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2007 (8) TMI 486 - AT - Income TaxSlump sale of business as a going concern - Taxable under "Capital Gain or Business Income" - Business of software development and developed technical knowledge and know-how of its own - intangible assets and M/s. Rohan Software Pvt. Ltd. (RSPL) transferred for a consideration to M/s. ICICI Infotech Services Ltd. (IISL) - HELD THAT:- We find that the decisions relied upon by the learned DR and the revenue authorities, i.e., Anand Electric Co. Ltd. v. CIT [1998 (11) TMI 106 - BOMBAY HIGH COURT] and CIT v. Artex Mfg. Co.[1997 (7) TMI 7 - SUPREME COURT], were decided before the introduction of section 50B by the Finance Act, 1999, with effect from 1-4-2000 and also the definition of "slump sale" in the newly inserted section 2(42C), which came into effect from 1-4-2000. Therefore, the decisions relied upon by the ld revenue authorities cannot be applied in the instant case of the assessee. "slump sale" has been defined as transfer of one or more undertakings as a result of sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales. In the instant case of the assessee, though in the purchaser’s books of account the individual assets have been priced independently, assessee had not assigned separate values and cones-quently sold the items for independent price. It is not the revenue’s case also that individual assets had the price fixed separately and charged. "Undertaking" is explained in Explanation 1 to section 2(19AA). According to this Explanation, as we noted, includes any part of an undertaking or a unit or division of an undertaking or a business activity as a whole. Revenue’s case is that some of the items like motor car and building has been retained by the assessee; as such this cannot be treated as a slump sale. But the fact to be considered is assessee is in the field of intellectual property rights. Computers, furniture, etc. which is linked with the business of the assessee has been sold. The items that the assessee kept separately, has nothing to do with assessee’s business, which is sold/handed over to the purchaser, i.e., IISL. The business has been sold. The purchaser could very well carry on the business, which was carried by the assessee before the sale, without purchasing any independent items. Thus, the plea of the revenue that the assessee has not sold the undertaking as a whole, is difficult to accept. One of the objections of the revenue is that when the assessee started the business, the professional receipt was less than Rs. 3 lakhs. Now it is more than Rs. 84 lakhs. The growth within a short period of three and half years is commendable. Many of the developments in the field, definitely, according to the revenue, would have taken place within a period of less than thirty six months and therefore, it cannot be treated as long-term capital gain. We are unable to accept this view of the revenue as well. A businessman does the business every day. If some of the items that are developed subsequently within less than thirty six months if sold, it cannot be taken independently. Assessee is selling the business as a whole. It is not part by part, bit by bit and as such, this contention of the revenue is without merit. Hence, the appeal by the assessee on this ground is allowed. In the result, appeal of the assessee stands allowed in part.
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