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TMI Blog2017 (1) TMI 982X X X X Extracts X X X X X X X X Extracts X X X X ..... and the other was running the leased the hospitals taken from various entities,that it had sold its own hospitals to Fortis Hospitals Ltd.(FHL),as per the business agreement,dated 24/08/209,that FHL acquired all the assets and liabilities of the assessee and purchased in form of slump sale, that the amount to be paid to the assessee was as per clause 3 of the agreement. He observed that computation of cost of acquisition and cost of improvement for slump sale was governed by section 50B of the Act,that as per the provisions of the said section net worth was being to be the cost of acquisition and cost of improvement, that the networks was to be computed on the basis of reducing the aggregate liabilities from the aggregate assets,that in the case under considera - tion the net worth of the assessee was negative,that the liabilities were more than the assets owned by the assessee.He relied upon the case of the Summit Securities Ltd.(ITA/4977/ Mum/2009,dated 07/03/2012)of the special bench of the Tribunal and held that if the negative net worth was there same was to be added to the full value of consideration for computing the capital gains.Aggrieved by the order of the AO,the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the undertaking. The full value of consideration of the undertaking for the purposes of computing the capital gains under section 48 should be taken at Rs. 143 crores and not Rs. 300 crores. The Assessing Officer was not right in adding the amount of liabilities being reflected in the negative net worth ascertained by the auditors of the assessee to the sale consideration for determining the capital gains on account of slump sale. (iii)That the aggregate value of the total assets of the undertaking was Rs. 1360 era res with the value of liabilities at Rs. 1517 crores. When the net worth was negative at Rs. 157 crores it automatically implied that the liabilities are more than the total assets. The contention that the liabilities could not be more than the aggregate value of assets, therefore, failed. The further argument that if the value of liabilities is more than the aggregate value of total assets then the "net worth" should be restricted to zero, ran contrary to the argument that the words "as reduced by" can never mean that the value of liabilities will be more than the aggregate value of the assets. (iv) That the Commissioner (Appeals) was not correct in coming to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (e) Sub-section (2) of section 50B makes it abundantly clear that the undertaking or division as a whole is considered as one capital asset the net worth of 'this capital asset is considered as cost of acquisition and cost of improvement for the purposes of sections 48 and 49. Therefore, it becomes patent that section 50B is a code in itself only for the determination of cost of acquisition and cost of improvement of the undertaking but not for the computation of capital gains in case of slump sale. The object of section 50B is to simply determine and supply the figure of cost of acquisition and cost of improvement of the undertaking or division, being its net worth along with the decision as to whether the undertaking is a long term or short term capital asset is decided and forwarded to section 48, the computation provision in the later section is activated for determining the income chargeable under the head "capital gains" in accordance with the mode of such computation as prescribed therein. The modus operandi to compute capital gain from the transfer undertaking thus provides for reducing the cost of acquisition and cost of improvement of the capital asset from the full v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Rs. 186.58 crores the same was to be further adjusted to any further liability,that during the process of transaction total liabilities exceeded Rs. 599.69 crores,that the excess liability came across during the transition was of Rs. 43.36 crores,that FHL did not pay the said amount to the assessee but same was adjusted from 186.58 crores,that the AO had wrongly added the disputed amount in the asset site and also in the liability side,that the amount in question was liability which was to be accounted in the liability decide and had to be deducted from the lump-sum consideration,that the amount was not received by the assessee nor had it accrued to him,that same had to be deducted from the lump-sum consideration received by the assessee.Finally, he held that the amount was to be allowed as the assessee had not received it. 6.2.Before us,the DR stated that matter could be decided on merits. The AR supported the order of the FAA.We find that the assessee and FHL had entered into a business agreement, that as per the agreement excess liabilities arising during the transition period had to be adjusted from the lump-sum amount of Rs. 186.58 crores,that during the process of transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HL Escrow Account was opened,that Rs. 15 crores was kept in the said account for settling the future liabilities,that the assessee was to receive the amount from the Escrow a/c.after a period of 2 years,that a liability amounting to Rs. 2.79 crores arose and was settled during the year,that the assessee had filed a revised return and made the claim about it, that there is no doubt about the incurring of the expenditure.The assessee had produced necessary evidences in that regard and same were found to be genuine by the FAA.In these circumstances,we are of the opinion that there is no need to interfere with the order of the FAA.Confirming the same,we dismiss Ground No.1.c . 8.Ground 2 is about treating the short term capital gains(STCG) as long term capital gains (LTCG).During the assessment proceedings,the AO found that the assessee owned 12 hospitals and 2 Nursing schools,that out of the 12 hospitals four were owned over a period of 3 years and rest of the hospitals were owned for a period less that 3 years,that it had claimed LTCG arising out of the slump sale for transferring the hospitals and nursing schools to FHL. The AO treated the entire gain on slump sale as STCG,instead ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset. So long as the undertaking is owned and held by the assessee for a period of more than 36 months, the capital gain arising from its slump sale is considered as long term capital gain notwithstanding the period for which its individual assets were owned and held." Respectfully,following the above,we hold that there is no need to interfere with the order of the FAA,as four hospitals of the assessee were owned by it for a period of more than 36 months and that it is a case of slump sale.Upholding his order,we dismiss Gr.No.2. 9.Last GOA is about disallowance of Rs. 48.71 lakhs made u/s.14A r.w.r. 8D of the Income- Tax Rules(1962)Rules.During the assessment proceedings,the AO found that the assessee had made investment for purchasing the shares of Kanishk Housing Development Co.Pvt. Ltd.(Kanishka),that Kanishk was a subsidiary company of the assessee.The AO held that though no exempt income was earned by the assessee the investment made by it were capable of earning exempt income in the future.Invoking the provisions of Rule 8D(2)of the Rules, he made a disallowance of Rs. 48,71,169/-. 9.1.Before the FAA,the assessee argued that it had not earned any exempt income during the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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