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TMI Blog2003 (1) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... sugar factory as a going concern for a total price of Rs. 53,50,000. The purchaser took over the liability of Rs. 15,90,324 and the balance Rs. 37,59,676 was shown apportioned against the various items of assets. The Assessing Officer held that the individual items of assets were sold and, therefore, the assessee was liable to profit under section 41(2) of the Income-tax Act, 1961 (the "IT Act") as well as the capital gains tax. The Commissioner (Appeals) confirmed the assessment order. The learned Tribunal held that the sale was of the whole of the going concern. Therefore, the assessee was not liable to profit under section 41(2) of the Income-tax Act, or capital gains. Section 41(2), of the Income-tax Act, as applicable to the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ittle different if the whole of it is sold as a going concern. In such a case, section 41(2) as coined by the Legislature cannot be attracted. The question is dependent on the facts of each case. This question seems to have already been answered. In CIT v. Mugneeram Bangur and Co. [1965] 57 ITR 299 (SC) at pages 305-306, it was held that where the sale is in slump without any itemwise earmarking section 41(2) is not attracted. In CIT v. Narkeshari Prakashan Ltd. [1992] 196 ITR 438 (Bom), it was held that where the sale is in slump without any itemwise earmarking, section 41(2) is not attracted. In Associated Clothiers Ltd. v. CIT [1967] 63 ITR 224, 231 (SC) and Pandit Lakshmikanta Jha v. CIT [1970] 75 ITR 790 (SC), it was laid down that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roposition from the reasoning given in the said decision. On the other hand, it had followed the same principle as was laid down in Mugneeram Bangur and Co.'s case [1965] 57 ITR 299 (SC) and had reaffirmed the said principle. He has also relied on a decision in CIT v. Electric Control Gear Manufacturing Co. [1997] 227 ITR 278 (SC) to support his contention. But this decision also proceeded on the basis that in the facts and circumstances of the said case, there was nothing to indicate that any of the assets were sold itemwise. Therefore, section 41(2) was not applicable to the said case. In fact, there is no difference in the view taken by the said decision. He has also relied on a decision in Southern Roadways Ltd. v. CIT [1999] 235 ITR 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be seen in its proper perspective. The assessee had sold the going concern for the whole of the consideration. The liability was set off the consideration. The purchaser had nothing to do with the liability. It had paid the consideration of Rs. 53,50,000 for the whole of the sugar factory as a going concern. It will meet the existing liability of the assessee out of the consideration, which was set off therefrom. The assessee had received the whole consideration for the entire sugar factory. Out of this consideration it had parted with the sum of Rs. 15,90,324 for meeting its liability. To the assessee it was Rs. 53,50,000, which it had received for the entire sugar factory as a going concern. Out of this consideration, it had set o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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