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2007 (9) TMI 456 - AT - Income TaxComputation of capital gains - sold manufacturing unit on slump sales basis as a going concern - Determination of cost of acquisition - Net worth of an assessee is negative - Disallowance of expenditure u/s 37 - Manufacturing and Sale of stationery item and trading activities HELD THAT:- Respectfully following the decision in the case of Zuari Industries Ltd. v. Asstt. CIT [2006 (6) TMI 136 - ITAT BOMBAY-E] held that in case of slump sale, where the liabilities are more than the value of assets, the net worth, viz., the cost of acquisition has to be taken at nil and entire sale consideration is liable to capital gains. Therefore, we also set aside the orders of tax authorities below on the first issue involved in the grounds of instant appeal of the assessee under consideration before us and the same is decided against the revenue and in favour of the assessee and accordingly ground of appeal of the assessee in this regard pertaining to this issue are allowed. Disallowance of expenditure u/s 37 - Incurred on Commercial Expediency - HELD THAT:- On going through the order of the CIT(A), we find that before recording a finding that the expenditure was not incurred for the business purpose of the assessee the CIT(A) has not allowed an opportunity to the assessee for explaining as to how the expenditure related to the business expediency of the assessee. We find force in the contention of the learned AR for the assessee that once the assessee has filed the complete details of the expenditure nothing more was required to be done by the assessee for showing its eligibility for claiming the deduction for the impugned expenditure and, therefore, the assessee did not consider it necessary to explain the same before the CIT(A). Had the CIT(A) asked the assessee to explain the assessee would have done so. We consider it appropriate to set aside the issue to the file of the CIT(A) for deciding the issue afresh after allowing reasonable opportunity of being heard to the assessee for explaining as to how the expenditure incurred/claimed related to the commercial expediency of the assessee. The CIT(A) shall also allow opportunity of being heard to the Assessing Officer. With these observations, the order of the CIT(A) in this regard is set aside and the issue of claim of deduction u/s 37 of the Act of the expenditure incurred by the assessee is restored to the file of the CIT(A) for compliance. The Ground No. 2 of the appeal of the assessee stands allowed for statistical purpose. In the result, the appeal of the assessee stands partly allowed for statistical purpose.
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