9911796707
TMI Blog2014 (12) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... suppliers, receivables from trade or others and petty cash related to the business - the consideration paid of 6,03,21,910 was for a running and going concern and to acquire an undertaking - 6,03,21,910/- was not sub-divided or bifurcated under the said agreement under different heads - Value of the fixed assets, which were transferred and on which depreciation was earlier claimed by Wimco Ltd. and after acquisition by the assessee was not specified or so stated in the agreement itself – It was lump sum payment. What was purchased by the appellant asseessee was an undertaking there being slump sale and the entire business including assets and liabilities were transferred for a lump sum amount - There was no break-up or division of the said amount in the agreement itself - The amount paid would be the sale consideration paid after taking into account value of the plant, machinery, dead stock as well as work in progress, stock in trade etc., and intangible items like goodwill, manpower, values of different licences etc. - This cost paid would be for both depreciable and non-depreciable assets - difficulties do arise in computing the actual cost of the assets on which depreciation is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 1990-91. The actual cost of fixed assets acquired was not examined by the Assessing Officer and assessment made was completed at 'nil' income. The matter regarding determination of actual cost was considered for the first time by the Assessing Officer during the assessment year 1991-92. Relying upon surveyor's report, the value of the said assets was taken as ₹ 3,50,37,238/-. We note that the said surveyor was appointed by the appellant company. The appellant company carried out the matter in appeal to the Commissioner of Income Tax (Appeals) [CIT(Appeals), for short] for both the assessment years 1990-91 and 1991-92. The CIT (Appeals) did not agree and held that the Assessing Officer had rightly computed the cost of fixed assets acquired at ₹ 3,50,37,238/- as against ₹ 6,10,02,641/- claimed by the assessee. He directed the Assessing Officer to make fresh assessment for the assessment year 1990-91 after considering the claim of depreciation of assets acquired from M/s Wimco Ltd. in the light of his findings in the assessment year 1991-92. Thereupon the Assessing Officer passed an appeal effect order under Section 143(3) read with Section 250 of the Act for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3/- LESS:OTHERALLOCATIONS LOSS FOR THE PERIOD 1.12.89 TO 30.3.90 11,57,339/- CAPITAL WORK-IN-PROGRESS NEW PROJECT 39,74,515/- WORKING CAPITAL 89,75,211/- PLANT & MACHINERY NEW ADDITION 1,42,22,682/- COST OF FIXED ASSETS CLAIMED IN THE BALANCE SHEET 6,10,02,641/-6,10,02,641/- CASE NOW PUT FORWARD BEFORE HONOURABLE TRIBUNAL LESS: OBLIGATIONS WHICH CANNOT LEGALLY BE CAPITALISED (NRDC, WARRANTIES, AND GRATUITY) CLAIMED AS REVENUE EXPENDITURE AS AND WHEN ACCRUED/INCURRED 1,49,03,413/- 4,60,99,228 INTEREST ON UNPAID PURCHASE CONSIDERATION FOR THE PERIOD 1.12.89 TO 29.3.90 NOW CLAIMED AS REVENUE EXPENDITURE FOR THE ASSESSMENT YEAR 1990-91 21,53,714/- COST OF FIXED ASSETS NOW CLAIMED BEFORE THE HON‟BLE TRIBUNAL 4,39,45,514/- COST OF FIXED ASSETS ESTIMATED BY THE DEPARTMENT 3,50,37,238/- ADD: ESTIMATED INTEREST COST FOR THE IMPLEMENTATION PERIOD AS PER SUPREME COURT DECISION 98 ITR 167, 173 60,00,000/- ESTIMATED ESTABLISHMENT COST DURING IMPLEMENTATION PERIOD AS PER DECISION ABOVE 24,00,000/- 4,34,37,238/- " 7. The aforesaid chart would indicate that ₹ 1,49,03,413/- i.e. obligations relating to NRDC royalty, warranties and gratuity were to be claimed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., which is as under:- "PARTICULARS AMOUNT (in Indian Rupees) Basic purchase, consideration based on Net Operating Assets as on 31.3.1989. 56580256 Increase in purchase consideration @ 17% on the unpaid amount for the period 1.12.89-29.3.90 2153714 Interest on delayed payments 7560 Increase/(Decrease) in purchase consideration due to movements with effect from 1.4.89 i) On account of fixed assets 3781995 ii) On account of working capital 7088869 iii) Loss for the period 1.4.89-30.3.90 3423556 iv) Corporate overheads 1200000 v) Increase @ 17% on the next monthly movement of above 103578 Fifty per cent stamp duty paid at Bombay 160140 TOTAL 60321910" 10. Another chart enclosed with the appeal by the assessee, pertains to and give details of balance to be allocated on fixed assets, reads as under:- "BALANCE TO BE ALLOCATED ON FIXED ASSETS PARTICULARS MARKET VALUE STAMP DUTY TOTAL FACTORED VALUE LAND 1357500 20497 1377997 2367962 BUILDING: -RESIDENCE 3300480 49835 3350315 5757212 -FACTORY 5947898 89808 6037706 10375249 PLANT & M/C 24043043 24043043 41315782 FURNITURE 388317 388317 6672387 MOTOR CAR (WDV) 13417 13417 23056 PATENT (WDV) 288693 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to different items, observing that the assessee had himself furnished the information to the Assessing Officer and, therefore, it cannot be said that the price attributed to the items transferred was not indicated. In the same volume, the Supreme Court in CIT vs. Electric Control Gear Mfg. Co. (1997) 227 ITR 278, concluded otherwise in case, again of slump sale with a lump-sum consideration being paid for a going concern, on the ground that the assessee had not furnished the bifurcation or information in this regard. 14. This distinction was noticed by the Supreme Court in PNB Finance Ltd. vs. CIT (2008) 307 ITR 75 (SC). This was a case relating to capital gains under Section 45 of the Act. The Supreme Court reversed the decision of the High Court holding that Section 45 was not applicable, for it was not possible to apply the computation provision which was inextricably linked and together with the charging section constituted an integrated code. Thus, an undertaking cannot be confused with its parts or assets and in case lump sum payment was made, it cannot be earmarked item wise. However, in the said decision Supreme Court noticed the decision in Artex Manufacturing Co. (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with what should be capitalised, but we have to answer what was the actual cost of the fixed assets on which depreciation should be claimed and allowed i.e. the actual cost paid by the assessee for the depreciable assets acquired from Wimco Ltd. For computing the value of the said assets, the appellant-assessee and Wimco Ltd. had both relied upon the surveyor's report dated 16th January, 1990 and 6th March, 1990. The said surveyor had valued all buildings, boundary wall and other plant and equipments. The aforesaid valuation report is detailed and elaborates and is also the basis on which Wimco Ltd. had paid tax on the resultant transfer. 17. We note for benefit the judgment of Supreme Court in the case of Jogta Coal Co. Ltd. vs. CIT AIR 1959 SC 1232, wherein the Supreme Court has held as under:- '12. The words which require to be considered are "on the original cost thereof to the assessee". It has been held by the Privy Council in Commissioner of Income-tax v. Buckingham & Carnatic Co. Ltd., that the word assessee in section 10(2)(vi) refers to the person who owns the property in question and who is being assessed and not the predecessor and depreciation allowance is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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