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TMI Blog2014 (5) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1922 - These words have to be construed by reference to other enactments - a reading of the clauses in the Scheme of Arrangement shows that the transfer of the undertaking has took place in exchange for issue of preference shares and bonds. Merely because there was quantification when bonds/preference shares were issued, would not mean that the monetary consideration was determined and its discharge was only by way of issue of bonds/preference shares - The Scheme does not refer to any monetary consideration for the transfer - The parties were agreed that the assessee was to transfer the undertaking and take bonds/preference shares as consideration - it was a case of exchange and not a sale - Section 2(42C) of the Act was inapplicable - If that was not applicable and was not attracted, then, Section 50B was also inapplicable - the Tribunal was of the view that the transfer of Lift Division comes within the purview of Section 2(47) of the Act but cannot be termed as a slump sale – the finding of fact cannot be said to be perverse or based on no material – as such no substantial question of law arises for consideration – Decided against Revenue. - Income Tax Appeal No. 2153 of 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in Writ Petition (Civil) No.1592 of 2012, decided on 30th March, 2012. 6. Mr. Suresh Kumar submitted that the law has been amended specifically to take care of the tendency of assessee's like the one before us in transferring the divisions or units and trying to pass off the transaction as not a sale but handing over of a running unit or going concern. The attempt is to circumvent and bypass the legal provisions with regard to the imposition of taxes on transfer. Earlier such transaction was not capable of being brought to tax and in terms of the applicable provisions. Therefore, the legislature intervened and by an amendment to the Act inserted the definition of slump sale and thereafter inserted Section 50B. The scheme has been set out in the judgment of the Delhi High Court. The controversy, therefore, before us should be determined and decided in the light of this judgment. It is submitted by him that transfer of the Lift Division was for consideration. That consideration was in rupees/Indian currency. That has been indicated in details by the Assessing Officer. It may be that the consideration is the value of the shares which have been handed over as a part of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be erroneous in law nor can it be termed as perverse. The appeal, therefore, does not raise any substantial question of law. 9. We have with the assistance of the learned counsel appearing for the parties perused the appeal paperbook including the order of the Income Tax Appellate Tribunal. We have also perused the relevant legal provisions and the decisions brought to our notice by the learned counsel for both parties. 10. At the outset, the counsel agreed that the question posed at paragraph 4(i), namely, the deduction claimed by the assessee on account of the provisions for warranty is concerned, that is fully covered in favour of the assessee and against the revenue by the judgment of the Hon'ble Supreme Court in the case of Rotork Controls Pvt. Ltd. (supra). The appeal, therefore, does not raise any substantial question of law in relation to this deduction. 11. The appeal survives now in relation to the transfer of Lift Division. 12. In relation to that, what has come on record and admittedly is that, during the assessment year in question, namely, 20053006, the assessee transferred its Lift Division to M/s. Tiger Elevators Pvt. Ltd., according to the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect matter of the appeal. It also posed the question as to whether such a transaction as was subject matter of exchange deed could be termed as a sale and alternatively whether the consideration of the sale is not the market value of the shares as on the date of the transaction, namely, Rs.95/per share but the face value of the shares. 16. In answering this question, the Hon'ble Supreme Court held that, it is only if there is a sale of the cinema house and the other assets that the taxable profits and gains are to be computed under Section 10(2)(vii) as the amount by which the written down value exceeds the amount for which the assets are actually sold. The Supreme Court held that the word sale or sold have not been defined in the Indian Income Tax Act, 1922. These words, therefore, have to be construed by reference to other enactments. The Supreme Court then referred to the definition of the term sale as appearing in the Transfer of Property Act, 1882 and the Sale of Goods Act, 1930. The Hon'ble Supreme Court then referred to the definition of the term Exchange as appearing in the Transfer of Property Act, 1882. It then rejected the contention of the revenue t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts that the covenantees, if remaining in the Duke's service, would receive respectively sums equivalent to their wages and salaries. If they left the service of the Duke the payments would still have been due, but it was in nearly all instances explained to the employee that so long as the service continued, while the deed did not prevent his claiming ordinary wages in addition, it was expected that he would not do so. It was argued for the Crown that though in form a grant of an annuity, the transaction was in substance merely one whereby the annuitant was to continue to serve the Duke at his existing salary, so that the annuity must be treated as salary. Neither the Court of Appeal nor the House of Lords agreed with this contention. To regard the payments under the deed as in effect payments of salary would be to treat a transaction of one legal character as if it were a transaction of a different legal character. With regard to the supposed contrast between the form and substance of the arrangement, Lord Russell of Killowen stated at page 524 as follows: If all that is meant by the doctrine is that having once ascertained the legal rights of the parties you may disrega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er words, the Tribunal held and as a fact that this is not a case where the consideration was determined and decided by parties in terms of money but its disbursement was to be in terms of allotment or issue of bonds/preference shares. In fact, all the clauses read together and the entire Scheme of Arrangement envisages transfer of the Lift Division not for any monetary consideration. The Scheme does not refer to any monetary consideration for the transfer. The parties were agreed that the assessee was to transfer the undertaking and take bonds/preference shares as consideration. Thus, it was a case of exchange and not a sale. Therefore, the Tribunal held that Section 2(42C) of the Act was inapplicable. If that was not applicable and was not attracted, then, Section 50B was also inapplicable. 19. We are of the opinion that the findings of fact rendered by the Tribunal from paragraph 40 and in relation to Ground No.2 are thus rendered by applying the legal principles to the facts and circumstances of the assessee's transaction. In the given facts and circumstances and going by the clauses of the Scheme and reading them harmoniously and together, the Tribunal held that the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Income Tax Act as capital gains on 'slump sale' paid under the Scheme of Arrangement to the petitioner by its subsidiary. The Settlement Commission held that the amount of Rs.375 lacs received by the petitioner from its subsidiary on transfer of its project finance business and assets based on financing business including its shareholding in SRIE Insurance Broking Pvt. Ltd. was taxable under Section 50B of the Act as a slump sale. 25. The argument of the petitioner was that this is a transfer under the Scheme of Arrangement but is not a sale. The Scheme of Arrangement was sanctioned by the High Court of Calcutta. The argument was that this is a transfer of a statutory interest and character. Section 50B therefore had no application as the Scheme of Arrangement is not a slump sale. 26. It is in dealing with that argument and in the peculiar facts that the Delhi High Court held that the petitioner's contentions cannot be accepted. The petitioner before the Delhi High Court had admitted that there was a monetary consideration in the Scheme of Arrangement. The money was paid and additionally shares of a third company were issued in favour of the assessee. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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