TMI Blog2018 (7) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, the first and foremost pre- condition to invoke section 14A r. w. r. 8D is incurring of expenditure for exempt income. In the case under consideration the AO has mechanically applied the formula without bringing the basic facts i. e. amount of expenditure incurred for earning exempt income. Therefore, we are of the opinion, that matter should be restored back to the file of the AO for fresh adjudication. Here, we would like to mention that a reasonable disallowance can be made if it is found that expenditure was incurred for earning tax free income. The disallowance should not be more than 2% of the exempt income. We order accordingly. Ground no. 3 is partly allowed. Reopening of assessment - Computing and charging to tax Long-Term Capital Gain (LTCG) u/s. 50B on transfer of packing division - whether the assessee could have raised the ‘sale versus exchange’ controversy in the reassessment proceedings at appellate stage-especially when it had made no such claim before the AO - Held that:- After the judgment of Bharat Bijlee [2014 (5) TMI 512 - BOMBAY HIGH COURT] it has to be held that transactions involving exchange were not covered by the provisions of section 50B of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - - - Dated:- 16-5-2018 - Sh. Rajendra, Accountant Member And Pawan Singh, Judicial Member For The Revenue : Shri Manjunath Swamy-CIT-DR For The Assessee : Shri Arvind Sonde Order u/s. 254(1)of the Income- tax Act, 1961(Act) - PER RAJENDRA, AM Challenging the order, dated 16/02/2015, of CIT(A)-51, Mumbai, the assessee has filed the present appeal. Assessee-company, engaged in the business of manufacturing of aluminium caps, metal containers, petrochemicals etc., filed its return of income on 15/11/2007, declaring total income at Rs. NIL. The original assessment was completed on 29/12/2009, wherein the Assessing Officer (AO)made disallowance u/s. 14 A read with rule 8D. Subsequently, he issued a notice u/s. 148 of the Act, as he was of the opinion that certain income had escaped assessment. 2. First ground of appeal is about validity of reopening. We would deal with it in the subsequent paragraphs. 3. Next ground of appeal is about confirming the disallowance of ₹ 1. 23 crores on account of provision for gratuity and ₹ 39. 80 lakhs on account of provision for leave wages transferred to Oriental Containers Ltd. (OCL) on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... packing divisions about the gratuity and leave wages. In short, issue needs further verification. Therefore, in the interest of justice we remit back the issue to the file of the AO for fresh adjudication. He is directed to decide the issue after affording a reasonable opportunity of hearing to the assessee and after considering the judgment of W T Suren Co. Ltd. (supra), relied upon by the assessee. The assessee would furnish the copy of agreement, if any, entered in to with regard to unpaid gratuity and leave wages. Second ground of appeal is decided in favour of the assessee, in part. 4. Third ground of appeal is about confirming the disallowance of ₹ 45. 70 lakhs u/s. 14A read with rule 8D of the Rules. During the reassessment proceedings, the AO observed that while completing the original assessment the then AO had made a disallowance of ₹ 1. 02 lakhs under rule 8D (2) (ii) of the Income Tax Rules, 1962 (Rules), that the AO had inadvertently considered interest expense of ₹ 5. 50B lakhs instead of net interest expense of ₹ 1. 86 crores, that there was no cogent discussion in the order as to why the then AO had adopted the figure contrary to the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 86 crores, that the assessee had stated that net figure was ₹ 1. 52 crores. He directed the AO to replace the figure of interest expenditure at ₹ 1. 52 crores as against ₹ 1. 86 crores. He gave proportionate relief to the assessee. 4. 2. Before us, the AR argued that Rule 8D(ii)was not applicable from next assessment year, that AO and the FAA wrongly applied the said rule and made the disallowance, that assessee would have no objection if proportionate disallowance was made considering the orders of the FAA. s for the earlier years. The DR supported the order of the FAA. 4. 3. We have heard the rival submissions. We find that during the assessment and reassessment proceedings the AO had applied the provisions of section 8D(2)(ii)of the Rules, though the same were not applicable for the year under consideration. The principle governing the 14 A is that no expenditure should be allowed to an assessee if he claims exemption for such income. Thus, the first and foremost pre- condition to invoke section 14A r. w. r. 8D is incurring of expenditure for exempt income. In the case under consideration the AO has mechanically applied the formula without bringing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24. 40 crores +2. 5 crores). As the assessee had already offered to tax ₹ 2. 95 crores, so the balance amount of ₹ 24. 40 crores was added as LTCG on account of sale of packing division. 5. 1. Aggrieved by the order of the AO, the assessee preferred an appeal before the FAA and made elaborate submissions. After considering the available material, he held the assessee had transferred the net liability of ₹ 24. 40 crores on account of slump sale, that in lieu thereof it had received 29, 90, 000 shares of OCL with face value of ₹ 2. 95 crores, that the net effect of the slump sale was that the assessee was benefited by ₹ 27. 35 crores (Rs. 24. 40 crores plus ₹ 2. 95 crores), that at one hand it had been relieved of discharging the liability of ₹ 24. 40 crores and on the other hand it received shares with face value of ₹ 2. 50crores without payment of any sum. He referred to the case of Summit Securities Ltd. (19 taxmann. com 102) of the special bench of the tribunal wherein various aspects of provisions of section 50B were considered. He further observed that the assessee itself had recognised the value of 29. 90 lakhs lakhs shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment proceedings was with regard to mode of computation, that there was no dispute as regards as to whether the transaction was a slump sale or not, that at the time of filing of appeal it was an admitted fact that there had been a slump sale and that the assessee had computed tax on capital gain, that it had voluntarily paid tax on the same when the return was filed u/s. 139(1), that the above admitted fact remained so even when the return was filed in response to notice u/s. 148, that subsequent to the reassessment proceedings the dispute or the grievance of the assessee was confined to the computation as per section 50B of the Act, that the transaction in question was a slump sale was a foregone conclusion on the part of the assessee, that during the appellate proceedings the assessee had raised additional ground contending that transaction was not a slump sale and that the provisions of section 50B will not apply, that it was an entirely new contention raised by the assessee, that the new contention did not stem of flow from the grounds of appeal originally filed, that it could not be said that there was an omission to raise the said grounds, that the assessee has raised the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e head capital gains arising from the transfer of its packing division. The FAA referred to the BTA where the parties had been referred as seller and purchaser. After referring to various provisions of the BTA, he held that the real intention of the transaction was that of sale and not of exchange, that the purchase consideration, being fully paid-up 29. 90 lakhs lakhs equity shares of OCL, that the transaction was a slump sale, that while filing the return in response to reassessment notice the assessee had appended a note with the return stating that it had received the consideration of some of ₹ 2. 95 crores by way of 29. 90 lakhs lakhs equity shares of ₹ 10 each which was offered as LTCG on sale of packaging division u/s. 50B, that the conduct of the assessee was in consonance with the clauses of the BTA, that the BTA was never construed as a case of exchange. He further observed that the original assessment was completed u/s. 143 (3) wherein the long-term capital gain on slump sale at ₹ 2. 95 crores was excepted, that in the reassessment proceedings the long-term capital gain on some say had been assessed at ₹ 27. 35 crores as against ₹ 2. 95 cror ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale versus exchange during the appellate proceedings. He relied upon the cases of Anand Electricals (1998-LL-1105-3), Nagpur Electrical (65CTR 223), Wockhard hospital (2017 tax publication), Equinox Solution (393ITR 566)and stated that in the cases of P Nallammal (supra)and Kalidas Dhanjibhai(supra)nothing had been laid down about the provisions of the Act, that both the cases did not deal with taxing the income, that one of them was a criminal appeal, that the assessee should have made a claim in the original return, that it was prevented from raising the issue of sale versus exchange once such claim was not made by it during the AO or FAA, that additional ground raised by it was an afterthought. 5. 3. We have heard the rival submissions and perused the material before us. We find while filing the original return of income the assessee had offered ₹ 2. 95 crores for taxation on account of sale of packing divisions, that the AO had reopened the assessment on three counts, that one of the reasons was that assessee had not offered the full value of LTCG, that in the reassessment proceedings, the AO made an addition of ₹ 24. 40 crores to the income of the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained from asserting a particular position in law where it would be inequitable to do so. iv. There could not be estopple against the statute/law. One cannot be prevented by any estopple from ascertaining one s rights under a particular Act so long the Act continues to be the law in force. There may be many reasons like wrong advice, ignorance, confusion or not correctly under -standing the law or the rights, for a party to take pleadings against his rights under the Act or statute, which he/it can always correct either in the same proceeding or in any subsequent proceed -ing and take a plea according to his/its rights under the Act/statute. v. As estoppel is an equitable doctrine, so, the person wishing to assert it, must normally come to the court with clean hands . It cannot be equated with the doctrine of waiver, as it relates to relinquishing a right once it has arisen. There cannot be any estopple against the statute, as stated earlier, but once a provision is made for the benefit of an individual, such benefit can always be waived as there is no public interest involved in waiving such right. Estopple is distinct from the equitable doctrine of laches. In the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... validity of taxing the dividend during the year of assessment in question, it must be taken that it had resiled from the position which it had wrongly taken while filing the return. Quite apart from it, it is incumbent on the Income-tax Department to find out whether a particular income was assessable in the particular year or not. Merely because the assessee wrongly included the income in its return for a particular year, it cannot confer jurisdiction on the Department to tax that income in that year even though legally such income did not per tain to that year. We are therefore of the view that the income from dividend was not assessable during the assessment year 1958-59, but it was assessable in the assessment year 1953-54. It cannot, therefore, be taxed in the assessment year 1958-59. x. In the matter of Uptron India Ltd. v. Shammi Bhan, (AIR 1998 SC 1681)it has been held that a wrong concession on question of law made by counsel is not binding on his client and such concession cannot constitute a just ground for a binding precedent. 5. 5. a. Now we would like to discuss some of the cases pertaining to estoppel and taxproceedings. First among them is the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on behalf of the department that the assessee had accepted the conditions voluntarily and with eyes open and it should not be allowed to challenge their validity. Negating the said argument, the Hon ble Court held as under: This is not a correct proposition. It is well settled that there is no estoppel against law . Finally, the court allowed the writ petition and it also held that there was violation or principle of natural justice. 5. 5. b. Next is the matter of Assam Company (India) Ltd. (256 ITR 423), wherein the Hon ble Gauhati High Court has also deliberated upon the issue of estopple. In that matter the assessee had filed its return of income on 30/07/1982, declaring an income of ₹ 51, 81, 550B/-for the AY. 1982-83. It was engaged in the business of cultivation, manufacture and sale of tea and also derived income from rent, tea made out of the green leaves purchased during the year and substantial export of tea made. In the return, it claimed deduction u/s. 35B of the Act in respect of warehouse charges paid abroad. The original assessment was completed by the AO u/s. 143(3) of the Act on 31/03/1985, and while making such assessment, he allowed weighte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said date irrespective of the date on which the warehouse charges were actually incurred. Finally, he held that it was entitled to such allowance to all assessments made after 01/ 08/1981. In the appeal before the Tribunal, the Revenue, placed reliance on judgments of Bishnauth Tea Co. Ltd. (197 ITR 150B)and Assam Frontier Tea Ltd. (224 ITR 398). The only ground urged on behalf of the Revenue was as under : . the Commissioner of Income-tax (Appeals) was not justified in holding that the claim of the assessee u/s. 35B(1)(b)(ix) should be given to all assessment proceedings on 01/08/1981, and thereby directing the Assessing Officer to allow the same. It was explained on behalf of the Revenue that the dispute between the applicant-company and the Revenue was as to whether the grant of export markets development allowance was to be given only in respect of the warehouse charges incurred after 01/08/1981, or such allowance is to be made available in respect of the assessment made after that date, irrespective of the date on which the warehouse charges were actually incurred. According to the Revenue, the benefit of such allowance can be extended only in respect of war ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warehouse charges incurred prior to 01/08/1981, are covered by clause (iv) of section 35B(1)(b) of the Act in the absence of appeal or cross-objection by the assessee? Before the Hon ble High Court the counsel of the assessee made detailed submissions. The counsel for the department argued that in the reassessment proceedings, the case of the assessee was wholly based on rule 6AA and section 35B(1)(b)(ix) of the Act and there was no reference to any claim u/s. 35B(1)(b)(iv) of the Act, that it was abundantly clear from the recital of facts and the discussion in the above mentioned orders, the contentions of the assessee were all related to section 35B(1)(b)(ix) of the Act and rule 6AA of the Rules, that it was not open for it to raise any plea pertaining to the claim for such allowance u/s. 35B(1)(b)(iv) of the Act, that the subject matter of the appeal before the Tribunal was wholly confined to the examination of the claim of the assessee u/s. 35B(1)(b)(ix) of the Act, that it was not permissible under the law to enlarge the scope of the subject matter of the appeal that the Tribunal was fully justified in refusing to consider the plea of the assessee with regard to its cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the learned Tribunal, the reference application and the statement of case are consistent. There appears to be no dispute with regard to the narration of facts and the sequence of events right from the original assessment order till the final order of the Tribunal It is in this factual background that the question referred to this court has to be answered. As noticed above, u/s. 35B of the Act certain deductions were allowable in respect of some expenditure in the matter of assessing the tax liability of an assessee, incurring the said expenditures. The different heads of expenditure for which the said deductions were made allowable are set out under clause (b) of sub-section (1) of section 35B. For ready reference, the expenditure contemplated under sub-clauses (iv) and (ix), relevant for the present case are quoted hereinbelow : xxx For the purpose of explaining the activities contemplated under sub-clause (ix) above, rule 6AA was incorporated by the Income-tax (Eighth Amendment) Rules, 1981, with effect from August 1, 1981. Clause (b) of the said rule, which is relevant for the purpose of this case is quoted hereinbelow : xxx On a reading of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y complied with. The appeal of the Revenue was thus dismissed. It may be relevant to mention here that the facts of the case clearly disclosed that the claim of the assessee in that case was both under sub-clauses (iv) and (ix) of section 35B(1)(b) of the Act. ` xxx In the decision reported in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC), the assessee had offered the sum of ₹ 22, 84, 994 received as interest on some deposits made by it for tax assessment and the assessment was completed on that basis. In the appeal before the Commissioner of Income-tax (Appeals) a number of grounds were taken by the assessee challenging the assessment. However, the inclusion of the aforesaid amount was neither challenged nor considered by the Commissioner of Income-tax (Appeals). From the order of the Commissioner of Income-tax (Appeals), the assessee filed an appeal before the Tribunal. In the appeal before the Tribunal as well, the assessee did not object to the inclusion of the aforesaid amount. Subsequently, by a letter, additional grounds were sought to be raised by the assessee objecting to the inclusion of the aforesaid amount in the total income. The Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. xxx As already noticed by us, the facts and the sequence of events narrated in the orders of the Commissioner of Income-tax (Appeals) and the Tribunal and those set out in the statement of the case are not in dispute. The core question is whether the Tribunal ought to have considered the plea of the applicant company that it was entitled to the benefit of weighted deduction u/s. 35B(1)(b)(iv) of the Act in the absence of any appeal or any cross-objection filed by it against the order of the Commissioner of Income-tax (Appeals). The applicant-company in the reassessment proceedings had claimed the benefit of weighted deduction in respect of warehouse charges on the basis of section 35B(1)(b)(ix) read with rule 6AA. The point remains that the head of expenditure on account of which the weighted deduction is claimed by the applicant-company is warehouse charges . The apex court in CIT v. Assam Frontier Tea Ltd. [2002] 253 ITR 549, as referred to above, had held that in a case where the warehouse in the foreign country is run by an agent of an assessee but the expenditure incurred thereon is reimbursed by the assessee to the said agent, it amounted to maintenance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in the widest possible terms, we feel guided in this regard by the emphatic observations of the apex court contained in its decision of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 . We have also taken note of the observations of the apex court to the effect that the purpose of the assessment proceeding before the taxing authority is to assess correctly the tax liability of an assessee in accordance with law. We consider it to be a solemn duty of the taxing authorities to correctly assess the tax liability of an assessee by duly following the relevant provision of law and therefore do not countenance an inflexible and mechanical adherence to the law of procedure and in the process deny an assessee a benefit to which it is otherwise entitled in law. In our considered opinion, that could not have been the purpose of framing the Appellate Tribunal Rules. There cannot be any estopple against law. We are therefore not in favour of granting such a primacy to the rules of procedure so as to wipe off a substantial right otherwise available to the assessee in law. We find this view of ours also reinforced by the language of rule 11 which does not require the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l would pass appropriate orders as it would deem fit in accordance with law. 5. 5. c. In the matter of Jolly Fantasy World Ltd. (373 ITR 530), the Hon ble Gujarat High Court dealt with the issue of not raising a ground before the appellate authorities. In that case, in consequence of an appellate order, the AO completed the block assessment u/s. 158BC of the Act against the assessee. In the appellate proceedings, the Tribunal permitted the assessee to raise additional grounds questioning the order passed u/s. 158BC r. w. s. 254 as bad in law, invalid or untenable since it was not on the basis of a warrant authorising the search issued in the name of the assessee but on the basis of the warrant issued on the joint names as shown in the panchnama. After considering the arguments of the assessee the Hon ble Court held as follows: 9. . . even if, it is considered for the sake of examination that the ground so raised before the Tribunal could also be raised before this court in the present appeals, then also, we find that it is well settled legal position that there cannot be any estopple or waiver against statute or law. We may make useful reference to the decision of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er jurisdiction and provisions which merely regulate the procedure by holding that such provisions which confer the jurisdiction or such mandatory provisions which are enacted in public interest on ground of public policy even in such revenue statutes could not be waived, because of the underlying principle that jurisdiction could neither be waived nor created by consent. Finally, the Hon ble Court held that participation by the assessee in the earlier round of litigation either before the AO or before the Tribunal or consequently before the AO could not operate as a bar to the assessee to challenge the jurisdictional authority of the AO u/s. 158BC of the Act. 5. 5. d . The Hon ble Uttrakhand High Court (327 ITR 626)has also dealt with similar issue. Matter relates to AY. s 1996-97, 2000-01, 2001-02, 2002-03 . The brief facts giving rise to the appeals filed by the Revenue were that the assessee, a non-resident company, filed its return of income declaring nil income. The assessee-non-resident company is a company incorporated in the United States of America. During the year under consideration, the assessee earned revenues under its contract with M/s. Enron Oil and Gas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it must be taken that the assessee had resiled from the position which it had wrongly taken while filing the return. It was further held that quite apart from it, it is incumbent on the Income-tax Department to find out whether a particular income was assessable in the year or not and, merely because the assessee wrongly included the income in the return for a year, it cannot confer jurisdiction on the Department to tax that income in that year even though legally the income did not pertain to that year. On the basis of the ratio of the aforesaid judgment, the Tribunal has not committed any error in holding that the principle of res judicata shall not operate. Thus, the fact that in some of the earlier years, the assessee had offered to pay tax u/s. 44BB cannot operate as estopple against it. 5. 5. e. We would also like to refer to the judgment of the Hon' ble Calcutta High Court in the case of Sail DSP VR Employees Association 1998 v. Union of India [2003] 262 ITR 638. The petitioners who were employees of SAIL were subjected to voluntary retirement. SAIL had been deducting tax at source on the amount paid under their voluntary retirement scheme. On a writ petition a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor is there any waiver of the legal right. It is always open to take the plea that the figure, though shown in his return of total income, is not taxable in law. In the light of the said proposition of law, we hold that the assessment of total income of the assessee is required to be made as per the provisions of law contained in the Income-tax Act. 12. The view expressed by the respected co-ordinate Bench is a correct position of law and to be applied in the instant appeal as well. Merely because an offer was made having no cogent basis or an approval of law that should not estop a taxpayer from correcting his mistake. Rather, it is a duty of the Revenue Department to tax the legitimate amount from a taxpayer. This is what exactly was directed by the Central Board of Direct Taxes in a very old administrative instructions for guidance of the Income-tax Officer on matters pertaining to assessment vide Circular No. 14 (XL-35), dated April 11, 1955 . . Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a tax payer in every reasonable way, particularly in the matter of claiming and securing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue raised by the assessee-company in its cross-objection by submitting that the claim being sought to be made therein was not made by the assessee either before the AO or before the CIT(A). He has also submitted that even such claim was not made by the assessee-company in its return of income filed for the year under consideration and it is too late in a day to raise the same at this stage during the course of appellate proceedings before the Tribunal. The Counsel for the assessee, on the other hand, has submitted that there is no such estopple in law and the assessee can stake the claim even during the course of appellate proceedings before the Tribunal if the same is in accordance with law. In support of this contention, he has relied on the decision of Hon'ble Delhi High Court in the case of CIT v. Bharat General Reinsurance Co. Ltd. and that of Delhi Special Bench of Tribunal in the case of Indo Java Co. v. IAC (1989) 35 TTJ (Del)(SB) 111. XXX 9. We have considered the rival submissions and also perused the relevant record including the case laws cited by the representatives of both the sides in support of their stand. As regards the objection rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake away from a party the relief that he is entitled to where the tax is levied or collected without authority of law. Therefore, it has to be ensured that taxes levied or collected by the AO. s have legal sanction. Admission or refusal by an assessee about taxability of an item of income cannot make a non taxable item taxable or visa versa. The Supreme Court of India in Shelly Products (261 ITR 367), has held that if the assessee has by mistake or inadvertence or on account of ignorance, included in his income any amount which is exempted from payment of Income-tax or is not income within the contemplation of law, the assessee may bring the same to the notice of the AO, which if satisfied, may grant the assessee necessary relief and refund the tax paid in excess, if any. In Bharat General Reinsurance Co. Ltd. (81 ITR 303)the Hon ble Delhi High Court, held that merely because the assessee wrongly included the income in its return for a particular year, it cannot confer jurisdiction on the Department to tax that income in that year even though legally such income did not pertain to that year. The Bombay High Court in Balmukund Acharya ( 310 ITR 310)held that tax can be collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine the tax payable thereon. In doing so, he may proceed on the basis that, where an assessee discloses that a certain sum of money has been deceived by him, the fact of that receipt may be accepted without anything more as constituting an admission on the part of the asses see. That would be an admission as to a state of fact. But whether the receipt can be considered as taxable income is quite another matter, and consideration of that question leads into the realm of law. If the Income-tax Officer assesses an assessee upon a receipt which is not taxable in law, it is always open to the assessee to take the case in appeal or in revision thereafter. It is then for the Appellate Assistant Commissioner or the Commissioner of Income-tax, as the case may be, to examine the matter and determine whether, although the money has been received by the assessee, it is taxable in law. The assessee is then within his rights in requiring the appellate or the revisional authority to examine the validity of the assessment to tax of a receipt which, though admitted by him, is not taxable in law . (emphasis added) 5. 7. 2. In the case of S. R. Koshti (276 ITR165 )issuing a word of caution t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y only discover or find the correct law. The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the court operated for quite some time, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood. Thus, after the judgment of Bharat Bijlee it has to be held that transactions involving exchange were not covered by the provisions of section 50B of the Act. Therefore, the assessee was entitled to raise the additional ground about the sale versus exchange controversy. The failure of the assessee to raise the issue before the AO or in the original grounds of appeal filed before the FAA cannot deprive it of its legitimate claim. In the earlier paragraphs, we have held that there cannot be any estoppels in tax proceedings. So, as far as taxability of ₹ 24. 40 crores is concerned, the assessee was entitled to raise it before the FAA for the first time in form of additional grounds. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in of ₹ 84, 26, 04, 286/- in its total income by a giving a note in its computation of income which is extracted as under: The company has w. e. f 1st November 2007 hived off its business of Planet M division consisting of leisure and retail products, on a going concern basis and transferred it to Planet M Retail Ltd. ('PMRL'), then wholly owned subsidiary of the company on a slump exchange basis. The company has been allotted the following scripts amounting to ₹ 12595 lacs for transfer of this business: Nos. Face Value Amount (Rs. ) Equity Shares 9, 50, 000 ₹ 10 each 95, 00, 000 6% Redeemable Unsecured Debentures 1, 25, 00, 000 ₹ 100 each 125, 00, 00, 000 125, 95, 50, 000 The difference between the value of the shares allotted in exchange and the value of the net assets of the business transferred amounting to ₹ 82, 87, 31, 848 has been included in Computation of Income as income u1s. 50B of the Income Tax Act out of abundant caution and without prejudice to the contention of the assessee that the difference is not chargeable to tax under the provisions of the Income Tax Act, 1961. In the opinion of the assessee, the transaction of hivin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, 04, 286/- as long term capital gain. The Ld. A. R. referred to para B of the business transfer agreement which is placed at page No. 59 to 83A of the paper book wherein the assessee specifically pointed out that it was mentioned in the said agreement that the transferor has agreed to transfer on a going concern on slump exchange basis. The Ld. Counsel also brought to our notice the para 2. 1 of the said agreement which was worded identically and described the transfer as on a going concern slump exchange basis . The Ld. Counsel also took us through the provisions of section 50B of the Act wherein the language used was slump sale which is defined in section 2(42C) of the Act. The Ld. A. R. submitted that the assessee transferred under business transfer agreement an undertaking Planet M Division, the cost of acquisition of which could not be arrived at and thus the charging provisions as provided under section 45 of the Act fail resulting into no income tax liability on the said long term capital gain of ₹ 84, 26, 04, 286/-. The Ld. A. R. submitted that ₹ 84, 26, 04, 286/-, being the amount of capital gain resulting from exchange of net assets relating to one division ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not a sale the case would still be covered under the provisions of capital gains simpliciter as held by the Hon ble Court in the two cases (supra). 16. The Ld. A. R. submitted that in the case of sale, the consideration is often discharged or settled by issuance of shares/debentures and in that case it could not be taken to mean that the said is a case of exchange of assets and not sale and therefore, not liable to tax. 17. Finally the Ld. D. R. relying heavily on the order of Ld. CIT(A) prayed that the order being legally reasoned and devoid of any defect legal or otherwise and therefore should accordingly be affirmed. 18. We have heard the rival contentions and perused the relevant materials placed before us and also gone through the impugned order and the various decisions cited by the rival parties. The undisputed facts are that during the year the assessee hived off a division from its business on 01. 11. 2007 called Planet M. division consisting of leisure and retail products, on a going concern basis and transferred it to Planet M Retail Ltd., then wholly owned subsidiary of the company on a slump exchange basis for a consideration of ₹ 125, 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arged by the transferee company by way of allotment of 5% cumulative preference shares in the transferee company. The question before the Apex court was whether the transaction was a sale or an exchange and consequently whether it was liable to tax under the Income Tax Act. After observing that the expressions sale , price , and exchange were not defined in the Income Tax Act, the Apex court relied on the definitions in the Transfer of Property Act which were as follows: - Sale is a transfer of ownership in exchange for a price paid or promised or part paid and part promised. Price is the money consideration for a sale of goods . When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being money only, the 20 transaction is called an exchange . After noting the above definitions their Lordships at page 696 held that:- The presence of money consideration is, therefore, an essential element in a transaction of sale. If the consideration is not money but some other valuable consideration, it may be an exchange or barter, but not a sale. 20. In the present case the consideration was not money but e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll transactions encompassed by section 45 must fall under the governance of its computation provisions. A transaction to which those provisions cannot be applied must be regarded as never intended by section 45 to be the subject of the charge. . . . . . . . . . . . . . . . . . The character of the computation provisions in each case bears a relationship to the nature of the charge. Thus, the charging section and computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section. 21. After considering the facts of the assessee s case in the light of aforesaid decisions we are of the view that the case of the assessee is squarely covered by the ratio laid down by the Hon ble Apex Court and the various High Courts. Whereas the decision as relied upon by the Ld. D. R. in defense of his argument is actually 22 distinguishable on facts. Accordingly, we hold that the Planet M Division transferred by the assessee as on a going concern basis where no cost of acquisition is possible to be attributed individual assets in that under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had made full disclosure of all the facts. He relied upon the case of Kelvinator of India Ltd. (320 ITR 561)and stated that reopening was bad in law. 6. 1. The DR stated that facts of Kelvinator India (supra) were not applicable to the facts of the case under consideration, that the AO had not formed an opinion, that he did not apply his mind. He referred to the cases of Rajesh Jhaveri (291 ITR 50B0), EMA India Ltd (266 CTR 659), (315 ITR 84)and Ameen Pathology (252 ITR 673). 6. 2. We have heard the rival submissions and perused the material before us. We find that while issuing notice u/s. 148 of the Act the AO had observed that income had escaped on three counts. It is found that on two issues no queries were made during the original assessment proceedings. So, there is no question of changing of opinion, as argued by the assessee. On those two issues no opinion was formed. For initiating proceedings u/s. 147-148, there should be prima facie satisfaction that income had escaped assessment. At that stage the AO is not supposed to have concrete proof of escapement. The reasons to believe should be such that a common man in similar circumstances would fell that st ..... X X X X Extracts X X X X X X X X Extracts X X X X
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