2023 (11) TMI 134 - HC - Income Tax

Nature on sale - Slump Sale - capital gain u/s 50B - Transfer of asset or not? - assessee submitted that and and buildings were not transferred under the Agreement and only individual assets were transferred but the ownership was retained by assessee. Therefore, it is not as slump sale as per Section 2(42C) and capital gains cannot be computed under Section 50B of the Act holding that it is a long-term slump sale - HELD THAT - As per Clause 2.1(i) of the Business Agreement it is clear that assessee has transferred the right to use the immovable properties . Assessee has not transferred the whole undertaking which is one of the essential conditions under Section 2(42C) of the Act. Therefore, the transfer cannot be considered as a slump sale . Section 50B of the Act provides a mechanism for assessment of capital gain on transfer of an undertaking in a slump sale . Admittedly, immovable assets of the assessee s business were not transferred. Therefore, it does not satisfy the essential conditions under Section 2(42C) of the Act. Decided in favour of assessee.

Summary

Issues involved:
The issue in this case revolves around whether the transfer of a hospital as a going concern, without assigning values to individual assets and liabilities, constitutes a "slump sale" for the purpose of computing capital gains under Section 50B of the Income Tax Act, 1961.

Summary of Judgment:

Issue 1: Interpretation of 'Slump Sale'
The Appellants contended that the transfer should be considered a slump sale as the business was sold as a going concern, falling within the definition of 'slump sale'. However, the Respondent argued that since only the right to use immovable properties was transferred, and not the entire undertaking, it does not meet the criteria of a 'slump sale' as per Section 2(42C) of the Act. The Court agreed with the Respondent, emphasizing that the transfer did not encompass the whole undertaking, thus ruling that it does not qualify as a 'slump sale'.

Issue 2: Application of Section 50B
Section 50B of the Act provides a mechanism for assessing capital gains in a 'slump sale'. The Court noted that since the immovable assets of the business were not transferred in this case, the transaction did not fulfill the necessary conditions under Section 2(42C) of the Act. Consequently, the Court found no error in the ITAT's decision to allow the assessee's appeal, as the transfer did not meet the requirements for a 'slump sale' under the law.

Conclusion:
The Court dismissed the appeal, answering the questions of law in favor of the assessee and against the Revenue. The ITAT's order from June 27, 2018, confirming that the transfer was not a 'slump sale', was upheld without costs.