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TMI Blog2018 (7) TMI 1611X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred its division at Thazhambur Road, Navalur Village & Post, Kancheepuram along with plant & machinery, furniture & fixtures, computers, inventories etc. As per the ld. Authorised Representative, though the total consideration agreed was Rs. 18,31,00,000/-, what was received during the previous year relevant to the impugned assessment year was only Rs. Rs. 16,02,00,000/- and the balance sum of Rs. 2,29,00,000/- was received in subsequent financial year 2012-2013. Further as per the ld. Authorised Representative, assessee had computed capital gains for the impugned assessment year, considering the sum of Rs. 16,02,00,000/- and the balance sum of Rs. 2,29,00,000/- was offered in the subsequent assessment year. However, as per the ld. Authorised Representative the ld. Assessing Officer held the date of actual receipt of consideration as irrelevant since the slump sale agreement was entered on 06.04.2011. Accordingly, to ld. Authorised Representative, the ld. Assessing Officer computed the capital gains for the impugned assessment year taking Rs. 18,31,00,000/- as the sale consideration. 4. Continuing his submissions, the ld. Authorised Representative, stated that assessee had move ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year. Reliance was placed on the judgment of Hon'ble Bombay High Court in the case of CIT vs. Hemal Raju Shete,(2016) 136 DTR 417, that of Hon'ble Jurisdictional High Court in the case of CIT vs. Motor Credit Co. P. Ltd, (1981)127 ITR 572 and that of Hon'ble Apex Court in the case of CIT vs. Hindustan Housing and Land Development Trust Ltd, 161 ITR 524. 5. Per contra, ld. Departmental Representative submitted that slump sale agreement was clear regarding the question of consideration. According to him, just because a part of the consideration was to be released in the subsequent year would not mean that capital gains had to be distributed over various years. 6. We have considered the rival contentions and perused the orders of the authorities below. Slump sale agreement entered by the assessee on 06.04.2011 mentions the consideration at clause 3 thereof. The said clauses is reproduced hereunder:- 3 CONSIDERTION:- 3.1 Purchase Price for the Business The purchase price for the, Business (the "Purchase- Price") is INR 18,31.00,000 (Indian Rupees Eighteen crores thirty one lakhs only), provided that the Purchase Price shall be subject to a working Capital adjustment as agreed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent that any claim made pursuant to . any of the aforesaid clauses has not resulted in an indemnification obligation as on* the-date of the expiry of the Escrow Period, the amount of such claims shall be released from the Escrow Account to the Seller Without prejudice to the right of Purchaser to make an indemnification claim in respect of the same pursuant to Clause 7 below, if such claim were to crystallise on a future date. Save as provided in the foregoing provisions of this Clause 4.8.1, there shall be no other claim of set off, adjustment or deduction by Purchaser from the Escrow Amount 4.8.2 Within 5 (five) Business Days after expiry of the Escrow Period, the balance amount (being the Escrow Amount less any amounts deducted for claims filed by Purchaser pursuant to Clause 4.8.1 ),increased by interest accrued in the Escrow Account, shall be paid to the Seller 4.8.3 Purchaser shall not merge with any other entity belonging to the Purchaser Group or otherwise, and shall not dispose of the Business transferred pursuant to this Agreement, until the payment of the Escrow Amount to the Sellers In accordance with the terms of this Agreement. In the event of any proposal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after a period of 365 (Th.fee Hundred and Sixty Five) days from the 'Closing Date ("Escrow Period") less any Damages notified by the Purchaser under an Indemnity Letter to the Escrow Agent in accordance with Clause 7.3. The Escrow Agent shall release the amount of Damages, if any, to the Purchaser in accordance with Clause .7.3; Provided in the* event that the* Escrowed Amounts reduced by Damages as specified in the Indemnity Letter(s), is reduced to zero on account of adjustments made by the Purchaser on account of Damages suffered by it or claims made . against the Seller Group, the Escrow Agent shall not be required to transfer any monies to Seller's Bank Account. The Damages in respect of a Seller shall be in the proportion as .. {)ailed in Schedule 4. Provided further that under .00 circumstances will the amount of . Damages to be adjusted, in respect of a Seller from the Escrow Account exceed the .. proportion of the Escrowed Amount attributable to such Seller as set forth in Schedule 4. In the event the Damages exceed the amount as detailed in Schedule 4 with respect to . each Seller, the Parties hereby agree and understand t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l immediately release the Escrowed Amounts in . favour of the Seller Group upon receipt of Written notification in the form set out ID . Schedule 5 from Purchaser and Seller Group pursuant to this clause 7.4. The Escrow Agent shall rely exclusively on such written notification and shall release the Escrowed Amounts to Seller Group, upon receipt of such written notification, and is not required to verify the contents or authenticity of the letter. 7.5 * Any payment by the Escrow Agent under this Agreement will be made without any deduction or withholding for or on account of any tax unless such deduction or withholding is required to be made by the Escrow Agent. in its capacity as an Escrow Agent by Applicable Law. 7.6 The Escrow Agent shall not be obliged to check or ensure, and the Escrow Agent shall be entitled to presume, .that any Communication/s from the other Parties to the Agreement are correct, accurate and in accordance with Applicable Law, and shall merely be required to act as per such Communication /s. . Specimen signatures of the aforesaid .. this Agreement, and the Escrow Agent shall at all times be entitled to rely on the same without any further verification. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port of an accountant as defined in the Explanation below sub-section (2) of section 288 indicating the computation of the net worth of the undertaking or division, as the case may be, and certifying that the net worth of the undertaking or division, as the case may be, has been correctly arrived at in accordance with the provisions of this section. Explanation 1.- For the purposes of this section, ''net worth'' shall be the aggregate value of total assets of the undertaking or division as reduced by the value of liabilities of such undertaking or division as appearing in its books of account : Provided that any change in the value of assets on account of revaluation of assets shall be ignored for the purposes of computing the net worth. Explanation 2.- For computing the net worth, the aggregate value of total assets shall be,- (a) in the case of depreciable assets, the written down value of the block of assets determined in accordance with the provisions contained in sub-item (C) of item (i) of sub-clause (c) of clause (6) of section 43 ; (b) in the case of capital assets in respect of which the whole of the expenditure has been allowed or is allowable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the whole of the expenditure of Rs. 10,41,749/- debited by the assessee in its profit and loss account. Ld. Authorised Representative submitted that ld. Commissioner of Income Tax (Appeals) allowed the claim on pro-rata basis for six days, considering the slump sale agreement entered on 06.04.2011. Contention of the ld. Authorised Representative was that type of expenditure incurred by the assessee was necessary to maintain its legal status as a company and ought not have been disallowed. 11. Per contra, ld. Departmental Representative strongly supported the orders of the lower authorities 12. We have considered the rival contentions and perused the orders of the authorities below. What was disallowed by the ld. Assessing Officer is reproduced hereunder:- 13. Expenses Sl.No Particulars Amount 1 MANUFACTURING EXPENSES 2,84,847 Power and fuel 14,056 factory rent 2,49,265 repairs to machinery 460 Insurance 1,628 Factory security charges 19,228 Factory maintenance Navaloor 210 2 EMPLOYEE BENEFITS ..... X X X X Extracts X X X X X X X X Extracts X X X X
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