9911796707
TMI Blog2003 (11) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... t unit is stated to have been sold as a going concern on 'as-is-where-is basis'. It is true that separate procedures have been laid down for valuation of current assets, obsolete items, statutory dues, contingent liabilities, etc. To our mind, such special procedures for the valuation of certain items do not detract from the concept of a slump sale. There is an intervening period between the sale agreement and the date of transfer. During this period, as mentioned by the learned counsel for the assessee, items of the current assets and other items, fluctuate widely, and it is to guard against such fluctuations, the agreement stipulated special procedures for valuation of such items. Such stipulation of special procedures for certain items do not detract from the fact that it is a slump sale of the unit as a whole and as a going concern. Physical assets of the assessee's cement unit involved huge machinery and also substantial acreage of land exceeding 2000 acres. These tangible assets are spread over different places like Cuddapah and Secundarabad in Andhra Pradesh and Madras, Bangalore, Ernakulam etc. When tangible assets situated at far-flung areas are involved, it wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he matter, we accept the contentions of the assessee on this aspect, and hold that no tax is leviable on the transfer of the cement unit in this case, as the requirements of computational provisions of section 48 are not satisfied. Assessee's grounds on this issue are accepted. Thus, we do not have to go into the question of correctness or otherwise of the directions given by the CIT(A) for ascertaining the cost of acquisition of the undertaking. Claim for depreciation without reducing the W.D.V. of the assets of the block - In the present case, the Assessing Officer presumably treated both the fertilizer and cement business as one unit and so, while computing the short-term capital gains u/s 50, he gave deduction for the W.D.V. of the blocks of both the fertilizer unit and of the cement unit. As we have held in the context of departmental appeals hereinabove that the lumpsum consideration is not allowable to the depreciable assets and so the provisions of section 50 are not attracted in this case, it makes no difference whether both the units are treated as the same business or they are treated as separate units or businesses. In view of the specific provision of section 43(6) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, and the third one, viz. ITA No. 253/Hyd/1995 is filed by the Revenue. Of the two appeals filed by it, the assessee did not press the appeal, ITA No. 460/Hyd/1995. The same is, accordingly dismissed. In effect, we are left with two appeals, viz. ITA No. 99/Hyd/1995 by the assessee and ITA No. 253/Hyd/1995 by the Revenue, which are cross-appeals, directed against the order of the CIT(A)-V, Hyderabad dt. 24th May, 1994. 2. The assessee-company has two manufacturing units'one for fertilisers and the other for cement. Initially, the company was incorporated on 16th Oct., 1961 for manufacture and sale of fertilisers. It set up a cement unit in 1984. The said cement unit was sold as per an agreement executed on 9th June, 1990 between the assessee-company and a Madras based company, the India Cements Ltd., for a consideration of Rs. 105,69,54,104 and this consideration comprised of Rs. 105.30 crores for fixed assets and Rs. 39,54,104 for net current assets. It is this transaction of sale which has given rise to the above mentioned cross-appeals. 3. The question arising in these cross-appeals is whether the sale of the cement unit in question is a slump sale or an itemised sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 91 was credited by the assessee to the P L a/c. 6. The AO computed the capital gains on the sale of the undertaking at a figure of Rs. 38,38,97,728 with the following remarks : ..... It is seen from Annex. B of the assessee's letter dt. 25th March, 1994 that they have worked out the surplus at Rs. 36,29,54,491. This figure has been arrived at after claiming several deductions which are not admissible for computation of capital gains under the provisions of s. 45. I am, therefore, obliged to allow those deductions which are permissible under s. 45 of the IT Act. The following deductions are being allowed Total sale consideration 105,69,54,104 Less 64,82,98,196 40,86,55,988 Less 2,47,58,188 38,38,97,728 Only two deductions are admissible out of the deductions claimed by the assessee and no other deduction is possible as the assets are depreciable assets. Therefore, net capital gain works out to Rs. 38,38,97,728, which ought to have been included in the total income of the assessee. 7. Even though the AO computed the profit under the head capital gains, as mentioned above at Rs. 38,38,97,728, he did not levy any tax on this amount. On the other hand, he proceeded to compute the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le assets, and so, the provisions of s. 50 are not attracted. He further held that the asset sold being the entire undertaking, namely, the cement unit, the capital gains tax on the sale of the undertaking, which is a capital asset, is leviable, and he also gave certain directions for working out the said capital gains. He gave directions for the working out of the cost of acquisition and cost of improvement of the undertaking for the purpose of ascertaining the quantum of capital gains that can be brought to tax on the sale of the undertaking in terms of s. 45 of the Act. 11. As already mentioned, the Department is aggrieved by the finding of the CIT(A) that the sale was a slump sale and not an itemised sale; and so, tax under s. 50 of the Act is not leviable. The assessee's appeal is on the issue that, even assuming that it is a slump sale, there can be no capital gain on the sale of the undertaking. ITA No. 253/Hyd/1995 filed by the Revenue : 12. The grounds taken by the Revenue read as under : (i) The CIT(A) should have held that even if it is used as a transit accommodation, it is still a guest house and that the expenditure relating thereto is not allowable within the mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment's paper book No. 2. The relevant portion of the terms and conditions accompanying the invitation extended to the assessee-company reads as under : Terms and conditions for offer to purchase the undertaking comprising the cement division of Coromandel Fertilisers Ltd. 1.0 Offers for purchase of the undertaking comprising the cement division of Coromandel Fertilisers Ltd. (hereinafter referred to as CFL ) shall be subject to the terms and conditions set out below. 2.0 It is agreed and understood that the undertaking comprises the operations and activities of the cement division of CFL as a going concern. This includes, inter alia the cement plant with all and together with buildings, structures, housing colony thereon, monies and mining leases, all plant, machinery, equipment, capital work-in-progress, vehicles, furniture, fixtures therein at Chilamkur Village, Cuddapah District in the State of Andhra Pradesh, and plant and machinery, office equipment, furniture fixtures at the divisional office at Secunderabad, at the marketing offices at Secunderabad, Madras, Bangalore and Ernakulam and at warehouses in the States of Andhra Pradesh, Tamilnadu, Karnataka and Kerala. Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he undertaking and arising in respect of or in relation to the operations and activities of the undertaking. Such current liabilities and provisions shall be taken over by the prospective buyer and the value thereof shall be adjusted against the value of the current assets. The value of the current liabilities and provisions shall be as per CFL's books of accounts duly verified by M/s A.F. Ferguson Co. and the value so determined shall be final and binding. However, liabilities in respect of statutory levies such as sales-tax, excise, customs, octroi, mineral rights tax, and liabilities appertaining to pending legal cases upto the date of transfer of the undertaking shall be and remain the liability of CFL. Similarly, any benefits or credits relating to the aforesaid statutory levies which accrue after the date of transfer of the undertaking and which relate to the period upto the date of transfer of the undertaking shall belong solely to CFL. Any possible or potential liability arising out of orders made under the Jute Packaging Materials (Compulsory Use in Packing Commodities) Act, 1987 and the Rules framed thereunder, upto the date of transfer of the undertaking shall be tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll set out the terms and conditions of sale and purchase as of the undertaking including those mentioned above and such other terms and conditions applicable to a transaction of this nature. The prospective buyer shall, on or before the execution of the said agreement for sale, pay to CFL 10 (Ten) per cent of the agreed price for purchase of the undertaking excluding the price determined as aforesaid to be payable for net current assets as and by way of earnest money. Interest will not accrue on the earnest money so paid. 9.0 In the event of the prospective buyer failing or neglecting for any reason to comply with the terms of paragraph 8.0 above, CFL shall be entitled without prejudice to its other rights or remedies at law, to revoke and cancel its acceptance of the offer of the prospective buyer by notice in writing to the prospective buyer and upon such revocation and cancellation, CFL shall stand discharged and released from any obligation to sell or transfer the undertaking to the prospective buyer. 10.0 Within 90 days of the date of execution of the said agreement for sale or such further period as may be mutually agreed upon (time in this respect being of the essence) the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Sir, Offer for purchase of the undertaking comprising the cement division of Coromandel Fertilisers Ltd. 1. We refer to your letter dt. 2nd April, 1990 inviting our offer for the purchase of the undertaking comprising the cement division of CFL. 2. We are pleased to make our offer as hereunder subject to the terms and conditions stipulated herein: 3.1 Our offer is for the purchase of the undertaking as going concern comprising the cement division and its activities which includes, inter alia, the cement plant with all land together with buildings, structures, housing colony thereon, mines and mining leases, all plant machinery, equipment, capital work-in-progress, vehicles, furniture, fixtures therein at Chilamkur Village, Cuddapah District in the State of Andhra Pradesh and plant and machinery, office equipment, furniture, fixtures at the divisional office at Secunderabad, at the marketing offices at Secunderabad, Madras, Bangalore and Ernakulam and at warehouses in the States of Andhra Pradesh, Tamil Nadu, Karnataka and Kerala, industrial land other licences, trade mark and brand name, goodwill and other intangible assets, all relating or pertaining to the operations and activi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne by CFL and that of ICL's auditors by ICL. (e) As regards book debts, loans and advances deposits and the like, their value as of the date of transfer of the undertaking shall be as verified and determined by M/s A.F. Ferguson Co. and ICL's auditors and as adjusted for any bad or doubtful debts/advances/debit balances : 6.1 The scope of current liabilities as mentioned in para 4.2 of your letter cited is acceptable. However, the value of the current liabilities and provisions as on the date of transfer of the undertaking shall be duly verified by ICL's auditors along with M/s A.F. Ferguson Co. and the value so jointly determined shall be the value of the current liabilities and provisions to be taken over by ICL. The value so determined shall be deducted from the value of the current assets to be determined as per the procedure detailed in para 5 and the same shall be the value of the net current assets to be taken over by ICL and shall form the purchase consideration therefor. 6.2 If any liability arises upto the date of transfer of the undertaking but is not reflected either in full or in part in the books of CFL, ICL shall have the right to claim the same from CFL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation to the transfer of the undertaking or any part thereof shall be payable by ICL. 9. This offer is subject to the approval of the financial institutions and it is also subject to the requisite approvals from the shareholders/Governmental authorities under the Companies Act/MRTP Act and/or any other law. 10. The purchase price for the fixed assets mentioned in para 3.3 above will be paid by ICL by taking over the liability of CFL to the financial institutions in respect of various secured loans as on the date of the transfer of the undertaking. This amount as of 30th Sept., 1989 was Rs. 78.13 crores. 11.1 ICL is willing within 30 days of the date of receipt by it of acceptance of the offer by CFL or within such extended time mutually agreed upon, to enter into an agreement for sale with CFL which will set out the terms and conditions of sale and purchase of the undertaking including those mentioned above and such other terms and conditions applicable to a transaction of this nature. All terms and conditions of the said agreement should be mutually acceptable to both the parties. 11.2 Inasmuch as payment of the purchase consideration is to be effected by taking over the secured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directors on 3rd May, 1990, and it may be seen at p. 53 of the Department's paper book No. 2. The said minutes read as under : Minutes of the meeting of the committee of directors held on 3rd May, 1990 at 8.30 a.m. at Secunderabad. Present Mr. P. McCrea Mr. T.R. Bailek Mr. M.V. Subbaiah Mr. N.C. Roy Present : Mr. N.C. Roy The committee discussed in detail the terms and conditions of the purchase price offered by the two highest bidders namely, the India Cements Ltd. and Gujarat Ambuja Cements Ltd. At 9.30 a.m. discussions were held with the managing director of India Cements Ltd. and his team regarding the terms and conditions offered by them. It was also indicated that the purchase price offered was lower than our expectations. After the discussions it was agreed that India Cements Ltd. would submit their final revised offer by 10.00 a.m. on 4th May, 1990 at the registered office of the company at 'Coromandel House', Sardar Patel Road, Secunderabad-500 003. Similarly, at 11.30 a.m., discussions were held with the managing director of Gujarat Ambuja Cements Ltd. and his team regarding the terms and conditions offered by them. It was also indicated that the purchase pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the board meeting at 11.00 a.m. on 5th May, 1990, which they agreed to do. The committee then evaluated the terms and conditions of the final two revised bids and submitted its recommendation to the board that the highest bid of India Cements Ltd. should be accepted. 20. The terms of the sale were reduced into an agreement dt. 9th June, 1990 and the said agreement may be seen at pp. 1 to 53 of the assessee's paper book No. 1. The said agreement is crucial for deciding the issue raised in this appeal. The relevant portion of the said agreement reads as under : Agreement This agreement made this ninth day of 1st June, 1990 between Coromandel Fertilisers Ltd., a company incorporated under the Companies Act, 1956 and having its registered office at Coromandel House, 1-2-10 Sardar Patel Road, Secunderabad'500003 (hereinafter referred to as the vendor which expression shall include, unless repugnant to the context or meaning thereof, its successors) of the one part and the India Cements Ltd., a company incorporated under the Indian Companies Act, 1913 and having its registered office at Dhun Building, 827, Anna Salai, Madras'600002 (hereinafter referred to as the purchaser w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remises at Secunderabad) all relating or pertaining to the operations and activities of the vendor's cement division; (v) Net current assets of the vendor as hereinafter defined relating or pertaining to the operations and activities of the vendor's cement division; (vi) all the industrial and other licences held by the vendor relating or pertaining to the operations and activities of its cement division; (vii) trade mark and brand name owned by the vendor relating or pertaining to the operations and activities of its cement division; (viii) The goodwill and other intangible assets of the vendor relating or pertaining to the operations and activities of its cement division; and (ix) At the purchaser's option to be exercised not later than 31st July, 1990, but except as provided in cl. 10 herein, all the benefits and obligations of all current and pending contracts including that of purchase, selling, leasing, hire purchase, maintenance and such other contracts, policies, agencies, permits, orders, registration and other agreements relating or pertaining to the operations and activities of the cement division of the vendor, to the extent that all or any of the foregoing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The purchaser has on or before the execution of this agreement (a) paid to the vendor the sum of Rs. 5.27 crores (Rupees five crores and twenty seven lakhs only) by demand drafts the receipt whereof the vendor doth hereby admit and acknowledge, and (b) furnished to the vendor the guarantee dt. 9th June, 1990 of Citi Bank N.A. for a sum of Rs. 5.26 crores (Rupees five crores and twenty six lakhs only) in a form agreed with the vendor, as and by way of earnest money. Save as provided in cl. 21 herein, interest shall not accrue to the purchaser on the earnest money deposited with the vendor. 4. (A) The purchaser agrees and undertakes to pay to the vendor on or before the execution of the deed of transfer hereunder mentioned (time in this respect being of the essence) : (i) the balance of Rs. 100.03 crores (Rupees one hundred crores and three lakhs only) as reduced by the amount of the secured loans outstanding as of the transfer date transferred by the vendor to and taken over by the purchaser with the approval of the public financial institutions and banks; and (ii) 90 per cent of the value of the net current assets as per the vendor's books of accounts made up as of the last d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereon more particularly described in the first schedule hereto and on the other immovable assets of the vendor, present and future, relating to the undertaking and a charge by way of hypothecation of all movable assets relating to the undertaking (save and except book debts) to secure the repayment of the secured loans granted by the public financial institutions and banks to the vendor; (ii) it has issued privately placed tax mortgage debentures to the UTI, the redemption whereof is secured by the said mortgage and charge by way of hypothecation; (iii) Out of the secured loans, more particularly described in the third schedule, a loan of Rs. 32.67 lakhs is due and payable by the vendor to HDFC as on 9th June, 1990, which loan is intended to be secured by the vendor creating in favour of HDFC a mortgage by deposit of title deeds in respect of : (a) land admeasuring approximately 1.28 acres within the land, hereditaments and premises; more particularly described in the first schedule hereto; and (b) the dwelling units constructed by the vendor thereon land constituting the housing colony in the undertaking. The vendor undertakes to create the aforesaid security in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligation pertaining to the period upto and including 28th Feb., 1989, as of the transfer date. Should such obligation be reintroduced by the Government of India at any time between the date of this agreement and the transfer date, the vendor shall compensate the purchaser such amount as is mutually agreed upon between them in writing in respect of any such obligation on the part of the vendor remaining unperformed or unfulfilled by the vendor as of the transfer date. 9. Notwithstanding anything to the contrary herein contained or implied, it is expressly agreed and declared that: (A) All inventories of raw materials, goods-in-process, finished goods, stores, spares, fuel and packing material as of the transfer date shall be physically verified jointly by authorised representatives of the vendor and purchaser respectively along with authorised representatives of their said auditors. The value of the inventories so jointly verified shall be thereafter determined jointly by the said auditors of the vendor and the purchaser on a going concern basis in accordance with the principles previously followed by the vendor in the preparation of its own balance sheet and P L a/c insofar as such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pursuant to this agreement shall be shared equally by the vendor and the purchaser. (I) Any income-tax or surtax liability relating to the period preceding and upto and including the transfer date shall be the sole liability of the vendor, and (J) The purchaser shall incur no liability for any income-tax, surtax or such related levies on the sale and transfer by the vendor to the purchaser of the undertaking pursuant to this agreement or on the consideration agreed to be paid by the purchaser to the vendor hereunder. 10 (a) The purchaser shall take into its service as from the transfer date all the employees of the vendor employed by it as of the transfer date in the operations and activities of the undertaking at all locations of the undertaking including Secunderabad without any break or interruption in their service with the vendor upto the transfer date, upon terms and conditions of employment (including retirement benefits) not in any way less favourable than those applicable to the immediately before the transfer date. The vendor has, at the request of the purchaser, provided to the purchaser a list of all its aforesaid employees as on 24th April, 1990, the receipt whereof i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause. 12. The vendor shall bear and pay all assessments, rents, rates, taxes, outgoings and impositions of whatsoever nature relating or pertaining to the operations and activities of the undertaking (save as provided in cl. 9(F) (herein) upto and including the transfer date and if any such payments relate to the period after the transfer date, the same shall be apportioned between the vendor and the purchaser. The vendor shall, save as provided in cl. 9(F) herein, be liable and responsible for all obligations or liabilities arising from or in respect of the operations and activities of the undertaking upto and including the transfer date. The vendor shall indemnify and at all times keep the purchaser fully indemnified from and against all claims, demands, actions, proceedings, costs, charges, expenses or other liabilities made or brought against, suffered or incurred by the purchaser by or as a consequence of the failure, refusal or neglect on the part of the vendor to comply with its obligations under this clause. 13. The vendor shall retain for a period of at least 8 years from the transfer date all books of accounts and other relevant books, papers, documents and records relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of public financial institutions, and banks and all other authorities as required by or under any applicable law, consent of the company be and is hereby accorded pursuant to the provisions of s. 293 of the Companies Act, 1956 to the board of directors of the company selling, transferring or disposing of as a going concern, the whole of the undertaking comprising the company's cement division at Chilamkur Village, Cuddapah district in the State of Andhra Pradesh and other locations more particularly described in the agreement for sale dt. 9th June, 1990 entered into by the company with the India Cements Ltd., a copy whereof is placed before this meeting, at the price and upon and subject to the terms, provisions and conditions therein contained. And resolved further that the directors be and are hereby authorised to execute all such documents and writings and to do all such other acts, deeds, matters or things necessary, proper or usual for the purpose of effectually transferring, selling and disposing of the said undertaking to or in favour of the India Cements Ltd. in pursuance of the said agreement for sale. 22. It may be seen from the terms of the above sale agreement dt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive estimate of deemed capital gain on account of cement unit sale (Rs. In crores) Sale consideration 105.30 Less: Land value (estimated surplus) 2.87 Balance consideration 102.43 Less: WDV of depreciable assets 34.22 Less: Additions during 1990-91 13.59 Deemed net capital gains 54.82 Notes :.......... . Sd/- 29th November, 1990'.. 24. After having obtained the certificate under s. 230A, the assessee executed a sale and transfer deed dt. 29th Nov., 1990 in favour of India Cements conveying the title to the land of over 2,000 acres and certain buildings. The said deed may be seen at pp. 19 to 126 of the Department's paper book. The relevant portion of the said deed reads as under : Deed of sale and transfer This deed of sale and transfer made at Cuddapah, Andhra Pradesh, this 29th day of November one thousand nine hundred and ninety between Coromandel Fertilisers Ltd., a company incorporated under the Companies Act, 1956 and having its registered office at Coromandel House , 1-2-10, Sardar Patel Road, Secunderabad-500 003 (hereinafter referred to as the vendor , which expression shall, unless it is repugnant to the subject or context thereof, include its successors and assig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pradesh executed a mining lease dated the 25th day of Feb., 1984 in favour of the vendor (hereinafter referred to as the mining lease ) covering an extent of about 1487.29 acres of land in Chilamkur Village, Cuddapah District, Andhra Pradesh, which forms part of the said land, more particularly described in part 'A' and part 'C' of the schedule hereunder written. Pursuant to the GO No. 326 dt. the 22nd May, 1981 issued by the Dy. Secretary to the Government of Andhra Pradesh, Industries and Commerce (Mines III) Department and the Order No. 2306/M(III)/81 dt. the 25th Feb., 1984 issued by the Asstt. Director of Mines and Geology, Cuddapah, which mining lease the vendor, has requested the Government of Andhra Pradesh, to transfer to the purchaser for the residue of the unexpired period of the term reserved thereunder; 6. by an agreement dt. 9th June, 1990 (hereinafter called the said agreement ) made between the vendor and the purchaser, the vendor agreed, subject to such consents and approvals as may be necessary, to sell and transfer and the purchaser agreed to purchase and acquire from the vendor, subject to such consents and approvals, as may be necessary, the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rket value whereof for the purpose of stamp duty chargeable on this deed of sale and transfer has been determined by a Government approved valuer engaged by the purchaser at Rs. 20.07 crores (Rupees twenty crores and seven lakhs only); 13. the vendor has obtained prior to the execution of these presents the requisite certificate from the IT authorities under s. 230A of the IT Act, 1961; 14. in pursuance of the said agreement, the vendor has at the request of the purchaser agreed to execute these presents. Now therefore this deed witnesseth that 1. In pursuance of the said agreement and pursuant to the aforesaid sum of Rs. 20.07 crores (Rupees twenty crores and seven lakhs only) having been paid by the purchaser to the vendor on or before the execution of these presents (which the vendor hereby admits and acknowledges of having received), the vendor both hereby grant, sell, convey, transfer, assign and assure unto the purchaser forever and absolutely on and from the date hereof (hereinafter called the transfer date ) All that : (A) the said land, more particularly described in parts A and 'D' of the schedule hereunder written subject insofar as a part of the acquired land ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty in respect thereof and subject to all such payments as are mentioned in the said agreement and subject also to the right of way as aforesaid. 2. And the vendor both hereby covenant with the purchaser that'. In the schedules to the above mentioned deed, the value of the lands is shown at Rs. 2,60,49,640 in Parts A to Part D-1 and the value of the buildings was shown in Part-E at Rs. 17,46,446. 25. It is mentioned by the learned counsel for the assessee that the market value of the land was estimated by the Government approved valuer at the instance of the purchaser. 26. It may be observed that, as per cl. 12 of the above transfer and sale deed, only the immovable assets and properties comprised in the cement unit, are governed by the said deed of sale and transfer, and as per cl. 11, the movable assets were neither included nor intended to be conveyed by the said deed of sale and transfer. It may also be observed that, as per cl. 10 of the said sale and transfer deed, the movable assets like plant and machinery etc., were transferred and delivered by the vendor to the purchaser prior to the execution of the said sale and transfer deed. It may also be mentioned that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted by us in writing which is being furnished for your reference. 6. How the price of Rs. 105.30 crores was arrived at and is there any specific appraisal report or valuation report by any technically competent person of your company or from outside? Ans. I submit herewith that no detailed asset wise valuation has been done prior to the acquisition of the plant and the valuation of the land and building has been done by the Government approved valuers after the agreement for purchase was executed. The valuation report is furnished herewith for your reference. For the plant and machinery no item wise valuation has been done either prior or after the acquisition. However a technical team, from the company visited the plant to inspect the condition of assets and the potential of the plant. 7. Before acquiring this plant, anybody from your company had visited for inspection of the plant? If so, please give the names and address. Ans. Yes. The following officials of the company visited the plant for inspection : Mr. R.K. Das, President (Operations) Mr. P.L. Subramanian, Vice President (Technical) Mr. S. Gopinath, General Manager, Dalavoi Plant 8. You have stated earlier that you ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n report only for land and building the balance amount was treated as the value of plant and machinery and other assets which was considered for the purpose of claiming depreciation in our books of accounts. 14. Is there any valuation report of your own submitted to your financial institution and to the board of directors? Ans. There is no such asset wise valuation report made by us. The valuation was based on setting up a plant of similar capacity and also the likely synergy the acquisition will bring to the India Cements Ltd. The board has authorised the chairman and the managing director to decide the bid price and accordingly the bid price of Rs. 105.30 crores was determined. Other than India Cements, the following companies seem to have submitted bid for the plant and we understand the bid details are as under: Gujarat Ambuja Cement Ltd. for about Rs. 95 crores (original bid was foru about Rs. 90 crores) Larsen Toubro Ltd. for about Rs. 75 crores (original bid was for about Rs. (sic) Crores). Our bid for Rs. 105.30 crores (original bid was for Rs. 94.50 crores) 15. Have you got valued plant and machinery with technical personnel before your offer of Rs. 105.30 crores? Ans. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department has recorded a deposition dt. 8th March, 1999 from Shri P. Nagarajan, Vice President, Finance of the assessee-company, which is contained in the additional evidence sought to be introduced by the assessee. It reads as under : ..... Q. 1. Please give the complete details of the sale of cement division of Coromandel Fertilisers Ltd. (hereinafter referred to as CFL) to M/s India Cements Ltd. (hereinafter referred to as ICL) like details of sale offer, details of negotiations, valuations if any done, 230A certificate, if any, obtained, proposals to banks and financial institutions and also show the correspondence in relation to all the points referred to above including the relevant resolutions and discussions held by the board and any committees constituted by the board. Ans. The board of directors of CFL at their meeting held on 25th Jan., 1990 constituted a sub-committee to review the performance and prospects of the erstwhile cement division of CFL. Based on the report of the sub-committee, the board at its meeting held on 10th Feb., 1990, after reviewing all the aspects relating to the cement division from the time since its commissioning, decided that it would be in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, Cuddapah, for transfer of the immovable properties connected with the cement undertaking to ICL. Simultaneously, agreements were executed for transfer of the movable properties as well as for transfer of all the loan liabilities entered into by CFL with various financial institutions and banks to the ICL. On execution of these agreements CFL received the balance sale consideration on 29th Nov., 1990. As may be seen from the documents produced, the entire process was based on bids received from the parties concerned and the highest bid was accepted after negotiations with the parties concerned. The company did not carry out any valuation for the purpose of arriving at the sale price. Q. 2 Please state whether you are aware of the facts of the above transaction? Also state whether any technical persons from the engineering or valuation side of the company were involved in the process of negotiation with ICL or any other bidder at any time in the dealings related to the above transaction? Ans. I was in the service of CFL as controller-finance and accounts and I was assisting the president and managing director of the company in the above transaction. To the best of my knowledge no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions had been held at Hyderabad with M/s Gujarat Ambuja Cements Ltd., Larsen Turbo Ltd., and India Cements Ltd. when detailed operating, financial and other information as required had been provided. Plant visits by teams from the above three prospective purchasers were planned to commence from 14th March to be completed by end of March, 1990. There has been no further communication from Mysore Cements Ltd. after the preliminary information had been provided as required by them. A telex message had been sent to the chairman and managing director of Cement Corporation of India Ltd., in response to a telex enquiry from their general manager at Yerraguntla Plant, asking for his confirmation whether there was serious interest. There has been no reply to the message so it is presumed that they are not interested. An approach has been received from the Standard Chartered Bank, merchant banking division, that they should be retained to handle the matter on our behalf. It was noted that they had been advised that in case they were representing any clients who were interested then they should let us have particulars, but it was not our intention to appoint merchant bankers to handle the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailable at p. 53 of the Department's paper book, the directors were of the view that the purchase price offered by one of the bidders, i.e. M/s Gujarat Ambuja, Cements was lower 'than our expectation' and such a remark from the directors, according to the learned standing counsel, would be possible only if the cement unit was otherwise got valued. In other words, the plea of the learned standing counsel is that there would be no criterion for the directors to judge the adequacy or otherwise of the purchase price offered by the bidders, if they did not have a valuation report in their hands. He pleaded that as such, there is suppression of material facts by the assessee. In this context, he also pleaded that it is a case where the ratio of the decision of the apex Court in the case of McDowell Co. Ltd. vs. CTO (1985) 47 CTR (SC) 126 : (1985) 154 ITR 148 (SC) is applicable. 31.2. The learned standing counsel further referred to the application given by the assessee for obtaining the certificate under s. 230A and also the computation of the tentative liability for short-term capital gains, which we have extracted hereinabove in para 23 of this order. It is argued that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods-in-process, finished goods, stores and spares, bad debts, loans and advances, deposits and the like. Even while evaluating such current assets, debts, loans and advances which are determined bad or doubtful shall be excluded. Defective, obsolete or unusable inventory is to be excluded from the ambit of transaction of sale [cl. 9(a) of the sale agreement]. In terms of cl. 9(e) of the agreement, statutory rates for the anterior period were agreed to be responsibility of the assessee. In terms of cl. 9(g), contingent liabilities continued to be fastened on the assessee, if contingency arises six months after sale and in terms of cl. 9(f), levy obligations as on the date of transfer of undertaking shall be the liability of the assessee-company. Pointing out to these aspects of the agreement governing the valuation of the different types of assets, and the provisions for different types of assets and liabilities coupled with the separate sale of land, and buildings, and separate valuation of plant and machinery, as mentioned hereinabove, the learned standing counsel argued that the cement unit was not sold for a lumpsum consideration, but its various assets were separately valued an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was incurring losses and so, the vendee-company was entitled to claim depreciation on the entire sale consideration of Rs. 105.30 crores, minus land value as the eligible amount without any deduction for goodwill. So, it is claimed that the above amount of Rs. 85 crores is allocable to depreciable assets, as held by the AO for the purpose of levy of capital gains under s. 50. The learned standing counsel pointed out that, for a sale to fall within the concept of slump sale, there should be no piecemeal or itemised sale of assets and it should be sale of an undertaking as a whole lock, stock and barrel. According to the learned standing counsel, the ideal example of the slump sale is the one considered by the Hon'ble Karnataka High Court in the case of Syndicate Bank Ltd. vs. Addl. CIT (1985) 45 CTR (Kar) 68 : (1985) 155 ITR 681 (Kar) where the assessee-company had international franchise besides branches in remote areas and also had secret reserves. It is pointed out that, in the instant case, there is absolutely no material brought on record by the assessee to say that the cement unit was intended to be disposed of, as a going concern. On the other hand, the various clauses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciable assets is concerned, it is the ratio of the decision of the apex Court in CIT vs. B.M. Kharwar (1969) 72 ITR 603 (SC) that holds the field and not the earlier decisions of the apex Court in the case of CIT vs. Mugneeram Bangur Co. (1965) 57 ITR 299 (SC) and CIT vs. Ajax Products (1965) 55 ITR 741 (SC). In this context, he referred to the observations of the apex Court in the case of Kharwar (supra), which are as under: The High Court observed that it was not possible to say that the entire business carried on by the firm at Surat, namely, the manufacturing of art silk cloth and sale thereof, was not taken over by the company. We do not propose to express any opinion on the correctness of that view, for, in our judgment, by virtue of the amendment made in s. 10(2)(vii), proviso (ii), of the Indian IT Act, 1922, by s. 11 of the Taxation Laws (Extension to Merged States and Amendment) Act, 67 of 1949, even under a realisation sale, excess over written down value not exceeding the difference between the original cost and the written down value is liable to be brought to tax. 31.11. In the light of the above observations, the learned standing counsel observed that, even when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greed with this proposition. 31.13. The learned standing counsel pointed out that the assessee itself knew that a substantial portion of sale consideration of Rs. 105.3 crores is apportionable to depreciable assets, as is evident from the calculation of short-term capital gains given in the context of application for certificate under s. 230A. 31.14. Apart from relying on the decision of the apex Court in the case of Kharwar (supra) and Artex Manufacturing Co. (supra), Shri Ashok also relied on the decision of the Tribunal in the case of Premier Automobiles Ltd. vs. Dy. CIT (2003) 79 TTJ (Mum) (TM) 850 : (2003) 84 ITD 169 (Mum) (TM) to which one of us, viz. Judicial Member, was a party. 32. The learned counsel for the assessee, Shri S.E. Dastur, countered the above arguments of the learned standing counsel for the Revenue. He has also filed detailed written submissions. The main plank of his contention is that what is transferred by the assessee is the entire undertaking, i.e. the cement unit and the entire undertaking was sold for a consideration of Rs. 105.3 crores plus the value of the current assets and in the fixation of the said sale consideration, there is no allocation of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee in the course of survey and even then Shri Mohan had only confirmed the position that the land and depreciable assets were not separately valued. He took us through the statement of Shri Nagarajan, Vice President (Finance) of the assessee-company, also which we have extracted hereinabove and pleaded that even Shri Nagarajan confirmed the same position. He further pleaded that the estimate of short-term capital gains assessable under s. 50, which was given by the assessee before the AO in the context of his application under s. 230A was only an estimate, and it was given only at the instance of the AO to indicate its liability to tax in the worst case scenario. It is pleaded that it does not mean that the assessee has in fact, admitted its liability at that figure. 32.4. The learned counsel further invited our attention to the definition of the term 'slump sale' given by the apex Court in the case of CIT vs. Artex Mfg. Co. (supra) at p. 269 of the report, which reads as under: While dealing with the question as to whether s. 41(2) would be attracted where there is a slump sale in the sense that the entire business is transferred for a lumpsum amount, it would be useful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les Ltd. vs. CIT (supra) with particular attention to pp. 60, 71, 78 and 79 of the said decision. He further explained that this principle is now recognised in Expln. (2) to s. 2(42C), which reads as under : (2)'' (42C) Slump sale means the transfer of one or more undertakings as a result of the sale for a lumpsum consideration without values being assigned to the individual assets and liabilities in such sales. Expln. 1''. Expln. 2 - For the removal of doubts, it is hereby declared that the determination of the value of an asset or liability for the sole purpose of payment of stamp duty, registration fees or other similar taxes or fees shall not be regarded as assignment of values to individual assets or liabilities; 32.8. He further explained that the transferee-company had to allocate some portion of the sale consideration to the depreciable assets for the purposes of claiming depreciation and in this context, he invited our attention to s. 211 of the Companies Act, r/w Part I of Schedule VI thereof. It is pleaded that what the transferee does in its books has no bearing on the question whether the transaction in question is a slump sale or not. 32.9. Referring t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The learned counsel for the assessee, Shri Dastur invited our attention to the report of the valuer, Shri B. Jagannadha Rao and associates dt. 6th Nov., 1990 and mentioned that the said report was sent to India Cements Ltd. and not to the assessee-company because the properties were got valued by the former company only for the purposes of payment of stamp duty. 32.12A. Referring to the contention of the learned standing counsel that the liability for capital gains tax in terms of s. 50 is attracted even in a slump sale on the basis of the decision of the apex Court in B.M. Kharwar (supra), Shri Dastur explained that a realisation sale is not the same as a slump sale. A realisation sale may be a slump sale or may not be a slump sale. All sales as a going concern are realisation sales but the converse is not true. The assets of a unit may be sold separately, and so, simply because it is a realisation sale, it is not sale as a going concern. In the present case, it is stated that the entire unit was sold as a going concern and the assets had not been sold separately. So, it is pleaded that the lump price realised in the said sale which is a slump sale, cannot be allocated to differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the balance sheet is low. 32.16. It is further pleaded that, if the Revenue seeks to assert that the transaction is contrary to that evidenced by the terms of the agreement of sale, it is for the Revenue to establish that, in fact, there is an itemised sale of assets, with different values ascribed to each asset that is transferred, and that the values were so ascribed on the date when the agreement was arrived at. It is pleaded that the consideration of Rs. 105.30 crores was arrived at, in the present case, as early as on 5th May, 1990, as is evident from the minutes of the meeting of committee of directors held of the same date, which may be seen at p. 54 of the Department's paper book No. 2. It is pointed out that there is no material whatsoever brought on record by the Revenue to establish that the parties in arriving at the lumpsum price of Rs. 105.30 crores placed some values on individual assets, and such values were aggregated. It is further pleaded that it is not fair on the part of the Revenue to harp upon what must have been the case or what ought to have been the case instead of looking at what actually happened. It is also pleaded that it is futile to talk of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance one entity only, there could be no liability to tax under the second proviso to s. 10(2)(vii) of the 1922 Act. Two contentions were raised before the Supreme Court. The first was that as the transfer had taken place between two entities, which were in substance the same, no liability to a balancing charge arose. The Supreme Court dealt with this argument at p. 608 of the report and held that the company was a legal entity distinct from partnership under general law. The legal effect of the transaction was to convey for consideration the rights of the firm in the machinery to the company and as the transaction resulted in excess realisation over the written down value of the machinery to the firm there would be a liability to tax under s. 10(2)(vii). The second contention that was urged was that as the transfer was effected with a view to close down the business no taxable profit arose because the transfer was not in the course of business of the assessee. This contention was also rejected by the Supreme Court having regard to the amendment made in s. 10(2)(vii) by the Amendment Act of 1949 as a result of which a balancing charge could be levied even if the transfer of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Act, 1949 referred to earlier even if plant and machinery is sold as a part of a realisation sale the provisions of the second proviso to s. 10(2)(vii) would be attracted. It proceeds on the assumption that the sale price for the transfer of the assets is known. A slump sale undoubtedly would be a realisation sale but all realisation sales may not necessarily be slump sale as parties may after closing down the business transfer the assets individually. The said decision is in no way contrary to or inconsistent with the earlier decision in Mugneeram Bangur (supra). They both operate in different fields. The first decision lays down the tests to be adopted in determining what would be a slump sale, the subsequent decision lays down the consequences that flow if it is a sale of itemised assets. The question of there being any assessment under the second proviso to s. 10(2)(vii) did not arise in Mugneeram Bangur's case and hence, there is no question of the subsequent decision in Kharwar's case overruling it. 32.20. It is, thus, pleaded that the question whether a unit was sold as a going concern did not fall for the consideration of the apex Court in the case of B.M. Kharwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) are in no way contrary to the principles laid down in the case of B.M. Kharwar (supra). It is further pointed out that both the cases of Artex Manufacturing (supra) and Electric Control Gear Manufacturing (supra) which involved similar issues also lay down the same ratio, even though, on facts, the conclusions drawn were different. 32.22. Referring to the provisions of s. 50 of the IT Act, it is mentioned that s. 50 comes into operation only when the following three conditions on the transfer of depreciable assets are cumulatively fulfilled: (a) The asset that is transferred forms part of a block of assets; (b) Depreciation has been allowed either under the Indian IT Act, 1922 or under the IT Act, 1961; (c) The full value of the consideration accruing or arising as a result of the transfer of such asset, can be ascertained. 32.23. It is pointed out that, in the present case, none of the above conditions is fulfilled, and hence, s. 50 is not attracted. In other words, the undertaking, which is transferred does not form part of block of assets, as the said expression 'block of assets' is defined under s. 2(11) of the IT Act, and further, no depreciation has been allowed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but the pre-condition for attracting both s. 50 and s. 41(2) is that a part of the sale consideration has to be relatable to the transfer of a depreciable asset. Otherwise, neither s. 41(2) nor s. 50 is attracted. As, in a slump sale, no portion of the sale consideration is relatable to the transfer of a specific asset, it is pleaded that the ratio of the decision of the apex Court in the case of Artex Manufacturing Co. (supra) and Electric Control Gear Manufacturing Co. (supra), which are given in the context of s. 41(2) of the IT Act, apply with equal force to s. 50. In other words, before s. 50 is invoked, it has to be seen whether the sale consideration is relatable to the transfer of depreciable assets. It is also mentioned that no portion of the sale price can be attributed to or ascribed to the transfer of depreciable assets, simply by some process of estimation or by invoking the provisions of s. 145. It is pleaded that the conclusions drawn in so many cases decided by the apex Court would have been different if the apex Court blessed such a principle of estimation. For example, in Srinivasa Shetty's case (supra), the apex Court could have estimated the goodwill, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The learned standing counsel for the Revenue, Shri Ashok assisted by Shri Jayashankar, CIT, in his rejoinder, pointed out that, as per the earlier decision of the Tribunal in India Cements Ltd., some of the so-called intangible assets like goodwill, brand name, trade marks, mining rights were held to be nil. He pointed out that that leaves only licences and work force. He pointed out that the work force is more a liability than an asset as is evident from the report of the technical personnel of the India Cements Ltd., a copy of which may be seen at p. 95 of the Department's paper book. He reiterated that the concept of slump sale does not survive the decision of the apex Court in the case of Kharwar (supra). It is pleaded that the assessee cannot hold back the benefit of excess depreciation on depreciable assets, and such benefit derived by him has to be coughed up, if the realisation on sale is in excess of the written down value in terms of s. 50. 33.1. The learned standing counsel for the Revenue stated that the decision of the apex Court in the case of Kharwar (supra) is applicable in the context of a realisation sale, and a realisation sale is nothing but a slump sale. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, whatever is the method of sale the assessee adopts, it is the obligation of the assessee to pay capital gains under s. 50 r/w s. 43(6)(c) of the IT Act. 33.4. Shri Ashok also pointed out that an assessee cannot be allowed to get away with such ruses. Hypothetically, an assessee owning two buses on which depreciation was allowed cannot combine the two buses into a trailer and sell the trailer and claim that s. 50 is not attracted because depreciation was not allowed on a trailer. Nomenclature of an asset may change as well as physical condition and additions and deletions may be there, but can the assessee be allowed by such changes to avoid liability under s. 50 by such means?, he questioned. Even if the consideration is a composite figure, it has to be assigned to different categories of assets to conform to the intention of the legislature, when it enacted s. 50. He also pointed out that the assessee is still claiming depreciation on the written down value of both the fertiliser and cement units on the ground that nothing is allocable to the depreciable assets of the cement unit, even after the entire cement unit had been sold out. He pointed out that by such methods, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sale observed that one has to adopt commercial principles for interpreting such transactions and held that the sale was a slump sale. We are of the view that the case of the assessee is on a far better footing than the case considered and decided by the Hon'ble Bombay High Court. 36. The learned standing counsel rhetorically mentioned that it is not merely the fanciful car of the managing director, which has been excluded from the scope of the sale. Actually, there are no exclusions. At any rate, no such exclusions have been brought to our notice. The entire cement unit as an undertaking has been sold, though special procedures have been laid down for the valuation of a few items. It is true that for the purposes of claiming interest on borrowed capital, the assessee pleaded that both the cement and fertiliser units were one and the same business of the assessee. That does not detract from the concept of a slump sale. The cement unit as a separate undertaking has been transferred. There may be different undertakings, which constitute one business. The transfer of any one of the undertakings, as a unit may constitute a slump sale. In the case of CIT vs. Narkeshari Prakashan Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facturing (supra) are concerned with the transfer of an undertaking as a going concern. The ratio of all the three decisions is more or less the same, even though Artex Manufacturing Co. (supra) went against the assessee and the decisions in the other two cases went in favour of the assessee. The conclusions in these three cases were different because of the different factual matrix of the respective cases, even though the ratio is the same. 40. As stated by the learned counsel for the assessee, the provisions of s. 50 are attracted, only when there is an itemised sale. We agree that the three conditions mentioned by the learned counsel for the assessee are to be satisfied before the provisions of s. 50 can be attracted. In a slump sale none of these three conditions are attracted. In a slump sale, it is not the depreciable assets alone that are transferred, and what is transferred is the entire undertaking as one asset. The undertaking did not receive any depreciation at the hands of the Department. Further, the consideration received in a slump sale is not allocable to the depreciable assets. Actually, it appears that s. 50 visualises only the transfer of a depreciable asset or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in the case of Syndicate Bank vs. Addl. CIT (supra) in which the Hon'ble High Court was considering the question of capital gains on the transferred entire undertaking being a banking concern. The relevant portion of head note reads as under: If there is a transfer of a whole concern and no part of the agreed price is indicated against different and definite items having regard to their valuation on the date of sale, the agreed price cannot be apportioned on capital assets in specie. What is sold in such a case is not individual items of property forming part of the aggregate, but the capital asset consisting of business of the whole concern or undertaking. What arises for consideration from the point of view of taxation is only the gain in respect of that transaction and nothing else. 42. The learned standing counsel has also argued that even if the amount received is a lumpsum consideration, it is for the assessee to allocate it or on the failure of the assessee to do so, for the Tribunal to do it, if necessary by resorting to the provisions of s. 145. We do not find such a procedure would be legal. If an estimate can be resorted to the Supreme Court would not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the view that it is too late in the day for the Revenue to raise the question of validity of the transfer for the first time before the Tribunal. 45. Further, if there is any suppression of materials, it is for the Revenue to establish the same. They have conducted a survey on the premises of both the assessee and the vendee company. They did not find anything adverse to dispute the claim of the assessee that it was a slump sale. On the other hand, both the functionaries of the contracting parties, viz., Shri Nagarajan and Shri B.M. Mohan, whom the Department found fit to examine during the survey proceedings, confirmed the stand of the assessee that it was a slump sale, and that there was no separate valuation of the assets. 46. We are actually surprised that the Revenue sought permission to introduce by way of additional evidence paper book II before the Tribunal. There is nothing in the so-called additional evidence running into hundreds of pages, which contradicts the claim of the assessee or which at least throws doubt on the claim of the assessee. The evidence contains the statement of Shri Mohan which only confirms the claim of the assessee. 47. The Revenue sought to draw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R (Mad) 289 : (1988) 170 ITR 238 (Mad) which has rightly concluded that the decision in McDowell (supra) cannot be read as laying down that every attempt at tax planning is illegitimate and must be ignored, or that every transaction or arrangement which is perfectly permissible under law, which has the effect of reducing the tax burden of the assessee, must be looked upon with disfavour. Though the Madras High Court had occasion to refer to the judgment of the Privy Council in IRC vs. Challenge Corporation Ltd. (1987) 2 WLR 24, and did not have the benefit of the House of Lord's pronouncement in Craven's case (1988) 3 All ER 495 (HL) : (1990) 183 ITR 216 (HL), the view taken by the Madras High Court appears to be correct and we are inclined to agree with it. We may also refer to the judgment of the Gujarat High Court in Banyan Berry vs. CIT (1996) 131 CTR (Guj) 127 : (1996) 222 ITR 831 (Guj) at 850 where referring to McDowelli's case (supra), the Court observed: 'The Court nowhere said that every action or inaction on the part of the taxpayer which results in reduction of tax liability to which he may be subjected in future, is to be viewed with suspicion and be tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... context of slump sale has to be ascertained from the four decisions of the apex Court mentioned above, we do not find it necessary to deal with the other decisions cited by the parties. 52. In the light of the above, we do not find any error in the order of the CIT(A) in holding that the entire cement unit should be treated as a capital asset. As, admittedly, the unit was established in 1984, we do not see why it cannot be treated as a long-term capital asset. As we have held that s. 50 is not applicable in a slump sale, we do not find any merit in Ground Nos. 2, 3 and 4 taken by the Revenue. They are rejected. 53. On ground No. 1 relating to the transit accommodation, no argument has been advanced before us. Further, the CIT(A) seems to have decided this issue in the light of the order of the Tribunal in assessee's own case for the asst. yr. 1982-83 and 1983-84. In this view of the matter, we reject this ground as well. 54. In the view we have taken of the matter, we uphold the order of the CIT(A) on the nature of the sale in question. We hold that it is a slump sale, and we also hold that no tax in terms of s. 50 is exigible. 55. Whether there is any liability for capital ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o appreciate that s. 50 of the Act has application only where capital gains has to be determined on the sale of assets and the actual cost of assets comprising the cement undertaking alone could be relevant to a computation of the cost of the undertaking as a whole. (b) Without prejudice to ground 3(a) above, the CIT(A) failed to appreciate that the present scheme of the IT Act, 1961, does not provide for determination of written down values of assets but only of block of assets and as such there are no written down values normally available for assets which form part of a block and, thus, a computation of 'cost' on the basis directed by him would not be feasible. Ground No. 4 The CIT(A) erred in holding that : (a)(i) Legal fees, consultancy fees and other similar items incurred in connection with the transfer of the undertaking were not deductible in arriving at the capital gains that may be assessable as a result of the sale of the undertaking having failed to appreciate that such expenditure having been incurred wholly and exclusively in connection with such transfer. The allowance of such expenditure is specifically under s. 48 of the IT Act. (ii) He further erred in ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead income from business on the basis of the fresh computations to be made for giving effect to this order, having failed to appreciate that s. 32A(3)(ii) permits setting off of the unabsorbed investment allowance carried from earlier year to reduce the total income of the assessee to nil and not his only the business income as erroneously directed by the CIT(A). The total income includes income under the head 'capital gains' and therefore, the unabsorbed investment allowance of Rs. 5,02,16,945 is available for set off against the long-term capital gains on sale of the cement undertaking. (b) Your appellants request that the CIT(A) having held there is no transfer of any individual plant commissioned in the cement undertaking, unabsorbed investment allowance in respect of the cement plant as claimed in the return of income be allowed to be set off against the capital gains, if any, as may be determined or to the extent not set off be allowed to be carried forward. Ground No. 7 The CIT(A) erred in confirming the disallowance on account of entertainment expenditure of Rs. 2,64,266 having failed to appreciate that a portion of such expenditure (say 50 per cent) was spent on em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59. In the course of hearing before us, the learned counsel for the assessee has summarised the main issues that arise in this appeal into three and they are as under : (1) Whether the transfer of the business of cement unit as a going concern, being a capital asset, gives rise to chargeable capital gains as the cost of acquisition of such a capital asset cannot be determined. (2) Presuming a view is taken that the cost of acquisition of an undertaking is determining such cost of acquisition and cost of improvement. (3) Is the assessee-company eligible to depreciation in respect of depreciable assets, which have been transferred to India Cements. 60. In the context of Department's appeal, ITA No. 253/Hyd/1995, we have held hereinabove that the cement unit is a capital asset and what is transferred is the entire unit as a going concern, and so, the sale consideration received is not allocable to the depreciable assets, and so liability under s. 50 is not attracted. In the light of this finding, the main question to be considered is whether the transfer of the cement unit as a capital asset gives rise to chargeable capital gains under s. 45 of the IT Act. If we hold that no charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dairy Agricultural Farm vs. CIT (1987) 65 CTR (AP) 44 : (1988) 169 ITR 291 (AP) (10) Addl. CIT vs. K.S. Sheikh Mohideen (1979) 8 CTR (Mad) 84 : (1978) 115 ITR 243 (Mad) (11) Voltas Ltd. vs. Dy. CIT (1998) 64 ITD 232 (Mum) 63. In the above decisions, various assets of tangible and intangible nature like tenancy rights, protected tenancy, import entitlements, trees of spontaneous growth, calves born on a farm, self-generated trade marks were considered and it was held that there cannot be any levy of capital gains on the transfer of such assets, as computational provisions contained in s. 48 cannot be satisfied. 64. The learned counsel for the assessee invited our attention to the provisions of s. 55(2)(a) and mentioned that the legislature has realised the consequence of the view taken by the Courts as well as the Tribunal and has subsequently incorporated the definition of the 'cost of acquisition in respect of a number of assets and provided for taking the cost of such assets to be 'nil'. Initially, the amendment was made to take the cost of goodwill to be 'nil' w. e. f. asst. yr. 1988-89. Thereafter, w. e. f. 1995-96, the cost of acquisition of tenancy rights, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd cost of improvement to be the net worth of the undertaking on the date of transfer. This amendment has been declared to be prospective and has been so held by the Bombay High Court in its unreported decision in the case of Premier Automobiles (supra), and the Ahmedabad Bench of the Tribunal in the case of Industrial Machinery Associates vs. CIT (2003) 78 TTJ (Ahd) 434 . For the asst. yr. 1991-92 with which we are concerned in these matters, s. 50B was not on the statute book. It is further explained that Memorandum explaining the provisions of the Finance Bill, 1999 [(1999) 152 CTR (St) 13 : (1999) 236 ITR (St) 127] makes it clear that the new section is effective from 2000-2001. It refers to the provision inserted to tax the slump sale as the 'new provision' as opposed to the provisions dealing with amalgamation of companies, which are referred to as rationalisation of existing provisions. So, it is pleaded that it is clear that the provisions of s. 50B cannot be treated as clarificatory and they have only prospective operation. 66. In this context, the learned counsel for the assessee has also relied on the decision of the Supreme Court in CIT vs. Official Liquidator, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y ignored the intangible assets which are not reflected on the balance sheet. He further directed the current assets to be taken as on 31st March, 1991, whereas they should have been taken on the date of transfer. It is further pleaded that the cost of certain intangible assets for which there is no cost of acquisition should be taken at the value of the asset on the date of transfer. It is pleaded that this proposition is in consonance with the principles laid down in CIT vs. Solomon Sons (1933) 1 ITR 324 (Rangoon) and Francis Vallabarayar vs. CIT (1960) 40 ITR 426 (Mad). So, the cost of acquisition of the cement undertaking, according to the learned counsel for the assessee would be : (a) Cost of acquisition of the depreciable assets (not just their written down value) (b) Cost of acquisition of the non-depreciable assets; and (c) Value (not the cost of acquisition) on the date of their transfer of the intangible assets. 70. So, it is pleaded that the method directed by the CIT(A) for ascertaining the cost of acquisition of the undertaking is wholly unsustainable. This is, of course, without prejudice to his main contention that the cost of an undertaking is inherently undetermin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an adjustment in the written down value where there is a slump sale [see s. 43(6)(c)(i)(C)]. In the course of the hearing a query was raised as to whether the appellant could claim depreciation in respect of assets of which it was not the owner. It was submitted that in the year subsequent to the year of acquisition of the asset, the question of ownership was irrelevant where an adjustment as contemplated by s. 43(6)(c)(i)(B) could be made (i.e., a case where the consideration attributable to a particular depreciable asset was determinable). It was submitted that even where such adjustment could not be made (as in the present case) the test of ownership was not required to be satisfied. 73. We have questioned the learned counsel for the assessee as to whether the blocks of depreciable assets of the cement unit did not cease to exist by virtue of the sale to India Cements Ltd. In other words, the question implied that, even if the sale in question is a slump sale, the block of assets ceased to exist, and so, the assessee cannot get depreciation on such ceased blocks of assets. We have also invited his attention to the provisions of s. 70 of the IT Act, which read as under : Sec. 70 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance was first computed; Provided''.. Provided further'.. Explanation''' 75. The above provision was not there on the statute book for the assessment year under appeal before us. However, we pointed out that the section as it stood for some of the years on the statute book indicated, along with the provisions of s. 70 which we have extracted hereinabove, that the income of each source or business has to be separately computed. If this view is correct, we pointed out that the w.d.v. of the block of assets of the cement unit should be reduced for the grant of depreciation in subsequent years as they are not owned by the assessee and are not used in the business of the assessee. 76. The learned counsel for the assessee pleaded before us, that, firstly source-wise or business-wise computation of income is not called for, in terms of the form of return of income. He mentioned that the source-wise or business-wise profit or loss before grant of depreciation is computed for different sources of business and they are aggregated and from the aggregate of such profit or loss, a deduction is granted for eligible depreciation of all the sources of business. He men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, the increased liability was provided for and correspondingly the cost of the assets was increased. The Department has accepted the methodology adopted by the assessee. The sum of Rs. 26,20,889 represents the additional liability incurred as on 26th Nov., 1990 compared to 31st March, 1990 and having regard to the methodology adopted, the CIT(A) ought to have directed that this figure also went to increase the cost of assets that were transferred. He erred in restricting the allowance to fluctuations upto 31st March, 1990. There were certain assets which were not taken over by India Cements Ltd. on account of the fact that they were considered obsolete. The appellant submits that the value of these assets as appearing in the books prior to the write off ought to be allowed as a business loss as none of these assets were of a capital nature and were in the nature of items of stores and spares. The agreement contemplated that the net current assets will be taken over at a figure arrived at after conducting a joint audit by chartered accountants of both the parties. As a consequence thereof certain assets were valued at Rs. 25,25,604 in excess of the value appearing in the books. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible assets, which are not reflected in the balance sheet, it is for the assessee to point out such intangible assets, so that valuation of such intangibles can also be made for deducting the same from sale consideration. It is mentioned that computation of cost of acquisition and cost of improvement is the job of an accountant. There may be some difficulty in ascertaining such costs, but it does not mean that it is impossible to compute. 82. He further pleaded that the fertiliser division itself was got valued as a going concern, and similarly, the cost of the undertaking also can be computed. In this context, he relied upon the decision of the Hon'ble Calcutta High Court in the case of Saharanpur Light Railway Co. Ltd. vs. CIT (1994) 208 ITR 882 (Cal), wherein as per the relevant portion of the head-note, it was observed as under : (ii) that it was not the case that the property, namely, plant and machinery, did not have a cost of acquisition or the assets were self-generated assets like goodwill. The assets here were tangible assets and they were neither free commodities nor were they generated on their own as in the case of goodwill. In such a case, a mere practical obstacl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned standing counsel stated that the assessee claims interest on capital borrowed for the purposes of setting up of the cement unit as revenue expenditure on the ground that both the fertiliser and cement units are part of one business of the assessee, and at the same time, calls it a slump sale when only the cement unit is sold, leaving the fertiliser unit intact. Similarly, it contends that the entire undertaking of the cement unit is sold, and, at the same time, for evaluating its cost, it ropes in the difficulty of ascertaining the cost of its different items or assets. 86. Finally, Shri Ashok mentioned that as many as three High Courts have held that the cost of an undertaking is ascertainable for the purposes of levy of capital gains tax, and in this connection, he referred to the unreported decision of the Bombay High Court in the case of Premier Automobiles (supra) and the decision of the Karnataka High Court in the case of Syndicate Bank (supra) and the Madras High Court in the case of India Bank (supra). In the light of these decisions, he pleaded that there is no reason to hold that the cost of an undertaking is not ascertainable. 87. He further mentioned that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their written down value from the block. 90. Assisting the learned standing counsel, Shri Jayashankar, CIT-Departmental Representative argued on the issues raised in ground No. 4 above. On the question of the difference on revaluation of the multi-currency loans, the learned Departmental Representative invited our attention to the provisions of Expln. 2 to 43A and stated that, as the liability towards repayment of multi-currency loan is taken over by the India Cements, it does not go to increase the cost of the asset that was transferred, and so, there is no justification for the revaluation. On the question of obsolete items and spare parts that were written off, it is pleaded that it is not ascertained whether they represented allowable business expenditure or whether they were capital items. It is stated that the books have to be seen to verify as to how exactly they were reflected in the books. 91. In his rejoinder, the learned counsel for the assessee mentioned that there is no methodology by which one can arrive at the cost of an undertaking, as distinct from its value, as on a specified date. The asset called 'undertaking' is of a fluctuating nature and it is quite d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the question of grant of depreciation without reducing the w.d.v. of the assets of the cement unit from the block, it is admitted that there is an anomaly, if the depreciation is allowed without such reduction. It is, however, pleaded that such anomalies have to be rectified only by the legislature. It is also mentioned that the legislature has been seized of the anomaly, and it has brought in the necessary amendment under s. 43(6)(c)(i)(C) w. e. f. 1st April, 2000 by the Finance Act, 1999. Sec. 43(6)(c)(i)(C) provides for the decrease, in a slump sale, of the w.d.v. of the assets that are sold. It is, however, pleaded that this provision has no retrospective operation, and hence, cannot be applied for the assessment year under appeal. 95. Referring to the plea that ownership and user of the assets in business is mandatory for grant of depreciation, it is pleaded that these conditions cannot be applied after the introduction of the concept of 'block of assets' w. e. f. 1st April, 1988. It is further pleaded that s. 43(6)(c) governed as to what has to be done when there is sale of an asset for arriving at the w.d.v. and the said provision is quite clear and, in the light ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) had no occasion to consider the question of ascertaining the cost or date of acquisition and cost or date of improvement, etc. In the present case, the CIT(A) went in detail into the modus of ascertaining these aspects and so, it is not a case where the matter can be remanded to the Department, and it is for the Tribunal in the present case, to give a finding as to whether the computational provisions of s. 48 can be fulfilled in the case of transfer of an undertaking or not. 100. With regard to the concession pleaded by the learned standing counsel in the case decided by the Hon'ble Madras High Court in Indian Bank (supra), the learned counsel for the assessee pleaded that the only concession given by the counsel in that case was that the decision of the Madras High Court in the case of CIT vs. K. Rathnam Nadar (1969) 71 ITR 433 (Mad) was approved by the apex Court in the case of CIT vs. B.C. Srinivasa Setty (supra). It was not conceded that the cost of an undertaking was not ascertainable. The Court took the view that, if the cost of goodwill cannot be ascertained, similar is the position in respect of the cost of an undertaking, and so, decided the issue in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed to the assessee after the said date, and as adjusted. 103. It may be observed that the cost of acquisition of a depreciable asset was taken as its written down value. It is on the basis of this provision that the Court concluded that the cost of acquisition of the undertaking could be worked out on the basis of the written down value of the depreciable asset. There is no provision comparable to s. 50 on the statute book for the asst. yr. 1990-91. In the present case, we are not concerned with the working out of the cost of acquisition of the depreciable asset or any other separate asset. Before us, the question is as to how to ascertain the cost of acquisition of the entire undertaking. The plea that the cost of acquisition of entire undertaking is unascertainable was not raised before the Hon'ble Madras High Court. The limited issue before the Hon'ble High Court was whether the cost of the undertaking should be taken at the written down value of the depreciable assets or their original cost. This is totally different from the issue raised before us. In other words, it was conceded before the Court that the cost of the entire undertaking could be determined on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrel. According to him in order that s. 12B(I) may come into operation, there must be a transfer of capital assets as such. Where the entire business as a whole is disposed of including the capital assets held for the purpose of its business, it is not a sale or transfer of the capital assets as such but it is a sale or transfer of the business itself. Sec. 12(B)(I), therefore, will not apply to such cases. In our opinion, the argument cannot be accepted. Capital assets, as defined in s. 2(4A), is property of any kind held by an assessee whether or not connected with his business, profession or vocation with the exception of certain specific items as are specified in the said definition. Capital gains under s. 12B(I) is gain, which arises on the sale, exchange or transfer of a capital asset, i.e. on the sale, exchange or transfer of property of any kind as specified in s. 2(4A). The fact that the property is connected with business or unconnected with the business is immaterial. It is the existence of the property and the gain arising on its disposal by sale, exchange of transfer that alone is necessary for the purpose of constituting a capital gain whether the assets are sold alon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssumed that consideration was attributable to depreciable assets. So, this decision, which was approved by the Supreme Court in Killick Nixon Co. vs. CIT (1967) 66 ITR 714 (SC) is also distinguishable. 109. Similarly, the decision of the Hon'ble Calcutta High Court in Saharanpur Light Railway Co. (supra) is also distinguishable. In that decision, what was involved was the ascertainment of the fair market value of some machinery as on 1st Jan., 1954. For the reasons validly brought out by the learned counsel for the assessee and detailed while dealing with his arguments hereinabove, this decision is also distinguishable. 110. In the case of Syndicate Bank vs. Addl. CIT (supra), the Hon'ble Karnataka High Court considered the question of capital gains on the sale of an undertaking, being a banking concern as a whole. The concluding remarks of the High Court are as under : Of course, if the cost of acquisition of the business undertaking acquired by the Government of India under the BCATU Act cannot be ascertained, then the undertaking cannot be an asset within the meaning of s. 45. But, we express no opinion on this aspect of the matter since there is no finding by the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision for levy and computation of capital gains in case of slump sale. Sec. 50B is a substantive provision which specifically brings to charge profits arising from the slump sale and enacted a deeming provision which lays down that such profits arising from the slump sale would be deemed to be the income of the previous year in which the transfer took place. The provision essentially deals with substantive rights of the subject and imposes new burdens. It is a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have retrospective operation. In the instant case, the provision has been expressly enacted by the legislature prospectively w. e. f. 1st April, 2000. Board's Circular No. 779 dt. 14th Sept., 1999 specifically indicated in para 56.5 that the amendments in relation to amalgamation, demerger and slump sale would apply to the asst. yr. 2000-2001 and subsequent years. It is, thus, manifestly clear that s. 50B introduced by the legislature for levy and computation of capital gains in slump sale is effective from asst. yr. 2000-2001 and subsequent years and would not apply for the earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible to conceptualise the cost of acquisition of such a going concern as well as date of acquisition thereof. If the cost of acquisition and/or the date of acquisition of the asset cannot be determined, then it cannot be brought within the purview of s. 45 for levy and computation of capital gains. Looking to the nature and character of the capital asset being the going concern, the slump sale consideration realised by the assessee would be outside the purview of capital gains under s. 45.'CIT vs. B.C. Srinivasa Setty (1981) 21 CTR (SC) 138 : (1981) 128 ITR 294 (SC); Sunil Siddharthbhai vs. CIT (1985) 49 CTR (SC) 172 : (1985) 156 ITR 509 (SC); CIT vs. K.P.V. Shaikh Mohammed Rowther Co. (1985) Tax LR 675; and Syndicate Bank Ltd. vs. Addl. CIT (1985) 45 CTR (Kar) 68 : (1985) 155 ITR 681 (Kar) relied on; CIT vs. F.X. Periera Sons (Travancore) (P) Ltd. (1991) 94 CTR (Ker) 176 : (1990) 184 ITR 461 (Ker); and CIT vs. Artex Mfg. Co. (1997) 141 CTR (SC) 290 : (1997) 227 ITR 260 (SC) distinguished. The capital gain has been arrived at an amount of Rs. 1,02,97,689 as short-term capital gain on the ground that it relates to stock-in-trade. The computation is on the face of it factually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specie. What is sold in such a case is not individual items of property forming part of the aggregate, but the capital asset consisting of business of the whole concern or undertaking. What arises for consideration from the point of view of taxation is only the gain in respect of the transaction and nothing else. 114. For an undertaking, apart from the cost of acquisition, cost of improvement has also to be computed to meet the requirements of s. 48. For this, initially date of acquisition and dates of improvement have also to be determined. Further, the cost of the undertaking may not possibly be equated with the cost of the assets, depreciable or otherwise reflected on the balance sheet. There are so many other intangible assets like brand name and goodwill and even patent rights, permits and licences which are not reflected on the balance sheet. The improvement of an undertaking cannot possibly be equated to the new assets acquired after the commencement or setting up of the business. It is arguable that the improvements are a result of revenue expenditure written off in each year. For example, the improvement of an undertaking may involve such intangible factors like the traine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he balance sheet may not be correct, as the cost of the undertaking includes the expenditure on its improvement which is written off year after year by debiting to the P L a/c. What are reflected on the balance sheet are assets which, by definition, are those expenditure or reserves which yield services in future. So far as the cost of acquisition of an undertaking is concerned, it cannot be restricted to such assets alone, whether they are taken at original cost or at their written down value. 116. We have indicated hereinabove, a number of decisions in which the Courts have held that the computational provisions failed in respect of levy of capital gains tax on the transfer of capital assets like route permits, goodwill, import entitlements, tenancy rights, trees of spontaneous growth, etc. An undertaking involves a number of such items. When some of these items are not amenable for the levy of capital gains tax, as per the Court rulings, there is all the more reason to hold that an undertaking, which comprises so many such items, is also not amenable to levy of capital gains tax, as the requirements of computational provisions of s. 48 are not satisfied. 117. In this context, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the transfer of an undertaking fail. It is to make up for this lacuna that s. 50B has been introduced by Finance Act, 1999 w. e. f. 1st April, 2000. The said section reads as under : 50B(1) Any profits or gains arising from the slump sale effected in the previous year shall be chargeable to income-tax as capital gains arising from the transfer of long-term capital assets and shall be deemed to be the income of the previous year in which the transfer took place; Provided''' (2) In relation to capital assets being an undertaking or division transferred by way of such sale, the net worth of the undertaking or the division, as the case may be, shall be deemed to be the cost of acquisition and the cost of improvement for the purposes of ss. 48 and 49 and no regard shall be given to the provisions contained in the second proviso to s. 48. 3............. Explanation 1'For the purposes of this section, net worth shall be the aggregate value of total assets of the undertaking or division as reduced by the value of liabilities of such undertaking or division as appearing in its books of account; Provided that any change in the value of assets on account of revaluation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a procedural section. This plea does not seem to be acceptable. If s. 50B is held to be retroactive, similar construction needs to be placed upon the provisions of s. 55(2)(a), which provides for deeming the cost of acquisition of certain assets like goodwill, trade marks, brand-name, etc., of a business as 'nil' from specified dates. Sec. 55(2)(a) is a deeming provision, inasmuch as it deems the cost of acquisition of specified assets to be 'nil'. Similarly, s. 50B is also a deeming provision, as it deems the cost of acquisition of an undertaking as its 'net worth' which has to be calculated as per the stipulated mode. There does not seem to be any decided case where the provisions of s. 55(2)(a) are held to be retroactive. So, analogously, there seems to be no case for holding that s. 50B is retroactive. 122. Further, there is a basic difference between r. 1BB of the WT Rules on the one hand and s. 50B and s. 55(2)(a) of the IT act under consideration, on the other. Rule 1BB has been considered by the apex Court as a rule of evidence because it deems the market value of the residential house to be one arrived at on application of a particular method of v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od for some years on the statute. Learned counsel for the assessee contended that the blocks are maintained only assessee-wise and not source/business-wise. He, however, admitted that separate books of accounts have been maintained for the fertiliser unit and the cement unit even though the books of the cement unit were subsequently handed over to M/s India Cements Ltd. He mentioned that, however, the block-wise details of the fertiliser unit and the cement unit are available with the assessee. We are of the view that computation of income has to be made source/business-wise in terms of s. 70 of the IT Act. Sec. 32(2) as it stood for some period on the statute book which we have extracted hereinabove leads us to the same conclusion. Further, there are various sections in Chapter VI-A like s. 80-I, 80-IA, 80-IB, 80HHC etc. under which relief has to be granted to specified industrial undertakings. So it appears to us that the scheme of the Act is that the income has to be computed for each source or business or undertaking under the head 'business' and the loss of one source/business or undertaking can be set off against income under a different source under the same head. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and management between them Placitum E. p. 411) in the light of the finding of the Tribunal in the context of the claim for deduction of s. 36(1)(iii), was rejected. It was also held that the business of manufacture of cement did not commence in that year. So it appears to us that the fertiliser and cement units are separate sources and as all the blocks of assets of cement unit are transferred to India Cements Ltd., they have ceased to exist and so the pre-condition of ownership and user in the year stipulated in s. 32 are not satisfied, and, consequently, the assessee is not eligible for the grant of depreciation without reducing the WDV of the blocks of the cement unit from the block of assets. Actually, there is no such reduction involved because the blocks have to be maintained separately for each source. When the blocks of the cement unit have ceased to exist, they are no longer eligible for grant of depreciation. Sec. 43(6)(c)(ii) comes into picture only when the block continues and does not seem to apply to a case like the present one, where the block has ceased to exist. Sec. 43(6)(c)(i)(C) relating to slump sale does not apply for the assessment year in question. 128. Eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed, in respect of that block of assets in relation to then said preceding previous year and as further adjusted by the increase or the reduction referred to in item (i). Explanation 1 :''.. As already mentioned, s. 43(6)(c)(i)(C) is not applicable for the assessment year in question. It is claimed that s. 43(6)(c)(ii) stipulates what is to be done when an asset falling within a block is sold. The monies received in respect of the asset will have to be reduced from the value of the block and depreciation has to be granted on the remaining WDV of the block and it is immaterial whether the asset is owned by the assessee or used in the business of the assessee. Supposing the money receivable on the sale of the asset is less than its WDV, what can be reduced is only the money receivable on the sale and not its WDV. In view of the specific provision of s. 43(6)(c)(ii) stipulating as to how exactly depreciation has to be granted on the block on sale of an asset falling on the block, it is claimed that it is immaterial that the blocks of the cement unit have ceased to exist and they are no longer owned by the assessee or used by the assessee. This is on the assumption that the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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