TMI Blog2006 (5) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring division of the assessee. 3. The facts which are relevant and material to decide this issue are as follows: As per the agreement entered into with Kelvinator of India Ltd. on 30th Aug., 1994, the assessee-company agreed to sell its entire undertaking as a going concern which included immovable properties, plant and machinery, equipment, furniture, inventories of raw materials, finished products, work in progress, stores, all existing liabilities and obligations, rights, title, benefits, administrative staff, workers, etc. As per the said agreement the undertaking was agreed to be transferred by the assessee to Kelvinator of India Ltd. on 31st Jan., 1995 for a total consideration of Rs. 6.30 crores. In its return of income filed for the year under consideration, i.e., asst. yr. 1995-96, the assessee declared a long-term capital gain of Rs. 4,29,38,582 arising from the said transfer. During the course of assessment proceedings before the AO, the contention of the assessee was that the said undertaking being a long-term capital asset under s. 2(14), capital gain on slump sale/transfer thereof was exigible under s. 45 and not as short-term capital gain under s. 50 as proposed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit was introduced in the statute only w.e.f. 1st April, 2000. He, therefore, allowed deduction from the sale consideration on account of acquisition only to the extent of Rs. 1,95,93,802 being the net worth of the assessee's business as on the date of transfer and directed the AO to tax the long-term capital gain in the hands of the assessee at Rs. 4,34,06,198. This relief allowed by the learned CIT(A) has been challenged by the Revenue in ground Nos. 1 and 2 which read as under: "1. On the facts and in the circumstances of the case, the learned CIT(A) has erred in holding that long-term capital gain is chargeable on the sale of entire block of assets instead of short-term capital gain as per provision of sub-s. 50(2) of IT Act. 2. On the facts and in the circumstances of the case, the learned CIT(A) has erred in directing the AO to adopt cost of acquisition of the assets as per provision of s. 50B which is applicable w.e.f. 1st April, 2000 subsequent to asst. yr. 1996-97." 5. The assessee, on the other hand, has filed a cross-objection raising the following grounds on the issue relating to the charge ability of capital gain to tax: "1. That on the facts and in law the gains ..... 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 learned 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 learned counsel for the assessee, on the other hand, has submitted that there is no such estoppel 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 vs. Bharat General Reinsurance Co. Ltd. (1971) 81 ITR 303 (Del) and that of Delhi Special Bench of Tribunal in the case of Indo Java Co. vs. IAC (1989) 35 TTJ (Del)(SB) 111. 8. On merits, the learned counsel for the assessee has submitted that the issue raised by the assessee-company in its cross-objection is directly covered by the decision of Hyderabad Bench of T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions cited by the learned Departmental Representative are of hardly any help to support the case of the Revenue on the issue raised in the cross-objection filed by the assessee. For instance, in the case of Premier Automobiles Ltd., the issue before the Hon'ble Bombay High Court was whether there was a slump sale of business as a going concern or was it a case of an itemized sale of assets and their Lordships held, in the facts and circumstances of that case, that entire business was sold by the assessee as a going concern without any intention of sale of itemized assets. As regards the computation of capital gains arising from the sale of a going concern, Hon'ble Bombay High Court, however, did not render any verdict and sent back the matter to the AO with a direction to decide whether any capital gains tax liability arises from such sale and if so, to compute the quantum of capital gains under ss. 45 to 50. Thus, the issue relating to the chargeability of profit arising from slump sale of business as a going concern to tax as capital gains was not decided by the Hon'ble Bombay High Court in the case of Premier Automobiles Ltd. and the said decision cited by the learned Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 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. 12. In view of our aforesaid decision on the cross-objection of the assessee holdin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Before us, the learned Departmental Representative has mainly relied on the decision of Hon'ble Delhi High Court in the case of Elmer Havell Electrics Ors. vs. CIT (2005) 197 CTR (Del) 316 : (2005) 277 ITR 549 (Del) in support of the Revenue's case that disallowance of interest made by the AO was fully justified. A perusal of the said decision, however, shows that it was clearly established on record by the authorities below in the said case that the assessee had taken loans on interest and had advanced funds by diversion or otherwise to its sister-concern free of interest and having regard to this finding of fact given by the authorities below including the Tribunal, Hon'ble Delhi High Court held that the order of the Tribunal did not call for any interference. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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