Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2012 (3) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2012 (3) TMI 176 - ITAT MUMBAICapital Gains - Slump sale – whether amount of liability reflected in the negative net worth can be added to determine value of sale consideration - whether the “negative net worth” could be treated as Nil or had to be added to the “consideration” for determining capital gain - assessee transferred its “Power Transmission Business” to KEC Int Ltd under scheme of arrangement u/s 391 & 394 of the Companies Act for a total consideration of Rs. 143 crores – same being offered as Capital gains taking negative net worth of Rs 157 Crore to be nil – reference to Special Bench for determination of full value of consideration and capital gains - Held that:- Since capital asset is an undertaking (All assets minus All liabilities), the full value of consideration would be determined by reducing the value of liabilities of the undertaking from the agreed value of all the assets of the undertaking. If one adds the liabilities to this value, one is arriving at the consideration for the “assets” but not the consideration for the “undertaking“. Therefore, full value of consideration of the undertaking should be taken at Rs. 143 crore and not Rs. 300(143+157) crore. In case of a slump sale, Capital gain on transfer of 'Undertaking’ = Full value of consideration received or accruing (All assets minus All liabilities) - 'Net worth’ or in other words the cost of acquisition and cost of improvement (All assets minus All liabilities) of the undertaking. Hence, while sustaining the figure of sale consideration at Rs. 143 crore, the negative net worth is “deducted from” (i.e. “added to“) the full value of consideration. Consequently, the chargeable capital gain is Rs. 300 crores (Rs. 143 crores + Rs. 157 crores) – Decided in favor of Revenue.
|