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TMI Blog1988 (4) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... and interest of Gokul Gas Pvt. Ltd. (assessee-company) in relation to the undertaking (Kosangas Company) shall stand transferred to and vest in the Central Government free from all encumbrances. Sub-section (1) of section 4 lays down that all liabilities other than the liabilities specified in sub-section (2) of the assessee-company in relation to the period prior to the appointed day shall be enforceable against the assessee. 7. The liabilities which are enumerated in sub-section (2) of section 4 have been taken over by the Central Government and were liable to be discharged by the Central Government. These liabilities are (i) deposits collected from the customers for the use of gas cylinders and pressure regulators and from agents, (ii) provision for gratuity to officers and employees employed in or in connection with the said undertaking, and (iii) current liabilities relating to sundry creditors and accrued expenses of the undertaking. 8. Section 8 of the Act lays down that for the transfer to and vesting in, the Central Government under section 3 of the said undertaking, the Central Government shall pay the assessee an amount of rupee ten thousand. 9. The Income-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... according to him, represented deemed profit under section 41(1) of the Income-tax Act, 1961. This amount along with Rs. 10,000 receivable by the assessee as compensation under section 8 of the Act No. 28 of 1979 was, according to him, liable to be added as business income. He, accordingly, made addition of Rs. 4,01,00,975 in total income. 11. The above addition was challenged by the assessee in the appeal filed before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) held that no deduction had been allowed in the earlier years and as such provisions of section 41(1) were not attracted. He then considered provisions of section 41(2) and held that this was a case of acquisition of the concern as a whole for slump price and as such provisions of section 41(2) were not attracted. He deleted the addition of Rs. 4,01,00,975. 12. The department has now come in appeal before us. Following two grounds have been raised in the memo of appeal : "1. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in holding that provisions of section 41(1) cannot be applied and on that ground deleting an addition of Rs. 4,01,00,975. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ischarged by Central Government instead of the assessee. The second condition is thus, also not satisfied. For either of the two reasons provisions of section 41(1) were not attracted. This position is beyond any shadow of doubt. 16. The learned Commissioner of Income-tax (Appeals) has in paragraph 5 of the order given one more reason in support of the view that provisions of section 41(1) are not attracted. The said reason given is that no amount has been actually received by the assessee in the relevant year whereas the words "has obtained whether in cash or in any other manner whatsoever" in section 41(1) imply actual receipt and not mere accrual of right. He has relied on the decision of the Gujarat High Court in CIT v. Rashmi Trading Co. [1976] 103 ITR 312. We do not express any opinion on this aspect. We rest our decision on the facts that in respect of Rs. 5,79,14,487 no deduction or allowance had ever been allowed in any previous year and that the liabilities have not ceased or have not been remitted. 17. The Income-tax Officer has not relied on the provisions of sub-section (2) of section 41 of the Act. This is because there was no material to indicate that any particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Government along with other assets under the provisions of the Act. Even if they have not vested, the sale as a result of compulsory acquisition in the present case would be regarded as slump sale. This is because the business of bottling and marketing of L. P. Gas carried on by the assessee has been taken over as an integrated unit and no separate price for any item of assets has been specifically agreed upon. This is a case of sale of business as a whole for slump price at book value. 20. It is now well settled that business (is property and undertaking of a business is a capital asset of the owner of the undertaking. When an undertaking as a whole is transferred as a going concern, as in the present case, together with all its assets, what is sold is not the individual itemised property but what is sold is the capital asset consisting of the business of the undertaking and any tax that can be attached to such transaction for a slump price at book value would be merely capital gains tax and nothing else. If the capital asset, viz., the business of the undertaking, has a greater value than its original cost of acquisition, then, capital gains may be attracted in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should make good that depreciation. If that is the principle underlying this proviso, we see no reason why the application of that principle should be limited to a case where a part of the undertaking is sold and not the whole." 23. Prima facie it appears that the above decision is authority for the proposition that second proviso to section 10(2)(vii) of the Income-tax Act, 1922 [which is in pari materia with section 41(2) of the Income-tax Act, 1961] applies equally when building, machinery or plant are sold together as it applies when each item is sold individually. However, that decision does not consider the question as to what would be the consequence when it is not possible to ascertain as to what price could be attributed to particular asset which forms part of all assets sold together. We are concerned with a situation in which it is not at all possible to attribute any particular price to each item of assets and determine as to what was the difference between the sale price and cost of that particular asset. Consequently, computation provision for determining the income under section 41(2) would be unworkable. The above decision is not an authority for the proposition t ..... 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