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2023 (3) TMI 140 - AT - Income TaxCapital gain u/s 50B - slump sale - disallowances made towards sundry debtors not collectible, bank guarantee, provision towards warranties, advance license liability and adjustment to net worth toward assets acquired - whether expenses and deductions claimed by the assessee as a deduction / adjustment to the purchase price is allowable? - HELD THAT:- As noticed that the assessee has sold capacitor business and component business on slump sale basis. As per section 2(42C) ‘slump sale’ means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales. We will therefore first look at the provisions of section 50B of the Act which contain the special provision for computation of capital gains in case of slump sale. Net worth is defined in Explanation 1 to section 50B as the difference between ‘the aggregate value of total assets of the undertaking or division’ and ‘the value of its liabilities as appearing in books of account’. The ‘aggregate value of total assets of the undertaking or division’ is the sum total of: WDV as determined u/s.43(6)(c)(i)(C) in case of depreciable assets, The book value in case of other assets. Net worth is deemed to be the cost of acquisition and cost of improvement for section 48 and section 49 of the Act. As per section 50B, no indexation benefit is available on cost of acquisition, i.e., net worth. Lower authorities have not examined the evidences submitted and have not verified the terms of the agreement. Assessee also has not given before the lower authorities which would help the CIT(A)/AO to understand the facts, with regard to the clear breakup of the various adjustments made and how the same is relatable to the completion accounts to substantiate that it is an adjustment to purchase price - issue of various adjustments disallowed by the CIT(A)/AO with regard to the computation of capitals gains should be remitted to the AO for a de novo verification of facts. AO is directed to consider the adjustments made based on completion accounts, objections filed by the purchaser, the details of bank guarantee invoked etc., before deciding the case. AO is also directed to keep in mind the decision of the coordinate bench in the case of Bhoruka Aluminium Ltd [2022 (8) TMI 1348 - ITAT BANGALORE] while deciding the allowability of the various adjustments claimed by the assessee against the provisional purchase price. The assessee is directed to submit all the relevant details and cooperate with the proceedings. It is ordered accordingly. Non deduction of TDS - disallowance towards payments to sales executives is also done on the basis that the assessee failed to furnish any credible evidence or details relating to the payments before the lower authorities - We therefore remit both these issues back to the AO to verify the details of tax deducted, evidences of sales promotion activity and the explanations the assessee would provide in this regard. The assessee is directed to submit the relevant evidences and documents in this regard and cooperate with the proceedings. Appeal filed by the assessee is allowed for statistical purposes.
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