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2019 (5) TMI 1369 - AT - Income TaxDisallowance of depreciation - assets purchased in slump sales - as per AO transaction was materialized during the accounting period relevant to the Asstt.Year 2013-14 - HELD THAT - Since in the case of vendor it has been held that wind energy division was sold in the Asstt.Year 2012-13, therefore, it is to be construed that the assessee has acquired this asset in this year and entitle for depreciation. Following the order of the Tribunal in the case GFL 2018 (8) TMI 857 - ITAT AHMEDABAD , we allow the claim of the assessee, and direct the AO to grant depreciation to the assessee in this year. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of depreciation amounting to ?7,55,62,862/- related to assets purchased in slump sales. 2. Determination of the actual date of transfer of wind energy business for tax purposes. Issue-wise Detailed Analysis: 1. Disallowance of Depreciation: The primary issue in this case pertains to the disallowance of depreciation claimed by the assessee on assets purchased through a slump sale. The assessee filed its return of income declaring a total loss, which included a claim for depreciation on the wind energy division acquired from its holding company, GFL. The Assessing Officer (AO) rejected this claim, arguing that the transaction materialized in the accounting period relevant to the Assessment Year (AY) 2013-14, not AY 2012-13. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, following the Dispute Resolution Panel's (DRP) directions in the vendor's case, GFL. 2. Determination of Actual Date of Transfer: The core of the dispute revolves around the actual date of transfer of the wind energy business. The AO and DRP contended that the transfer did not occur on 30.03.2012, as claimed by the assessee, but in the subsequent financial year. The DRP provided multiple reasons to support this view, including the timing of the slump sale agreement, possession certificates, continued operation by GFL, payment dates, regulatory approvals, and other procedural aspects. The Tribunal, however, did not concur with the AO and DRP. The Tribunal's analysis highlighted the following points: - Slump Sale Agreement and Possession: The agreement and possession letters were signed by authorized representatives of both companies on 30.03.2012. The Tribunal noted that both parties had complete knowledge of the business conditions, eliminating the need for physical verification of assets. - Continued Operation and Accounting Entries: The Tribunal acknowledged the issuance of debit/credit notes for one day (31.03.2012) for accounting purposes. This was deemed a procedural step to correctly allocate income and expenses post-transfer. - Payment and Banking Transactions: The consideration of ?1 crore was received by cheque dated 30.03.2012, deposited the same day, and cleared on 03.04.2012. - Regulatory and Statutory Approvals: The Tribunal emphasized that regulatory approvals, bank loan transfers, and other procedural aspects were post-closing activities and not preconditions for the transfer. These activities spanned multiple financial years and did not affect the actual transfer date. - Stock Exchange Intimation: The Tribunal noted that the intimation to stock exchanges was given on 30.03.2012, and the transaction was displayed on their websites the same day. - Legal and Procedural Compliance: The Tribunal referred to section 2(47) of the Income Tax Act, which defines "transfer" and includes the sale, exchange, or relinquishment of an asset. The Tribunal concluded that the execution of the agreement, transfer of possession, and payment of consideration on 30.03.2012 constituted a valid transfer. Conclusion: The Tribunal held that the wind energy business was indeed transferred on 30.03.2012, making the assessee eligible for depreciation in AY 2012-13. The Tribunal directed the AO to grant the claimed depreciation, aligning with the Tribunal's earlier decision in the vendor's case, GFL. The appeal of the assessee was allowed, and the order was pronounced on 7th March 2019.
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