9911796707
TMI Blog2017 (4) TMI 1640X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer on the basis of book value in the list of individual is not established but taking into consideration the agreement between the parties the second value which has been rightly pointed out was for the purchaser for the purpose of arriving at a price of assets. We are of the opinion that the Tribunal has not committed any error in allowing the appeal. In our considered opinion the three issues which are raised are answered in favour of the assessee. - Hon'ble Mr. Justice K.S. Jhaveri And Hon'ble Mr. Justice Vijay Kumar Vyas For the Appellant(s) : Mr. Anuroop Singhi For the Respondent(s) : Mr. N.M. Ranka, Senior Counsel with Mr. Siddharth Ranka JUDGMENT PER HON BLE JHAVERI, J. 1. By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has reversed the finding of the Assessing Officer as well as the CIT(A) and has partly allowed the appeal of the assessee. 2. The facts of the case are that the assessee has disputes of the property in part of his company to M/s Hindustan Coca Cola Bottling North West Pvt. Ltd., Gurgaon, Haryana and have agreed to sell its soft drink business assets for a consideration of Rs. 12, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . List is reproduced below: 1. Boiler 1.00 2. Building 3,27,775.00 3. Building Construction 22,87,255.00 4. Construction Installation 89,148.00 5. Cycle 10,158.00 6. Electirc fitting 1,07,719.00 7. Empty bottle purchase 42,95,787.00 8. Furniture 2,64,449.00 9. Generators 2,96,685.00 10. Laboratory equipment 1,24,911.00 11. Land 1,24,808.00 12. Loose tools 7,223.00 13. Plant and machinery 2,17,62,739.19 14. Office equipments 1,80,237.00 15. Old empty bottles 46,98,266.05 16. Old Wooden shells 12,46,809.67 17. Plastic crates 19,64,977.00 18. Computer 76,150.00 19. Purchase of fridge 14,04,676.00 20. Purchase of bottle coolers 8,86,494.00 21. Trolley 990.00 22. Wooden shell purchase 6,56,891.48 4,08,14,148.39 List of liabilities transferred to HCC for 98-99 (business undertaking) 1. Plastic crates deposits 35,75,720.00 2. Security received on bottles cooler 24,000.00 3. Security received on fridge 11,35,000.00 4. Woolen shell deposits 5,27,911.50 Total (A) 52,62,631.50 1. Empty Bottles deposits 57,05,494.96 Total (B) 57,05,495.96 5. He has also taken us to para 17.1 of the assessment order which reads as under: 17.1 In para No. 4 of its letter dated 10-02- 2004 the assessee stated tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated Preoperative expenses 7,75,000 Based on letter sent by Mr. Mukesh Bhawnani (Hindusthan Coca Cola Ltd March 2nd 2000 to Mr. Jaipuria. Sd. illegible 25-05-2000 This schedule also shows that only business assets of the assessee firm were transferred to M/s Hindustan Coca Cola Bottling NorthWest Pvt. Ltd and certain known and definite liabilities. It also fortifies my view that the sale consideration is ascertainable, apportionable and attributable to individual assets separately. 7. Therefore, he has contended that the view taken by the Tribunal is perverse and taking into consideration the law and more particularly Section 502B and subsequently amendment with effect from 01.04.2000, the judgment has been sought to be wrongly applicable. He has emphatically placed reliance on the Supreme Court decision in the case of Vatsala Shenoy vs. Joint Commissioner of Income Tax (Assessment), Mysore [2016] 389 ITR 519, wherein it has been held as under: 26. Section 2(42)C defines 'slump sale' and reads as under: slump sale means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid period. The High Court has touched upon this aspect in greater detail in para 30 of its judgment. Since we agree with the same, we reproduce below the discussion in the said para: 30. In view of the provisions of Section 45 it is clear that in the present case, the effect of the sale conducted by this Court among partners and under Clause 16 of the said Partnership Deed, is that once the partnership is dissolved, the partners would become entitled to specific share in the assets of the firm which is proportionate to their share in sharing the profits of the firm and they are placed in the same position as the tenants in common and for the purpose of dissolution and Under Section 47 of the Indian Partnership Act, 1932, it is clear that even after the dissolution of the firm, the authority of each partner to bind the firm and the other mutual rights and obligations of the partners continue notwithstanding the dissolution so far as may be necessary to wind up the affair of the firm and to complete transactions begun but unfinished at the time of the dissolution. Therefore, for realisation of the assets, discharging the liability of the firm and settling the accounts of the partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellants who are erstwhile partners were not successful bidders for continuation of business in the individual capacity of the MGBW and in view of Clause 16, all tangible and intangible assets vested with Association of 3 partners whose highest bid of Rs. 92 crores was accepted and admittedly after the passing of the order of this Court on 20.11.1994, all the Appellants herein and other out-going partners have given requisite undertaking as per the order of this Court and the MGBW as a going concern under the name and style MGBW and all trademarks used in the course of said business by the said firm and all tangible and intangible assets of the firm vested with the purchasers erstwhile 3 partners who paid the highest bid and the Appellants have received consideration of the conveyance and their respective share in the sale of net assets of the firm after their undertaking that they cannot interfere with the business of MGBW which is vested with all assets in favour of 3 partners have received the value of their net asset which has been distributed by the Official Liquidator and AOP 3 who have purchased the business of the old firm, succeeded to it and constituted a new firm in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation but it was never the agreement between the parties. 11. In that view of the matter, the appreciation of facts given by the Tribunal is perverse and therefore, he has referred to the decision of Supreme Court in the case of Commissioner of Income Tax, Bangalore vs. B.C. Srinivasa Setty [1981] 128 ITR 294 wherein it is observed as under: The section operates if there is a transfer of a capital asset giving rise to a profit or gain. The expression capital asset is defined in Section 2(14) to mean property of any kind held by an assessee . It is of the widest amplitude, and apparently covers all kinds of property except the property expressly excluded by Clauses (i) to (iv) of the sub-section which, it will be seen, do not include goodwill. But the definitions in Section 2 are subject to an overall restrictive clause. That is expressed in the opening words of the section : unless the context otherwise requires . We must therefore enquire whether contextually Section 45, in which the expression capital asset is used, excludes goodwill. Section 45 charges the profits or gains arising from the transfer of a capital asset to income-tax. The asset must be one which falls within the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an asset within the terms of Section 45 and therefore its transfer is not subject to income-tax under the head Capital gains . 12. He has also taken us to the decision of Supreme Court in the case of PNB Finance Ltd. vs. Commissioner of Income Tax [2008] 307 ITR 75 (SC) and more particularly the following para: However, no such formula existed during assessment year 1970-71. At that time, assessee had to deduct either cost of acquisition or fair market value as on 1.1.1954 from the sale price (compensation) of Rs. 10.20 cr. [see Section 55(2)(i)]. This option was conferred on the assessee solely for its benefit. However, Section 55(2) only triggered if there existed the figures of cost of acquisition and fair market value as on 1.1.1954 so that the choice could be exercised. At that time, it was open to the assessee to contend that he would exercise the option only after both the figures of original cost and fair market value of the asset as on 1.1.1954 was available. In short, it is only after 1.4.2000 that computation machinery came to be inserted in Section 48 which deals with mode of computation. 12. The question which arises for determination in this civil appeal is whether ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00. Therefore, the sale consideration had been 0 arrived at after taking into account the value of plant, machinery and dead stock as computed by the valuer and, consequently, it was held that the surplus arising on the sale was taxable under Section 41(2) of the Act and not as capital gains. In the circumstances, the judgment of this Court in the case of Artex Manufacturing Co. (supra) was not applicable to the present case. Further, this Court in the case of CIT v. Electric Control Gear Manufacturing Co. MANU/SC/1245/1997 : [1997]227 ITR 278(SC) has held that whether the business of the assessee stood transferred as a going concern for slump sale price, in the absence of evidence on record as to how the slump price stood arrived at, Section 41(2) had no application. It is interesting to note that the judgment in the case of Electric Control Gear Manufacturing Co. (supra) is given by the same Bench which decided the case of Artex Manufacturing Co. In fact, both the judgments are reported one after other in MANU/SC/0773/1997 : [1997]227ITR260(SC) respectively. In the present case, as can be seen from the impugned judgment of the Delhi High Court, the judgment of this Court in Elect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the computation provisions together constitute an integrated Code and when in a case the computation provisions cannot apply, such a case would not fall within Section 45. In the present case, the Banking Undertaking, inter alia, included intangible assets like, goodwill, tenancy rights, man power and value of banking licence. On facts, we find that item-wise earmarking was not possible. On facts, we find that the compensation (sale consideration) of Rs. 10.20 cr. was not allocable item- wise as was the case in Artex Manufacturing Co. (supra). 18. For the aforestated reasons, we hold that on the facts and circumstances of this case, which concerns assessment year 1970-71, it was not possible to compute capital gains and, therefore, the said amount of Rs. 10.20 cr. was not taxable under Section 45 of the 1961 Act. Accordingly, the impugned judgment is set aside. 13. He has also taken us to the decision of Bombay High Court in the case of Commissioner of Income Tax vs. Polychem Ltd. [2012] 343 ITR 115 (Bom) and more particularly to the following paras: 6. In the present case, while we deal with the submissions which have been urged on behalf of the Revenue and the assessee it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the assessee and the purchaser was the transfer of the business of the undertaking of the IMFL unit as a going concern. The total consideration of Rs. 10.6 crores that is determined under the agreement was for the transfer of the business and undertaking as a whole comprising of but not limited to the land, building and fixed assets. Among the assets that were transferred included the benefit of the existing contracts, licenses which the assessee held entitling it to manufacture and sell Indian Made Foreign Liquor, intangibles including the right to utilize trade marks and the labor force which was being transferred to the purchaser. The transaction involved a slump sale. There was no itemized valuation of the fixed assets and other assets which formed part of the undertaking. What was sold comprised of the undertaking and the business as a whole. 10. It must be emphasized that in the present case the Court is dealing with the position as it existed prior to the insertion of the provisions of Section 50B by the Finance Act of 1999. As a result of the provisions of Section 50B which have been inserted with effect from 1 April 2000 any profits or gains arising on a slump sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the fair market value as on 1/1/1954 it was not open to the assessee to contend that the cost of acquisition was not computable. The Tribunal consequently affirmed the view of the Assessing Officer. In appeal the Delhi High Court sustained the judgment of the Tribunal relying upon the decision of the Supreme Court in CIT Vs . Artex Manufacturing Company. MANU/SC/0773/1997 : (1997) 227 ITR 260 (SC) The Supreme Court in appeal held that the decision in Artex dealt with the provisions of Section 41(2) and was, therefore, not applicable to the case at hand which dealt with the issue of capital gains. The Supreme Court enunciated that as regards the applicability of Section 45 three tests are required to be applied. First, both the charging Section and computation provisions are inextricably linked. Second, the test of allocation / attribution must be applied, the object being to determine whether the slump price was capable of being attributable to individual assets. Third, there is a conceptual difference between the undertaking and its components. In that context the Supreme Court held as follows: ...there is a conceptual difference between an undertaking and its components. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent case are squarely within the principle which has been laid down by the Supreme Court in PNB Finance. 14. He has also placed reliance on the decision of Karnataka High Court in the case of Commissioner of Income Tax vs. B.V. Reddy Marketing (P.) Ltd. [2014] 42 taxmann.com 311 (Karnatka), Commissioner of Income Tax vs. Nutrine Confectionery Co. (P.) Ltd. [2014] 45 taxmann.com 11, and the decision of Calcutta High Court in the case of Commissioner of Income Tax vs. Coats of India Ltd. [2009] 176 Taxman 438 (CAL.). He has also referred to the decision of the Supreme Court in the case of Commissioner of Income Tax, Ahmedabad vs. Equinox Solution Pvt. Ltd., wherein para 13 14 has observed as under: 13. Our view finds support with the law laid down by this Court in Commissioner of Income Tax , Gujarat v. Artex Manufacturing Co. [MANU/SC/0773/1997 : 1997(6) SCC 437 CIT]. 14. In Premier Automobiles Ltd . v. Income Tax Officer and Anr., MANU/MH/0314/2003 : 264 ITR 193 (Bombay) also, the Division Bench of the Bombay High Court examined this question in detail on somewhat similar facts and has taken the same view. The Learned Judge S.H. Kapadia - (as His Lordship then was as Judge of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
