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2018 (8) TMI 919 - AT - Income TaxNature of sale of Hotel premises - whether the sale of land and building of hotel is to be treated as slump sale or not - Scope of section 50B - Held that - The mistake committed in the return of income cannot be the basis of assessment of non-taxable receipt as income. In order to understand whether the sale was a slump sale or sale of independent items of assets, necessary we have to examine the intention of the parties to the sale agreement. It is clear from reading of the entire clause of the sale deed that the assets of the assessee, including the license for boarding, lodging, bar etc. were also transferred to the purchaser along with land and building as a going concern. The entire business was sold for a total consideration of ₹ 20 crore consisting of land and building which includes furniture, equipments, kitchen equipments, telephone instruments, television, computer, etc. The building and other amenities are valued as a whole, without assigning value to any item of the assets. As mentioned earlier, consequent to the sale of the hotel premises, the business of assessee was closed down. Therefore, it is clear from the sale deed executed, the intention of the parties was to sell the hotel business as a going concern and the same is nothing but a slump sale. The sale of hotel premises by the assessee was a slump sale, liable to the taxed u/s 50B of the I.T.Act. It is ordered accordingly. - Decided in favor of Revenue.
Issues Involved:
1. Whether the sale of land and building of the hotel constitutes a 'slump sale' under Section 50B of the Income Tax Act. 2. Whether the Assessing Officer was correct in denying the set-off of brought forward losses and current year’s business loss. Detailed Analysis: Issue 1: Whether the sale of land and building of the hotel constitutes a 'slump sale' under Section 50B of the Income Tax Act. The Revenue's appeal was directed against the CIT(A)’s order which held that the sale of land and building of the hotel did not constitute a 'slump sale'. The Assessing Officer had considered the sale as a 'slump sale' and invoked the provisions of Section 50B of the Income Tax Act. The CIT(A) decided in favor of the assessee, stating that only the land and building were sold, and separate considerations were assigned and received for the same, while other assets and liabilities were not sold. The assessee, a firm engaged in the hotel business, sold its hotel premises at Ooty to M/s. BKR Hotels & Resorts Private Limited for ?20 crore. The sale deed executed on 18.01.2013 showed separate values for land and building. The Assessing Officer treated the sale as a 'slump sale' under Section 50B, arguing that the entire business was transferred as a going concern without assigning individual values to assets and liabilities. The CIT(A) relied on judicial precedents, including the Hon'ble ITAT, Kolkata, and the Cochin Bench, which held that a sale cannot be considered a 'slump sale' if only specific assets are sold without liabilities. The CIT(A) concluded that the sale of land and building separately does not constitute a 'slump sale' as per Section 50B. The Revenue argued that the entire business was sold, including licenses for boarding, lodging, and bar, which indicated a 'slump sale'. The assessee contended that no liabilities were transferred, and the sale was of individual assets. The Tribunal examined the sale deed and found that the intention was to sell the hotel business as a going concern, including licenses and other amenities, without assigning values to individual assets. The Tribunal held that the sale was a 'slump sale' under Section 50B. The Tribunal distinguished the case from the Kolkata Bench decision in DCIT v. Tongani Tea Co. Ltd., where no intangible assets like licenses were transferred, and individual values were assigned to assets. The Tribunal noted that the Cochin Bench decision relied on by the Kolkata Bench was reversed by the Hon'ble High Court. Therefore, the Tribunal concluded that the sale of the hotel premises was a 'slump sale' and liable to tax under Section 50B of the Income Tax Act. Issue 2: Whether the Assessing Officer was correct in denying the set-off of brought forward losses and current year’s business loss.The CIT(A) had allowed the set-off of brought forward losses and current year’s business loss, which the Assessing Officer had denied by treating the transaction as a 'slump sale'. Since the Tribunal held that the sale was a 'slump sale', the denial of set-off of losses by the Assessing Officer was upheld. Conclusion:The Tribunal allowed the Revenue's appeal, holding that the sale of the hotel premises was a 'slump sale' under Section 50B of the Income Tax Act, and the denial of set-off of brought forward losses and current year’s business loss by the Assessing Officer was correct. Order pronounced on this 14th day of August, 2018.
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