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TMI Blog2013 (10) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... of calculating net worth of the undertaking - Following decision of Gopee Nath Paul And Sons And Another Versus Deputy Commissioner Of Income-Tax [2005 (3) TMI 73 - CALCUTTA High Court] - Decided in favour of Revenue. - ITA No.2217/Del/2012 - - - Dated:- 14-6-2013 - I C Sudhir and T S Kapoor, JJ. For the Appellant : Shri A K Mishra, CIT-DR For the Respondent : Shri V K Jain, CA. ORDER:- PER : T S Kapoor This is an appeal filed by the revenue against the order of Ld CIT(A) dated 23.2.2010. The grounds raised by the revenue are as under:- 1. On the facts and in the circumstances of the case and in law the Ld CIT(A) has erred in giving a relief of Rs.12,42,42,474/- in the short term capital gains computed on account of slump sale. 2. On the facts and in the circumstances of the case and in law the Ld CIT(A) has erred in not appreciating the fact that the working of net worth submitted by the Chartered Accountant on Form No.3CEA had been wrongly calculated at Rs.23,14,24,472/- while the difference between the aggregate value of total, assts minus liabilities worked out to Rs.4,40,01,716/- only and thus reducing the short term capital gain from Rs.20,50,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is supported by business acquisition agreement filed during the course of assessment proceedings. In this respect, the revised calculation of capital gain was submitted as under:- Net sales consideration as per para 8.1. of agreement Rs.21,90,18,604/- Less: WDV of fixed assets. Rs.13,81,63,094/- Short term capital gain on slump sale. Rs. 8,08,5,510/- Less: Amount of secured loans repaid Out of slumps sale. Rs. 9,32,61,378/- Net short term capital loss. Rs. 1,24,05,808/- 4. The Ld CIT(A) after going through the submissions of assessee and after going through the remand report obtained during appellate proceedings arrived at the figure of capital gain amounting to Rs.8,08,5,510/- by holding as under:- I have gone through the submissions made by Ld AR and the facts discussed by the Assessing Officer in assessment order. There are two dimensions in respect of finalization of the computation of long term capital gain on slump sale in the case of the appellant. Firstly the sales consideration needs to be computed and secondly the net worth of the appellant needs to be computed. As per the calc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sferred. Therefore, the net worth of the undertaking shall be computed at Rs.13,81,63,094/- which represents the WDV of the fixed assets transferred by way of slump sale. Accordingly the calculation of short term capital gain on slump sale of the undertaking is calculated as under:- - Amount of consideration received on slump sale. Rs.21,90,18,604/- Less: Net worth of the undertaking represented by fixed assets. Rs.13,81,63,094/- Rs. 8,08,55,510. The AO has computed the net capital gain at Rs.20,50,98,284/- as against the correct working of Rs.8,08,55,51O/- as computed above and thus the appellant is allowed relief of Rs.12,42,42,774/-. Therefore, the ground No.2 of appeal is partly allowed. 5. Aggrieved, the revenue is in appeal before us. 6. At the outset, Ld DR submitted that capital gain to the assessee had occurred on account of profit on slump sale and profit has to be calculated as per the provisions of section 50B of the Act. He referred to Form No. 3CEA and submitted that sale consideration was Rs.25 crores and Ld CIT(A) has wrongly taken at Rs.21,90,18,604/-. He further argued that CIT(A) has taken this f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration. The Assessing Officer has taken the consideration value of Rs.25 crores by making an adjustment of current liabilities and current assets. The sale consideration has been specifically mentioned in the business acquisition agreement vide article 8.1. at page 61 of paper book which is at Rs.21,90,18,640/-. The Ld CIT(A) has taken this value as sale consideration and we are of the opinion that this is the correct value which should be considered for the purpose of calculation of capital gain. The Ld CIT(A) has not reduced the amount of secured loans from the amounts of total assets to arrive at the net worth of undertaking which in our opinion is not a correct position as per provisions of section 50B of the Act. 10. Section 50B is a special provision which is applicable in the case involving slump sale and which prescribes a particular method to calculate the capital gain earned by the assessee. Section also prescribes the method of calculating net worth of the undertaking. Since the main dispute is with respect to the calculation of net worth of undertaking we would like to reproduce the Explanation 1 of section 50B which reads as under:- Explanation 1 for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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