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TMI Blog2018 (11) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... ay that the sale consideration for the slump sale is a sum of ₹ 25.50 Crores by reading clause 3.1 of the Agreement dated 16.3.2007 in isolation. The evidence with regard to how much was the due to CPT towards MGT payable by the Assessee and how much was not waived by CPT have not been brought on record by the Assessee. The Assessee parted with the Kochi Terminal Undertaking on its slump sale as early as 16.3.2007 and the time for completion of condition precedent for slump sale as per the agreement, expired in December, 2007. KCPL refused to give any further extension of time for completion of the terms of the agreement by the Assessee. Therefore, there is merit in the contention of Assessee that it could not procure the required details from CPT and M/s. Aegis Logistics Ltd., who were the subsequent transferee of the Kochi Terminal Undertaking refused to co-operate. The issue should be remanded to the AO for consideration afresh on these aspects with a direction to the AO to exercise his powers under the Act, on specific request from the Assessee on the information required and the party from whom it is required, to establish its case that a sum of ₹ 5 Crores o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no dispute that the undertaking that was sold was held for more than 36 months by the Assessee. 2. Capital gains arising on slump sale are calculated as the difference between sale consideration and the net worth of the undertaking. Net worth is deemed to be the cost of acquisition and cost of improvement for section 48 and section 49 of the Act. Thus, the manner of computation of capital gain is same as provided in Sec.48 of the Act, except the variation that instead of reducing the cost of acquisition and cost of improvement from the full value of consideration that are received or that accrues on transfer, the net worth of the undertaking is taken as the cost of acquisition and cost of improvement. There is no dispute in the present case about the net worth of the undertaking that was sold and it is a sum of ₹ 29,69,09,841. 4. Section 48 of the Act lays down the mode of computation of capital gain and the relevant portion of the section for the present appeal, reads thus:- 48. The income chargeable under the head Capital gains shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l as the dues, if any; demanded by Cochin Port Trust or any other authority including but not limited towards Lease Rent, Way Leave Charges, Interest, Penal Interest, Premium, Delayed payment charges or any other charges, levies etc. for the period up to the Completion date, though arisen before, during or after execution of this Agreement and KSSPL obtaining a No Due Certificate from Cochin Port Trust or concerned authority in that behalf. iv) Valid permissions/licenses from the following authorities are transferred in favour of KCPL in a clean manner without any stipulation and originals handed over to KCPL by KSSPL: a. Petroleum storage licence from Chief Controller of Explosives allowing utilization of full storage capacity of 32,220 KL Class A Petroleum products in bulk, 18,720 KL Class C Petroleum products in bulk, total capacity being 50,940 KL. Approval of the Factory site by Chief Inspectorate of Factories and Boilers, Kerala (through Local Office) for the entire storage capacity of the storage terminal as\ stated in the foresaid point (a) above and annulment of Inspectorate of Factories and Boilers' order no. B-1058/2005 dated 18th April 2005, which severe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom KSSPL any amount paid by KCPL to Cochin Port Trust on account of MGT or premium for waiver of MGT Clause limited to ₹ 5,00,000: 6. It can be seen from clause 3.2.2 and 3.2.3 of the Agreement that out of the total consideration of ₹ 25,50,00,000 KCPL would retain a sum of ₹ 5,60,00,000 out of the sale consideration and shall release ₹ 60,00,000 when the conditions set out in clause 3.2.2 (ii) to (vii) are completed by the Assessee. With regard to the remaining sum of ₹ 5,00,00,000, clause 3.4 of the Agreement provides that the same will be paid only on the Assessee obtaining waiver of Minimum Guarantee Throughput (MGT) payable by the Assessee to Cochin Port Trust till the transfer of the Kochi terminal undertaking by the Assessee to KCPL or in the alternative it shall be paid directly by KCPL to Cochin Port Trust upto a sum of ₹ 5 Crores. The Assessee constructed storage terminal at Kochi Port on the land belonging to Cochin Port Trust, which was given on lease by Cochin Port Trust subject to the condition that the Assessee will handle a minimum quantity in the storage facility. By imposing such a condition for lease of land, Cochin Port ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee. In reply to the same the Assessee filed submission dated 23.3.2017 pointing out that the transfer of the Kochi terminal undertaking by the Assessee to KCPL which was its subsidiary was ultimately to transfer the said undertaking to M/s. Aegis Logistics Ltd. The Assessee expressed its inability to produce confirmation from M/s. Aegis Logistics Ltd., as he was a third party. The Assessee however produced a Memorandum of Agreement dated 16.2.2010 between the Assessee, KCPL and M/s. Aegis Logistics Ltd., wherein in clause 5.3 the factum of the Assessee s inability to get waiver from Cochin Port Trust and consequently there shall be a reduction of the sale consideration for slum sale from ₹ 25.50 Crores to ₹ 20.50 Crores. Clause 5.3 of the Agreement dated 16.2.2010 reads thus:- 5.3 KSSPL confirms that, due to reasons beyond their control, it was not able to fulfill its obligation set forth in Clause 3.3.3(i) of the Slump Sale Agreement, in getting the MGT waived before the committed date. KSSPL expressly confirms and agrees that subject to clause 6.1 above it has duly waived its right to recover the balance amount of ₹ 5,00,00,000 (Rupees Five Crores) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s further submitted by him that M/s. Aegis Logistics Ltd., who is now the owner of the Kochi Terminal undertaking which was subject matter of slum sale, would be in a position to explain the correct facts. Since the Assessee does not have power to compel them to divulge information on the position with regard to Assessee s liability towards MGT, the AO who has powers u/s.133(6) of the Act to call for information and u/s.131 of the Act to examine any person on oath, ought to have exercised his powers to get the correct information, rather than draw conclusions that the Assessee failed to give confirmation from KCPL, predecessor of M/s. Aegis Logistics Ltd. The Assessee made attempts to get the required information and informed the CIT(A) about his inability to get confirmation from M/s. Aegis Logistics Ltd. Besides the above, the letter dated 20.4.2010 of Cochin Port Trust clearly demonstrates that MGT upto date of transfer to KCPL payable by the Assessee was never waived by Cochin Port Trust. His argument was that when the Agreement read as a whole contains a bargain between the Assessee and KCPL that it is only on getting NOC from Cochin Port Trust, a sum of ₹ 5 crores would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh this was filed before CIT(A) and relied upon before CIT(A), the same should be ignored as it could be an afterthought to fill in the gaps in the case of the Assessee. 13. We have given a very careful consideration to the rival submissions. As we have already observed, Section 50B of the Income-tax Act, 1961 provides the mechanism for computation of capital gains arising on slump sale. Capital gains arising on slump sale are calculated as the difference between sale consideration and the net worth of the undertaking. Net worth is deemed to be the cost of acquisition and cost of improvement for section 48 and section 49 of the Act. Thus, the manner of computation of capital gain is same as provided in Sec.48 of the Act, except the variation that instead of reducing the cost of acquisition and cost of improvement from the full value of consideration that are received or that accrues on transfer, the net worth of the undertaking is taken as the cost of acquisition and cost of improvement. There is no dispute in the present case about the net worth of the undertaking that was sold and it is a sum of ₹ 29,69,09,841. Section 48 of the Act lays down the mode of computation of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that the evidence with regard to how much was the due to CPT towards MGT payable by the Assessee and how much was not waived by CPT have not been brought on record by the Assessee. The Assessee parted with the Kochi Terminal Undertaking on its slump sale as early as 16.3.2007 and the time for completion of condition precedent for slump sale as per the agreement, expired in December, 2007. KCPL refused to give any further extension of time for completion of the terms of the agreement by the Assessee. Therefore, there is merit in the contention of the learned counsel for the Assessee that it could not procure the required details from CPT and M/s. Aegis Logistics Ltd., who were the subsequent transferee of the Kochi Terminal Undertaking refused to co-operate. We are therefore of the view that the issue should be remanded to the AO for consideration afresh on these aspects with a direction to the AO to exercise his powers under the Act, on specific request from the Assessee on the information required and the party from whom it is required, to establish its case that a sum of ₹ 5 Crores or such other lesser sum was in fact not receivable by the Assessee as per the terms of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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