same parity of reasons the present case is decided in favor of assessee.

Issues Involved:
1. Applicability of Section 50B of the Income Tax Act, 1961.
2. Classification of the sale transaction as a "slump sale."
3. Taxability of agricultural land under Section 2(14)(iii) of the Income Tax Act.

Detailed Analysis:

1. Applicability of Section 50B of the Income Tax Act, 1961:
The primary issue was whether the sale of two tea estates by the assessee constituted a "slump sale" under Section 50B of the Income Tax Act, 1961. The Assessing Officer (AO) treated the sale as a slump sale, thereby attracting the provisions of Section 50B, which deals with the taxability of capital gains arising from the transfer of an undertaking as a going concern.

2. Classification of the Sale Transaction as a "Slump Sale":
The AO observed that the tea estates were sold as a whole and as a going concern, and thus, the transaction should be treated as a slump sale. The AO added the capital gains to the total income of the assessee based on this classification. However, the Commissioner of Income Tax (Appeals) [CIT(A)] disagreed with the AO's classification, stating that the sale was not a slump sale as per the memorandum of sale dated 11.08.2008. The CIT(A) noted that the assessee assigned individual values to the assets transferred, which included land, plantations, factory buildings, and plant and machinery. The CIT(A) cited several case laws, including the Supreme Court's decisions in CIT v. Artex Manufacturing Co. and PNB Finance, which held that if individual values are assigned to assets, it is not a slump sale.

3. Taxability of Agricultural Land under Section 2(14)(iii):
The CIT(A) further observed that even if the sale were considered a slump sale, the value of agricultural land could not be taxed under Section 2(14)(iii) of the Income Tax Act. However, this point was not adjudicated as the CIT(A) held that the sale was not a slump sale.

Tribunal's Decision:
The Tribunal upheld the CIT(A)'s order, stating that the sale transaction did not constitute a slump sale. The Tribunal referred to a similar case, DCIT v. M/s Tongani Tea Co. Ltd., where it was held that assigning individual values to assets and not transferring all liabilities indicated that the transaction was not a slump sale. The Tribunal noted that the sale agreement in the present case assigned specific values to various assets and did not include all liabilities, thus supporting the CIT(A)'s conclusion.

The Tribunal also addressed the argument regarding the agricultural nature of the land, stating that the land was agricultural and thus not taxable under the provisions of the Act.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming that the sale of the tea estates was not a slump sale and that the provisions of Section 50B were not applicable. Consequently, the cross-objection filed by the assessee became infructuous. The order was pronounced in the open court on 27/05/2016.

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