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TMI Blog2012 (4) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... 09-10, which was earlier not disclosed in the return which was pending scrutiny before the Assessing Officer and an income of Rs. 126,35,41,333/- under MAT for the assessment year 2010-11. 3. On 23rd July, 2010, the Settlement Commission passed an order under Section 245D(1) admitting the application. During the course of the proceedings, the Commissioner a filed report under Section 245D(2B) of the Act and Rule 9 of the Income Tax Settlement Commission (Procedure) Rules, 1997. Reply and clarifications by both the petitioner and the Commissioner were examined and considered by the Settlement Commission. 4. On 16th December, 2011, the Settlement Commission passed the final order determining and deciding various aspects and questions which were raised. In the present writ petition, we are only concerned with one aspect i.e. taxability of Rs. 375 lacs under Section 50B of the Act as capital gains on 'slump sale' paid under the Scheme of Arrangement to the petitioner by its subsidiary SREI Infrastructure Development Finance Ltd ("SIDFL", for short). 5. The Settlement Commission has held that the consideration of Rs. 375 lacs received by the petitioner from SIDFL on transfer of its p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elinquishment of the asset ; or (ii) the extinguishment of any rights therein ; or (iii) the compulsory acquisition thereof under any law ; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ; or (iva) the maturity or redemption of a zero coupon bond ; or (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property : Explanation.- For the purposes of sub-clauses (v) and (vi), "immovable property" shall have the same meaning as in clause (d) of section 269UA. xxx Section 50B. Special provision for computation of capital gains in case of slump sale.-- (1) Any profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 50B was inserted in the Act vide the Finance Act, 1999 w.e.f 1st April 2000, in view of the decisions that 'slump sales' were not taxable under the capital gain provisions because it was not possible to compute cost of acquisition. It was held that when computation cannot be made in the absence of cost of acquisition, then the charging section itself would not be applicable. [see PNB Finance Ltd. versus Commissioner of Income Tax, (2008) 307 ITR 75 (SC)]. 10. Slump sale, as then understood, meant transfer of business as a going concern, and therefore, it was not possible to determine the actual cost namely the cost of acquisition even though, in a given case, it might be a generated asset [see CIT vs. Artex Manufacturing Co. [1997] 227 ITR 260 (SC). In such cases, it was not possible to break-up and compute capital gains on the assets sold, either individually or in entirety. 11. The term 'slump sale', which has now been specifically defined in Section 2(42C) of the Act, means transfer of one or more undertakings as a result of sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales. The use of the word 'transfer' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 2(47). This is apparent as when we read the proviso and sub-section (1) to Section 50B together and in a harmonious way, it is clear that it applies to all types of "transfers" that can be categorized as a "slump sale". Sub-section (2) to Section 50B of also refers to transfer of an undertaking or division by way of sale i.e. "slump sale" and prescribes the mode of computing and calculating capital gains on such transactions. 13. We may refer to the judgment of the Supreme Court in CIT, Cochin vs. Grace Collis (Mrs.) and Ors., (2001) 3 SCC 430, wherein it has been held as under:- "15. We have given careful thought to the definition of "transfer" in Section 2(47) and to the decision of this Court in Vania case. In our view, the definition clearly contemplates the extinguishment of rights in a capital asset distinct and independent of such extinguishment consequent upon the transfer thereof. We do not approve, respectfully, of the limitation of the expression "extinguishment of any rights therein" to such extinguishment on account of transfer or of the view that the expression "extinguishment of any rights therein" cannot be extended to mean the extinguishment of rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s extinguishment of any right in a capital asset. Reference was made to another decision of the Supreme Court in Vania Silk Mills (P) Ltd. Vs. CIT, (1991) 4 SCC 22, wherein the term 'transfer' in Section 2(47) has been interpreted as under:- "11. It is true that the definition of "transfer" in Section 2(47) of the Act is inclusive, and therefore, extends to events and transactions which may not otherwise be "transfer" according to its ordinary, popular and natural sense. It is this aspect of the definition which has weighed with the High Court and, therefore, the High Court has argued that if the words "extinguishment of any rights therein" are substituted for the word "transfer" in Section 45, the claim or compensation received from the insurance company would be attracted by the said section. The High Court has, however, missed the fact that the definition also mentions such transactions as sale, exchange etc. to which the word "transfer" would properly apply in its popular and natural import. Since those associated words and expressions imply the existence of the asset and of the transferee, according to the rule of noscitur a sociis, the expression "extinguishment of any right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be appropriate here to notice the decision of the Supreme Court in Hindustan Lever vs. State of Maharashtra, (2004) 9 SCC 438, which arose under the Bombay Stamp Act, 1958. A question arose whether an order sanctioning the amalgamation of two companies under Section 394 read with Section 391 of the Companies Act, 1956, was an instrument within the meaning of Section 2(1) of the Bombay Stamp Act, 1958 in view of the insertion of clause (iv) to Section 2(g) which expanded the definition of term 'conveyance' to include every order made by the High Court under Section 394 of the Companies Act, 1956 in respect of amalgamation or reconstruction of the Companies etc. The contention of the petitioners therein was that amalgamation under Section 394 of the Companies Act, 1956, was not an order simpliciter of transfer of property by an act of parties with imprimatur of the Court. It was an order of the Court after judicial scrutiny. Such an order was not an act of the parties and constitutes a decree and, therefore, not a conveyance. The contention was rejected in the following words by the Supreme Court:- "18. It is difficult to subscribe to the view propounded by the learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. In that case in a suit for specific performance the property was conveyed to the vendee by a consent decree. The question arose whether the consent decree is an instrument and liable to be stamped. The consent decree contained a recital to the effect that "this decree does operate as the conveyance from the defendants in favour of the plaintiffs in respect of the said property more particularly described in Exhibit A to the plaint". The Court held that: (SCC p. 535, para 11) "11. There is no particular pleasure in merely going by the label but what is decisive is by the terms of the document. It is clear from the terms of the consent decree that it is also an 'instrument' under which title has been passed over to the appellants-plaintiffs. It is a live document transferring the property in dispute from the defendants to the plaintiffs." The aforesaid decree was based on an agreement between the parties. So is the case with an order under Section 394 of the Companies Act which is also based on an agreement between the transferor company and the transferee company. xxx 32. In view of the aforesaid discussion, we hold that the order passed by the Court under Section 394 of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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