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TMI Blog2020 (7) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A) has rightly directed the AO to compute the capital gains as a slump sale u/s 50B (2) and no interference is called for. Accordingly, we uphold the order of the Ld. CIT(A) and dismiss the appeal of the revenue. - IT Appeal No. 497 (VIZ.) OF 2019, Cross Objection No.130 (VIZ.) of 2019 - - - Dated:- 19-6-2020 - V. Durga Rao, Judicial Member And D.S. Sunder Singh, Accountant Member For the Appellant : S. Ravi Shankar Narayan, CIT-DR For the Respondent : G.V.N. Hari, AR ORDER D.S. SUNDER SINGH, ACCOUNTANT MEMBER 1. This appeal is filed by the revenue against the order of the Commissioner of Income-tax (Appeals) [CIT(A)]-1, Visakhapatnam in I.T.A No. 10491/2016-17/ACIT,C-3(1),Vsp/2017-18 dated 3-5-2019 for the Assessment Year (A.Y.) 2013-14 and cross objections filed by the assessee in support of the order of the Ld. CIT(A). 2. All the grounds of appeal are related to the deletion of addition made by the Assessing Officer (AO) on slump sale of windmills. Brief facts of the case are that the assessee is engaged in the business of aqua culture, export of frozen shrimp, sale of hatchery seed and wind power generation. During the previous year re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts u/s 50 of the Act. Accordingly taxed the sale consideration under short term capital gains. 3. Against which the assessee went on appeal before the CIT(A) and the Ld. CIT(A) examined the slump sale agreement entered by the assessee with M/s Clover Energy Private Limited and Lotus Clean Power Venture Private Limited and observed that the assessee has sold the windmills as a going concern inclusive of all its assets such as land, buildings etc. The windmills were transferred for an amount of ₹ 24,00,93,258/-. There was no separate valuation of each asset i.e. land, windmill or shed. The Ld. CIT(A) further observed that the assessee has been enjoying deduction u/s 80IA from 2009-10 onwards and the AO has not made any adverse remarks on claiming profits u/s 80IA as separate business of the assessee. Though the assessee has shown the windmill as part of block of all assets, depreciation claims are not independent factors to deny benefit under slump sale. Therefore, the Ld. CIT(A) held that each wind mill is a unit of undertaking covered under the definition of slump sale, hence directed the AO to treat the sale of windmill as slump sale and the consideration received should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould exceed 20% of its net worth as per the audited balance sheet of the preceding financial year or an undertaking which generates 20% of the total income of the company during the previous financial year. In the instant case, the company has not satisfied the condition of net worth being 20% or the profits of the 20% of the total income as defined in the Companies Act, therefore, the Ld. DR argued that the windmills cannot be treated as separate undertaking for the purpose of slump sale, hence contended that the Ld. CIT(A) erred in directing the AO to treat the windmills as separate unit, thus, requested to set aside the order of the Ld. CIT(A) and allow the appeal of the revenue. 5. Per contra, the Ld. Counsel of the assessee submitted that the definition of undertaking is given in the Income-tax Act as per which 'undertaking' shall include any part of an undertaking or unit, but does not include individual assets or liabilities or any combination thereon not constituting business activity. In the instant case, windmills are separate undertaking though the windmills are included in block of assets, they cannot be treated as assets of the assessee company. The Ld.AR fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rozen shrimp, LDPE Films and generation and sale of power through windmill operation. It means that the business of the appellant is constituted of 3 different activities. The windmill operation is one of the business units of the appellant. The income earned from each unit is shown in the P L account separately. The appellant acquired the subjective windmills in the FY 2005 and has been claiming deduction of profits u/s801A from the FY 2008-09 relevant to AY 2009-10. The appellant has also claimed deduction under chapter VI-A for the impugned AY 2013-14. There are separate ledger accounts for the business of windmills forming part of final accounts of the appellant. The appellant had entered in to 2 separate stump sale agreements effected as a whole while selling 3 windmills located at different places in the FY 2012-13. It is a fact that the appellant had been claiming depreciation on the subjective windmills. Having examined the undisputed facts it is worthwhile to examine the definition of slump sale in order to know whether the transfer is falling within the purview of slump sale u/s 2(42C). 6.2 Slump Sale u/s 2(42C). Slump sale means the transfer of one or more underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsory reading of both the sale deeds reveal that the windmills are identified as a going concern and an undertaking. The principle assets in the undertaking are land and wind turbine. The appellant disposed the asset as going concern inclusive of all lands, buildings and sheds etc. The subject windmills was transferred for lump-sum amount of ₹ 18,50,87,332/- (in first sale deed) and for ₹ 18,58,85,576/- (in second sale deed). The total consideration is ₹ 24,00,93,258/-. The operative date is the respective date of sale in both deeds. There is no separate valuation of assets such as land, wind turbines, sheds etc. 6.5 After examining the definition of 'slump sale' and 'undertaking' along with the sale deed, I am of the considered opinion that the sale affected by the appellant is squarely falling within the definition of slump sale. The windmill has been a unit of business of appellant The appellant has been enjoying the deduction u/s.801A from AY 2009-10. The Assessing Officer has not made any adverse remarks on claiming of profits u/s.801A being a separate unit of business of appellant There is no doubt that the subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of normal capital gains. It means that there is no need to consider indexed cost of acquisition or improvement in the case of slump sale. In the instant case the net-worth is arrived at ₹ 3,07,36,888/- which is not in dispute. The lump-sum consideration for sale of three wind mills is ₹ 24,00,93,258/- which is also not in dispute. Thus, the Long Term Capital Gains is the difference between lump-sum consideration and net-worth of undertaking. Accordingly, the Assessing Officer is directed to compute the Long Term Capital Gains under stump-sale. 6.1 In the instant case, there is no dispute that the assessee has sold the wind mills and claimed it as a separate undertaking. Separate undertaking is one which can be separated from the business unit and both the business units of the assessee should be run separately, independent of each and they should not be dependent on each other. The definition of undertaking is given in 2(42C) and section 2(19) of the Act, wherein undertaking is defined as any part of an undertaking or unit or division of an undertaking or a business activity taken as a whole, but does not include individual assets or liabilities or any combination t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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