2021 (11) TMI 930 - HC - Income Tax

Sale of the chemical unit of the assessee company - itemised sale OR slump sale - addition under section 50B read with section 2(42C) and explanation 1 to section 2(19AA) - HELD THAT - Tribunal found from the memorandum as well as the addendum that the individual assets were determined and fixed at a pre-determined and agreed value and such price has been received by the assessee by different account payee cheques during the previous year relevant to the assessment year 2009-10 - on perusal of the balance-sheet, the Tribunal found that on the date of transfer apart from the assets which were sold and transferred, the said chemical unit had several other assets which were never sold nor transferred to the purchaser - Tribunal took note of the crucial fact that none of the liabilities were transferred to the purchaser and the same continued to be a liability of the assessee and to be discharged and were discharged by the assessee. Tribunal in our view, rightly held that the sale cannot be regarded as a slump sale. The Tribunal took note of the decision of this Court in the case of Kwality Ice Cream (India) Ltd. 2011 (1) TMI 905 - CALCUTTA HIGH COURT in which it was held that though the sale of the undertaking was for a lump sum consideration, Section 50 of the Act in respect of depreciable assets will override all other provisions and for depreciable assets, the value has to be determined in accordance with the principles of block of assets, read with Section 43(6) of the Act. There are other decisions which were also noticed and referred to by the Tribunal. Thus, we find that the Tribunal has not committed any error of fact calling for an interference by this Court. - Decided against revenue.

Summary

Issues:
1. Whether the sale of the chemical unit should be treated as a slump sale or an itemized sale?
2. Whether the addition made by the assessing officer under specific sections of the Income Tax Act should be deleted?
3. Whether the Tribunal erred in treating the sale as itemized without considering relevant case laws?
4. Whether the impugned order is perverse, bad in law, and a product of non-application of judicial mind?

Analysis:

Issue 1:
The assessing officer considered the sale of the chemical unit as a slump sale, but the assessee contended it was an itemized sale. The Commissioner of Income Tax (Appeals) upheld the slump sale classification. However, the Tribunal disagreed, stating that the unit was not sold as a going concern but only specific assets were transferred at predetermined prices. The Tribunal analyzed the agreement and addendum, noting that individual assets were sold separately, not as a lump sum. The Tribunal's decision was based on a detailed examination of the facts and provisions of the Act, concluding that it was not a slump sale.

Issue 2:
The assessing officer made an addition under specific sections of the Income Tax Act, which the CIT(A) confirmed. However, the Tribunal, after thorough scrutiny, found that the sale did not qualify as a slump sale. The Tribunal highlighted that the assets sold were determined individually with separate consideration, and liabilities were not transferred. The Tribunal referred to relevant case law and held that the sale could not be considered a slump sale. The Tribunal's decision was based on a comprehensive analysis of the facts and legal provisions.

Issue 3:
The Tribunal's decision was challenged by the revenue, arguing that the Tribunal erred in its factual assessment. The revenue contended that if the Tribunal had determined the facts incorrectly, the High Court could interfere. However, the High Court found that the Tribunal had not made any erroneous determinations and had correctly analyzed the issue. The High Court concluded that there was no basis for interference under Section 260A of the Act.

Issue 4:
The respondent assessee pointed out that the Tribunal had correctly referred to a previous decision in a similar case. The High Court found no merit in the revenue's appeal and dismissed it, answering the substantial questions of law against the revenue. The High Court also rejected the connected application following the dismissal of the appeal.

In conclusion, the High Court upheld the Tribunal's decision, ruling in favor of the assessee and dismissing the revenue's appeal. The judgment provided a detailed analysis of the sale transaction, addressing the classification of the sale, additions made by the assessing officer, and the application of relevant case laws.