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TMI Blog2015 (5) TMI 474X X X X Extracts X X X X X X X X Extracts X X X X ..... ny also earned interest from FDRs by deploying said amount of consideration with the bank in short term fixed deposit account. Therefore, we are inclined to hold that such profits and gains from sale of assets and interest cannot be held as income derived from the activities of the industrial undertaking eligible for deduction u/s 80IC and the word “derived from” covers the source of income not beyond the first degree activities of the business. Disallowance to claim of deduction u/s 80IC of the Act on the income from sale of business assets and income from interest on short term fixed deposits with the banks confirmed. - Decided against assessee. Computation of short term capital gain - addition has been made rejecting the explanation of the assessee that the sale was a slump sale - Held that:- We are included to accept conclusion of the authorities below that sale of assets by the assessee company was not a slump sale in the light of definition given by the statute to the slump sale in section 2(42C) of the Act as the assessee company raised separate bills for each and every asset stating therein value of sale separately assigned to every asset, therefore, the sale of assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 80IC on account of interest of ₹ 1,02,347/-. (iv) n the facts and circumstances of the case, Ld. CIT(A) has erred both on facts and in law in confirming the action of the Assessing Officer in ignoring the provisions of the section 80IC which is quite distinct, despite the assessee bringing to his notice the judgement of Gauhati High Court in the case of Pancharatna Cement (P) Ltd vs Union of India (2009) 317 ITR 259. 3(i). On the facts and circumstances of the case, Ld. CIT(A) has erred both on facts and in law in confirming the action of the Assessing Officer in computing short-term capital gain at ₹ 5,14,80,518/- against ₹ 4,90,59,320/- computed as slump sale by the assessee. (ii) That the above-said addition has been made rejecting the explanation of the assessee that the sale was a slump sale. 4. On the facts and circumstances of the case, Ld. CIT (A) has erred both on facts and in law in confirming the disallowance of an amount of ₹ 6,47,197/- on account of expenses incurred by the assessee. 3. Briefly stated the facts giving rise to this appeal are that the case was selected for scrutiny and a notice u/s 143(2) of the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from sale of business as short term capital gain in the revised computation of income filed on 27.11.2009 and 07.12.2009 then the same cannot be held entitled for deduction u/s 80IC of the Act. The ld. DR pointed out that assessee itself has revised its claim of deduction u/s 80IC of the Act at ₹ 83,71,889.87 then assessee cannot claim the income from sale of business and earned on interest from fixed deposits as eligible u/s 80IC of the Act. 5.1 The ld. DR also contended that separate bills were raised for each and every asset which clearly proves that the sale of business by the assessee was not a slump sale as defined in section 2(42C) of the Act, hence, the profit so derived as short term capital gain is not eligible for deduction u/s 80IC of the Act. 6. On careful consideration of the above submissions, at the very outset, we find it appropriate to consider the ratio of the decision of Hon ble Gauhati High Court in the case of Pancharatna Cement P. Ltd., supra, wherein it has been held that the words derived by an undertaking or an enterprise from any business in section 80IC having regard to the plenitude of expense would take in their fold profits and gains mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s such profits and gains are not derived from business of industrial undertaking as required from eligibility u/s 80IC of the Act. The ld. DR further pointed out that the assessee company itself has excluded these amounts in the revised computation of total income filed before AO on 07.12.2009, therefore, the same cannot be claimed as deduction u/s 80IC of the Act. 6.2 On careful consideration of above submissions, we note that the CIT (A) has decided the issue with following observations and conclusion :- 2.2. I have carefully considered the submission of the Ld. AR and perused the assessment order passed by the AO. The Ld. AR tried to draw a distinction in the language used in section 80lA and section 80IC .I do not agree with the submissions of Ld. AR regarding the interpretation of section 80 IC. Section 80 IC is a special provision in respect of certain undertakings or enterprise in certain special category states. This section was inserted by the Finance Act, 2003 w.e.f. 01.04.2004 with an objective to promote industrialization of economically backward areas. The main purpose was to promote investment and employment in such areas. Sub-section (1) of section 80 IC provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 218 has held that the connotation of the words 'derived from' is narrower as compared to words 'attributable to'. By using the expression 'derived from', Parliament intended to cover sources not beyond the first degree. The Hon'ble Apex Court in the case of Novopan India Ltd. vs. Commissioner of Central Excise 1994 (73) E. L.T. 769 has held that while interpreting provision granting exemption, strict construction of the statute should be adopted. In the instant case, the appellant is claiming deduction u/s 80 IC on the sale of its manufacturing unit. The profit from sale of a unit cannot be termed as derived from the business of manufacturing or production or an article or thing. Considering the facts and circumstances of the case in its totality and various judicial pronouncements on the issue, I hold that the AO was fully justified in rejecting the claim of the 'appellant company. I therefore, confirm the addition made by the AO. This ground of appeal is rejected. 6.3 In view of the above, firstly, we note that the assessee company itself has submitted revised computation of its income before the AO twice, firstly on 27.11.2009 and secondly on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assigned to the individual concern and liabilities in such sale. The ld. DR also pointed out that in the letter dated 19.02.2009, the assessee explained that the assessee company sold its land and building along with all furniture, fixtures and fittings for a lump sum consideration without assigning value of individual assets, therefore, benefit of section 50B of the Act is available to the assessee company but this explanation could not be substantiated by the assessee. The ld. DR supporting the assessment order submitted that the assessee company raised separate bills for each and every asset stating therein value of sale separately assigned to every asset, therefore, the sale of assets by the assessee company cannot be held as slump sale. 8. On careful consideration of above submissions, we are included to accept conclusion of the authorities below that sale of assets by the assessee company was not a slump sale in the light of definition given by the statute to the slump sale in section 2(42C) of the Act. Therefore, we uphold the same and grounds no.3(i) and (ii) of the assessee being de void of merits are also dismissed. GROUND NO.4 9. Apropos ground no.4, the ld. co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale. Section 2(42C} of the I.T. Act, 1961 defines the slump sale/to mean the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in the such sales. It is noted that the appellant has sold plot of land and structure for ₹ 5,75,00,000/- by a separate agreement which does not include plant machinery and other assets. In addition to the plot of land and structure, the appellant also sold the other assets such as' plant and machinery for ₹ 23,65,000, Computer for ₹ 80,000/- furniture fixture for ₹ 45,000/- and office equipment for ₹ 10,000/-. Is further noted that separate bills' were raised for each and every asset, which clearly proves that it is not a slump sale. It is further noted that in the schedule of assets the appellant company has claimed loss on sale of plant and machinery at ₹ 5,99,829/-, Electric installation at ₹ 3,50,845/- furniture fixture at ₹ 60,25,246/-, Computers at ₹ 1,50,980/-, Generator at ₹ 4,07,000/-, Transforms at ₹ 1,50,581/-, Mobile at ₹ 6,072/- and Office equipmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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