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2006 (5) TMI 135 - AT - Income TaxAdditional Ground - capital gains - chargeability of profit arising from slump sale - manufacturing division - Interest on borrowed capital - HELD THAT:- In the case of Coromandal Fertilizers Ltd. [2003 (11) TMI 303 - ITAT HYDERABAD-B] is directly on the point in issue wherein it was held that the slump sale of an individual unit as a going concern does not attract capital gains tax as the computation provisions fail to compute the capital gain arising from such sale. It was also held that there was a lacuna in the statute to provide for such computation provisions which has been removed by insertion of s. 50B by the Finance Act, 1999 w.e.f. 1 April, 2000 and this provision being a substantive one is not retrospective in operation. To the similar effect is the decision of Ahmedabad Bench of Tribunal in the case of Industrial Machinery Associates [2001 (1) TMI 201 - ITAT AHMEDABAD-A] wherein it was held that prior to insertion of s. 50B effective from asst. yr. 2000-01, it was not possible to conceptualize the cost of acquisition of a going concern as well as date of acquisition thereof and since the cost of acquisition and or the date of acquisition of the asset could not be determined, it could not be brought within the purview of s. 45 for levy and computation of capital gains. Since the assessment year involved in the present case is 1995-96, the issue raised in the cross-objection filed by the assessee is squarely covered by the aforesaid decisions of the Tribunal in favour of the assessee and respectfully following the same, we hold that the gain arising from the slump sale of its manufacturing division by the assessee-company was not liable to tax. Accordingly, we allow the cross-objection filed by the assessee. Thus, assessee holding that the gains arising from the slump sale of the manufacturing division were not liable to tax, the issue raised by the Revenue in its appeal for asst. yr. 1995-96 in ground Nos. 1 and 2 has become infructuous. The same is accordingly dismissed. Disallowance of interest paid on borrowed funds - HELD THAT:- In the present case, the facts involved are entirely different inasmuch as the details of availability of funds and application thereof furnished by the assessee were sufficient to establish that the advances were given by the assessee to its sister-concerns mainly after 31st Jan., 1995 from the sale proceeds of its manufacturing division and not from the funds borrowed on interest as alleged by the AO. After verifying the said details, the learned CIT{A) also found that the advances to its sister-concerns had been given by the assessee-company out of such sale proceeds and there was no diversion of borrowed funds for non-business purpose. Before us the ld DR has not been able to show that these findings recorded by the learned CIT{A) are factually incorrect and this being so as well as considering the fund-flow position reflected in the details furnished by the assessee before the learned CIT(A) and reproduced by him in his impugned order, we hold that the disallowance of interest made by the AO was not justified. The impugned order of learned CIT{A) deleting the same is, therefore, upheld and ground No. 3 of the Revenue's appeal is dismissed. The only issue raised by the Revenue in its appeal for AY 1996-97 relating to the disallowance of interest is similar to the one raised in ground No. 2 of its appeal for AY 1995-96. Since the facts involved in AY 1996-97 as well as the arguments advanced by both the sides are similar to that of AY 1995-96, we follow our decision rendered in AY 1995-96 on a similar issue and uphold the impugned order of the learned CIT(A) deleting the disallowance made by the AO on account of interest. In the result, both the appeals of the Revenue are dismissed whereas the cross-objection of the assessee is allowed.
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