9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2004 (4) TMI 258 - AT - Income TaxComputation of the capital gain - Value of the plant and machinery and land - transfer of slump sale - non-compete - HELD THAT - As such the land was even today inaccessible on account of the road built by the BWSSB. Therefore it was submitted that land retained by the assessee was never used in the business of manufacturing selling and distribution of CO2 and could not be considered as a part of the undertaking. In Premier Automobiles Ltd. 2003 (4) TMI 43 - BOMBAY HIGH COURT also the matter had been sent back for determination in the light of these principles. In fact the Bombay High Court had clearly held that the determination had to be made on the footing that Kalyan unit constituted the capital asset and that the AO would have to determine the cost of the undertaking (if determinable) for the purposes of computing capital gains in the light of ss. 45 48 55 and then determine whether any capital gains are exigible. In the case of the assessee the fact that CO2 can be manufactured by anybody does not detract from the product quality low temperature technology production and marketing skill which the assessee has. Thus it is wholly inappropriate to suggest that merely because a product can be made by any body makes it incompatible for a manufacturer to receive a non-compete consideration. If Praxair had not arrived at a non-compete consideration as part of the overall consideration it would have been open for MGCL to set up a new CO2 manufacturing plant as it had within its capacity the potential to manufacture a product of superior quality it had the technology namely low temperature technology and it had production and marketing skills. It would thus compete with Praxair to its detriment. Thus we are of the firm and considered opinion that the agreement dt. 9th Feb. 1998 clearly indicated that the transfer by the assessee to the purchaser was of a slump sale as a going concern for a lump sum price and so it was nothing but a case of a slump sale. In view of the finding that the transfer was a case of slump sale we do not think it necessary to go into the aspects of computation of the capital gain on the basis that the sale was one of individual items. Therefore the method adopted by the AO in computation of the capital gain is not be gone into by us as it would not serve any purpose and would be only of academic importance. However in view of the unanimous view taken by the Hon ble High Courts of Karnataka Bombay Madras Gujarat and Delhi and especially that of the Hon ble High Court of Karnataka in the case of Syndicate Bank 1985 (3) TMI 48 - KARNATAKA HIGH COURT and that of the Delhi High Court in the case of PNB Finance Ltd. we are of the view that as the undertaking sold is a capital asset the provisions relating to capital gains would apply but while doing so the treatment that should be given to the transaction is that the undertaking is sold as a whole and the question of liability will have to be considered only as a transfer of an undertaking as a slump sale for a lump sum and that it is not permissible to split the sale consideration amongst the individual assets for this purpose. We therefore uphold the order of the learned CIT(A) insofar as it relates to slump sale. However we direct the AO to consider the liability to capital gain on the basis that this is a case of slump sale and the AO has to follow the directions contained in the various judgments and especially the one by the jurisdictional High Court at Bangalore. With this direction the conclusion drawn by the learned CIT(A) is modified to the extent indicated above. In the result the appeal filed by the Revenue is partly allowed.
Issues Involved:
1. Whether there is a slump sale. 2. If there was a slump sale, whether s. 50B is retrospective and applicable. 3. If there was no slump sale, whether the sale of assets is taxable. 4. If the sale of assets is taxable, what is the cost of acquisition, what is the cost of sale, and what is the cost of improvement. Summary of Judgment: Issue 1: Whether there is a slump sale. The assessee-company sold its business as a 'going concern' to M/s Praxair Carbon Dioxide (P) Ltd. for Rs. 2.9 crores and claimed the profit as a non-taxable capital receipt. The AO rejected this claim, arguing that the sale included both tangible and intangible depreciable assets, and computed capital gains u/s 50. The CIT(A) granted relief to the assessee, holding that the sale was of an entire undertaking and not just depreciable assets, and included compensation for non-competition. The Tribunal upheld the CIT(A)'s decision, concluding that the transfer was indeed a slump sale. Issue 2: If there was a slump sale, whether s. 50B is retrospective and applicable. The Tribunal did not find it necessary to delve into the retrospective applicability of s. 50B, as the primary issue was whether the sale constituted a slump sale. The Tribunal concluded that the sale was a slump sale, thus rendering the question of s. 50B's retrospective applicability moot. Issue 3: If there was no slump sale, whether the sale of assets is taxable. Given the Tribunal's conclusion that the sale was a slump sale, the question of whether the sale of assets is taxable as individual items was not addressed. The Tribunal emphasized that the sale should be treated as a transfer of an entire undertaking for a lump sum, not as a sale of individual assets. Issue 4: If the sale of assets is taxable, what is the cost of acquisition, what is the cost of sale, and what is the cost of improvement. The Tribunal directed the AO to consider the liability to capital gain on the basis that this is a case of slump sale. The AO was instructed to follow the directions contained in various judgments, especially those by the jurisdictional High Court at Bangalore, and to treat the undertaking as sold as a whole without splitting the sale consideration among individual assets. Conclusion: The Tribunal upheld the CIT(A)'s order, confirming that the transfer was a slump sale and directing the AO to assess the capital gains liability accordingly. The appeal by the Revenue was partly allowed, with specific directions to the AO for computation based on the slump sale treatment.
|
