TMI Blog2009 (9) TMI 235X X X X Extracts X X X X X X X X Extracts X X X X ..... on such premise. the appeals of the Revenue are allowed, and the orders of the assessing authority levying interest under section 234B of the Act in respect of the delayed remittance of advance tax is restored – Decision in favor of revenue – against the assessee. - 320, 325 and 597 of 2004 and 2971 of 2005 - - - Dated:- 30-9-2009 - D. V. SHYLENDRA KUMAR and ARAVIND KUMAR JJ. BRINDAVAN BEVERAGES LTD . Versus DEPUTY COMMISSIONER OF INCOME-TAX COMMISSIONER OF INCOME-TAX AND ANOTHER Versus HEWLETT PACKARD INDIA SOFTWARE OPERATION LTD . M. V. Seshachala for the Revenue. A. Shankar, G. Sarangan and Miss Vani H. for the assessee. JUDGMENT D. V. SHYLENDRA KU MAR J.- Re: I. T. A. No. 2971 of 2005: 2. This is an appeal of the Revenue under section 260A of the Income-tax Act, 1961 (for short "the Act") directed against the order dated March 31, 2005, passed by the income-tax Appellate Tribunal Bangalore in I. T. A. No. 863/Bang/2002 on the premise that the following two substantial questions of law which arise out of the order of the Tribunal have been wrongly decided by the Tribunal. "Whether the Tribunal was correct in holding that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilure of the assessee to conform to the requirements of sections 208 and 210 of the Act and as in the case of the assessee there being no requirement under sections 208 and 210 of the Act the liability for interest under sections 234B and 234C of the Act also is not attracted and therefore any levy of interest is illegal and not warranted. 4. In the case of the assessee in this appeal, though the assessee itself has conceded the liability for payment of advance tax and for short payment of instalments of advance tax or balance tax liability to be paid along with the return and on the basis of self-assessment in terms of section 210 of the Act and had actually calculated interest in terms of sections 234B and 234C of the Act on surcharge payments for the delayed period even in terms of its own return, but the assessee has nevertheless, made this an issue before the first appellate authority as the Assessing Officer had determined the tax liability of the assessee on the computation of income under section 115JA(1) of the Act to be an amount higher than what the assessee itself had declared and had consequently called upon the assessee not only to pay the balance tax amount but a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of sections 234B and 234C of the Act is automatic when once there is short payment or delayed payment of advance tax instalments and self-assessment tax; that the Assessing Officer has no choice for not levying interest when once it is noticed that there is a delay or short payment in paying the instalments of advance tax or the self-assessment tax; that in terms of section 115JA(1) of the Act it starts with a non obstante clause when once the total income of the assessee for the relevant previous year is by fiction deemed to be an amount equal to 30 per cent.. of the book profits of the assessee which again is required to be computed in terms of section 115JA(2) of the Act, there is no escape from the consequence of the operation of the provisions of sections 234B and 234C of the Act; that the extent of operation of non obstante clause of section 115JA(1) of the Act, being limited to the artificial manner of computation of total income of the assessee for the assessment year in question and in respect of all other aspects all other provisions of the Act being made applicable and operational is made explicitly clear by sub-section (4) of section 115JA of the Act; that the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mere fact that the assessee had in its return of income shown liability for payment of the instalments of advance tax, self-assessment tax and on the difference had computed the interest leviable under sections 234B and 234C of the Act is by itself not the concluding factor; that the liability can only be in terms of the statutory provisions and not merely because the assessee had so indicated in its return; that the charging provisions in terms of sections 115JA(1) and 115JA of the Act are in pari materia, there is no difference in computing the tax liability and therefore the judgment of the Supreme Court affirming the judgment of the Karnataka High Court in Kwality Biscuits ' case [2000] 243 ITR 519 in the appeal of the Revenue reported in the case of CIT v. Kwality Biscuits Ltd. reported in [2006] 284 FIR 434 (SC) concludes the issue and therefore the question should he answered in the affirmative. 13. Sri Sarangan, learned senior counsel appearing for the assessee would also draw our attention to the view taken by the Bombay High Court in the case of Snowcem India Ltd. v, Deputy CIT reported in [2009] 313 ITR 170 that though the Bombay High Court had differed f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having applied the ruling of the Supreme Court in the case of CIT v. Kwality Biscuits Ltd. reported in [2006] 284 ITR 434, that should be necessarily followed in the present case also; that no distinction can be made for understanding the question of levy of interest under sections 234B and 234C of the Act whether it is a case of determination of total income under section 115J or under section 115JA of the Act. 16. Even on the question of the legislative development of section 115JA of the Act having come in place of section 115J of the Act by the Finance (No.2) Act, 1996 with effect from April 1,1997, and section 115JA(4), not withstanding the provisions of sub-section (4) of section 115JA of the Act being at variance with the earlier provisions of section 115J of the Act, the submission is that sub-section (4) of section 115JA of the Act can be under stood to make a difference only in respect of procedural aspects governing the question of determination of tax liability under section 115JA(1) of the Act and cannot or does not cover the situation where substantive provisions like sections 234A, 234B, 234C which are virtually in the nature of charging sections can be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee has drawn our attention to the Finance Acts of the years 1996, 1997, 1998 and 1999 and would submit that reference to the provisions of section 115JA of the Act is conspicuously absent in Part III of the Finance Act providing for computing advance tax though mention is made of sections 115A, 115B, 115BB,115C. of the Act etc., and even of the provisions of section 161(1A), 164, 164A of the Act there also the total income is computed in an artificial manner and this coupled with the development brought about in the wake of introduction of section 115JB of the Act with effect from April 1, 2001, by the Finance Act of the year 2000 where alone for the first time mention is made in section 115JB of the Act for the purpose of computing advance tax and the rate is provided in Part III of the Finance Act, 2000 is a clear indication of the scheme of the Legislature not to compel an assessee to do an impossible thing, in the sense, not to compel an assessee liable for payment of tax under section 115J of the Act or section 115JA of the Act to pay advance tax and also subjecting the assessee to the consequence of non payment of advance tax within the stipulated time as the Legi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005 and also Sri Shankar, learned counsel appearing for the assessee in I.T.A. No.320 of 2004, would submit that the intention of the Legislature in understanding a statutory provision has to be gathered by not only the language used in the statute but attention should also be paid to what has not been said and it is for this reason it is submitted that what is said in the Finance Act, 2000 and which had not been said in the course of the Finance Acts of the years 1996, 1997, 1998 and 1999 assumes significance and importance in understanding and interpreting sub-section (4) of section 115JA of the Act and for this proposition reliance is placed on the decision of the Supreme Court in the case of CIT v. Tara Agencies reported in [2007] 292 ITR 444 (paragraphs 64 and 67). 23. We have perused the provisions of section 115JA of the Act as also the provisions of section 115J of the Act and examined the submissions made by Sri Sarangan, learned senior counsel appearing for the assessee in I T.A. No. 2971 of 2005 and Sri Shankar, learned counsel appearing for the assessee in I.T.A. No. 320 of 2004 in the wake of the statutory provision and in the background of the legislative cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serted in section 115JA of the Act and which has been pressed into service by Sri Seshachala, learned standing counsel appearing for the Revenue and this has not been made an issue earlier, the judgment in the case of SKS Refineries Pvt. Ltd. does not constitute a binding authority on us and therefore we are required to examine the question and proceed with the matter. Arguments/submissions of Sri A. Shankar, learned counsel for the assessee in I T A. No.320 of 2004 vis-a-vis two questions relating to the liability of the assessee for payment of interest under sections 234A and 234B of the Act 27. Sri Shankar, learned counsel for the assessee, for the purpose of contending that there is no scope for levy of interest in terms of sections 234B and 234C of the Act, in so far as the quantum of tax liability arising out of the application of the provisions of section 115JA of the Act is concerned, has drawn our attention to the realities of the matter to submit that when the assessee cannot possibly compute the book profits before the end of the accounting period, there is no way of ascertaining the book profits and offer 30 per cent.. of the amount as tax and therefore it is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such value of so-called perquisites constitutes part of the salary or otherwise being the actual position in view of the conflicting views taken by the Tribunal itself on this question and ultimately, the High Court virtually chose to accept the argument that the advance payment of tax even in terms of the tax deducted at source and remitted by the employer in itself was good enough if the estimation of the income of the assessee was to be on the premise that the value of food and other things supplied did not constitute income of the assessee and in this view of the matter, having concurred with the finding of the Tribunal for deleting interest, we find that the judgment in any way advance the case of the assessee in the present case, for the reason that the uncertainty as a ground for avoiding levy of interest under section 234 of the Act cannot be accepted for more than one reason. 28. Firstly, the aspect of uncertainty is very much present in any estimation. Advance payment of tax de hors the provisions of section 115JA of the Act, i.e., on the normal income of the assessee, it cannot be different only because such liability for tax is on the basis of the total income bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is recognized business practice in commercial parlance that even quarterly results of the performance of the company are published for the benefit of the shareholders and other members of the public and it this is a possibility, it cannot be said that it is impossible for the purpose of computation of liability in terms of the provisions of section 115JA of the Act. For these reasons, while we hold that the judgment of the Uttaranchal High Court in the case of Sedco Forex International Drilling Co. Ltd. [2003] 264 ITR 320 is not one applicable to the case of the present assessee with the logic that the provisions of sections 234B and 234C of the Act, i.e., levy of interest under these provisions, should fail or the assessee should be relieved from this liability for the reason that it is impossible to arrive at the book profit in advance and therefore it is an impossibility to pay instalments of advance payment of tax. 31. Though in this regard, Sri Shankar, learned counsel for the assessee, has drawn our attention to the Board Circular No.13 of 2001 dated November 9, 2001, which had been issued in the context of introduction of the provisions of section 115JB of the Act w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the simple reason that holding section 115J of the Act and section 115JA of the Act are all one and the same in pari materia and therefore the decision of the Supreme Court rendered while dismissing the appeal of the Revenue against the judgment of this court in Kwality Biscuits Ltd. v. CIT [2000] 243 ITR 519 equally governs the issue which only amounts to totally ignoring the provisions of sub-section (4) of section 115JA of the Act. Even on a reading of the provisions of sub-section (1) of section 115JA of the Act, it is quite clear that the fiction is called in aid to indicate as to what is the total income of an assessee that can be brought to tax which is a total income artificially arrived at as provided under sub-section (1) of section 115JA of the Act though even otherwise total income is ascertained in the normal course and that is not an impossibility. In fact, it is only after ascertaining the total income in the normal course and after ascertaining the consequential tax liability one has to examine as to whether the provisions of section 115JA(1) of the Act are attracted. The situation is quite simple, in the sense, if the total income as arrived in the normal co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act happens to be slightly higher. This can be illustrated by an example such as, in a case where the total income of a company as computed and indicated by the assessee itself is say Rs.100 crores, but 30 per cent., of the book profits of the assessee as computed in terms of section 115 JA of the Act is Rs.105 crores, the assessee can claim exemption from the operation of the statutory provisions requiring payment of instalments of advance tax and self-estimation tax even in respect of Rs.100 crores total income which otherwise would definitely attract all these provisions and the post facto ascertainment of book profits and computation of 30 per cent., of book profits being found higher than the total income arrived at in the normal course, operating retrospectively to relieve the assessee from the consequence of non-adherence to the requirements of other statutory provision which would operate on the usual total income of the assessee being Rs.100 crores and not adhering to the requirement of payment of instalments of advance tax and self-estimation tax. 36. Such an understanding not only brings about an incongruity but also leads to a situation where it brings about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no loss to the Revenue, the provisions of sections 234B and 234C of the Act are not attracted is an argument not acceptable in the present situation and the authorities supporting this proposition of law are of no relevance for two reasons. Firstly, as to the nature of levy is taken into question for under standing a statutory provision and while examining the validity of the levy of the provision is challenged as not a valid provision and in the present case, what is examined is not either the validity of provisions of sections 234B or 234C of the Act or even the scope and ambit of this provision but only the scope and ambit of the provisions of sub-section (4) of section 115JA of the Act and as to how section 115JA should be understood, interpreted and applied. In the present cases, the court is not examining the validity of the provisions of section 115JA of the Act leave alone the validity of section 234B or 234C of the Act but only the manner and understanding the extent of applicability of section 115JA of the Act. The argument also fails for the reason that the assumption there is no loss to the Revenue if the provisions of sections 234B and 234C of the Act are kept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay advance tax under section 208 of the Act when section 234B interest is levied automatically as there is no discretion? 44. The appellant in this case by way of an application dated September 8, 2008, has raised the following two additional substantial questions of law: "(c) Whether the Tribunal was correct in holding that the transfer of soft drink unit of the assessee was a slum (sic) sale, when the individual valuation of the assets has been made by the expert valuer before arriving at the total sale consideration for transfer of the unit? (d) Whether the Tribunal was correct in holding that there was no default under section 208 of the Act in not paying the advance tax on the ground that entire transaction of sale was a slum (sic) sale and no capital gains are chargeable, when the levy of interest under section 234B of the Act was mandatory?" I.T.A. Nos. 325 and 597 of 2004 are by the assessee. While I.T.A. No. 325 of 2004 by the assessee is also against the very order dated January 8, 2004, passed by the Tribunal, which, in turn had allowed the appeal in part and against that part of the appeal which had not been allowed by the Tribunal. It appears the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book profit under section 1 of the Act, is in accordance with law? (e) Whether the surplus on the sale of the undertaking as a whole requires to be credited to the profit and loss account in accordance with Parts II and III of Schedule Vito the Companies Act? (f) Whether the Tribunal is justified in law in holding that the decision of the Supreme Court in case of Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273 is not applicable to the appellant's case? 45. A brief minimum background to appreciate the circumstance and the manner in which the questions arose for our consideration in these three appeals is as under: 46. During the accounting period relevant for the assessment year, i.e., during the year between April 1, 1998, and March 31, 1999, the assessee claimed to have sold its soft drinks bottling unit to M/S. Hindustan Coca- cola Bottling (Southwest) Private Limited for a total consideration of Rs. 55,44,90,899. This had been preceded by an agreement for sale with the buyer entered into on June 4, 1998, agreeing to sell the soft drink beverage business undertaking of the assessee for a consideration of Rs. 48,00,00,000. On the assessee's own admission, the consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 71,88,175 Bottle coolers 1,01,25,975 Ice boxes 32,46,750 Fountain equipment 27,38,266 Miscellaneous 8,67,188 2,99,73,042 Bottles and shells Bottles 5,61,53,649 Wooden shells 88,36,808 6,49,90,457 Advertising materials 3,39,46,250 Motor vehicles 2,07,95,000 Grand Total 50,07,00,000 48. In the wake of such information gathered by the Department, a further notice was issued to the assessee as to why the transaction should not be treated as a transfer of assets as reported earlier in the report of the valuer and not as a single transaction but characterized as a slump sale, which in turn would disentitle the assessee to the benefits that could arise to the assessee if the transaction was to be treated as a slump sale. The Assessing Officer was also of the view that the assessee should have offered the surplus amount as capital gain. The Assessing Officer found that the assessee elsewhere had val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le agreeing with the view of the Assessing Officer and the Appellate Commissioner to the extent that the sale was not a slump sale and for taking this view relied upon the ratio in the decision of the Supreme Court in the case of CIT v. Electric Control Gear Mfg. Co. [1997] 227 IIR 278 as this decision was attracted to the facts and circumstances of the case, was also of the view that the ratio of the decision of the Supreme Court in the case of CIT. Artex Manufacturing Co. [1997] 227 ITR 260, was not attracted to the facts and circumstance of the present case. The Tribunal further opined that the fact situation prevailing in the case of the assessee attracted the ratio of the decision rendered by the Bombay High Court in the case of CIT v. Premier Automobiles Ltd. [1994] 206 ITR 1 the decision of this court in Syndicate Bank Ltd. v. Addl. CIT [1985] 155 ITR 681 and the decision of the Delhi High Court in the case of P.N.B. Finance Ltd. v. CIT [2001] 252 ITR 491, and for such reasons, even selling the business undertaking as a going concern also amounts to transfer of the capital asset within the meaning of section 2(14) of the Act, in which event, the capital g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee in terms of section 115JA of the Act to be corrected for the reason that the Tribunal has not only totally misunderstood the ratio of the decision of the Supreme Court in the case of Apollo Tyres Ltd. [2002] 255 ITR 273 but also thinking that the decision of the Bombay High Court in the case of Veekaylal Investment Co. (P) Ltd. [2001] 249 ITR 597; [2001] 166 CTR 96 covers the case of the assessee. 54. It is also contended that the Tribunal has failed to notice that the possibility of computation of capital gains arising out of the slump sale is a possibility only on and after April 1, 2000, where after the provisions of section 50B of the Act have become operative by the Finance Act of 1999 and the provisions having no application for the assessment year 1999-2000, the Tribunal could not have directed the Assessing Officer to compute the capital gain of the assessee for the assessment year 1990-2000 even after taking the view that the transaction of transfer of the bottling unit of the assessee as a going concern, amounted to a slump sale and not an item-wise sale of individual assets and for this reason also the order of the Tribunal is bad. 55. The assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest is by operation of statute, which the Assessing Officer is bound to compute and add irrespective of the explanation or circumstance pointed out by the assessee. 57. We have heard Sri M.V. Seshachala, learned senior standing counsel for the Revenue and Sri A. Shankar, learned counsel for the assessee in all these three appeals. 58. A few more facts that may be relevant and useful in appreciating the contentions of the learned counsel for the parties and the background in which the appeals arose are as under: Date Event (1) (2) June 3, 1997 The assessee entered into a memorandum of understanding with M/s. Hindustan Coca-cola Bottling (Southwest) Private Limited for transfer of its bottling unit to the buyer as a going concern. June 11/12, 1997 M/s. Hindustan Coca-cola Bottling (Southwest) Private Limited appointed M/s. John Foord (Asia) Pvt. Ltd., of Singapore as valuer to visit the plant and other business places of the assessee to evaluate various assets of the assessee and to submit a report. August 1, 1997 A supplementary memorandum of understanding was entered into between the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We having permitted the Revenue to raise additional grounds and additional questions in its appeal (I.T.A. No. 320 of 2004), the Revenue has raised an additional question as to whether the Tribunal was right in reversing the finding of the Assessing Officer and the appellate authority that the transaction was not in the nature of a slump sale nor was it a transaction of the entire assets and liabilities of the unit as a going concern, but a transaction where only some of the assets of the unit on transfer though the unit itself was transferred as a going concern and not all liabilities of the unit are also transferred, but many substantive liabilities having been retained by the assessee, the Tribunal was not right in reversing this finding to hold that the transaction was a slump sale, without appreciating the full facts and circumstances that prevail in the case of the assessee. 61. On this aspect, Sri M. V. Seshachala has submitted that the question as to whether the transfer of capital asset by the assessee is not a pure question of law, but a mixed question of fact and law and has to be necessarily inferred on appreciation of the facts and circumstances in each case, part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slump sale: CIT v. Narkeshari Prakashan Ltd. [1992]196 ITR 438 (Bom); CIT v. Electric Control Gear Mfg. Co . [1997] 227 ITR 278 (SC); CIT v. Mugneeram Bangur and Co. (Land Department ) [1965] 57 JTR .299 (SC); Premier Automobiles Ltd. v. ITO [2003] 264 ITR 193 (Bom); P.N.B. Finance Ltd. v. CIT [2001] 252 ITR 491 (Delhi); and in other cases such as: Premier Automobiles Ltd. v. ITO [2003] 264 ITR 193 (Bom); CIT v, Sedco Forex International Drilling Co. Ltd. [2003] 264 ITR 320 (Uttaranchal); CIT v. Artex Manufacturing Co. [1997] 227 ITR 260 (SC); CITv. Electric Control Gear Mfg. Co . [1997] 227 ITR 278 (SC); some courts held that it is not a slump sale. 66. Even on a transaction being characterized and concluded as in the nature of a slump sale, it is not as though there is no liability for payment of tax on computation of capital gains and there is no generalization that in all situations of slump sale, the computation provision for ascertainment of capital gains in terms of section 48 of the Act is not workable, for the reason that one of the two amounts viz., the full value of the consideration for which the asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2001] 252 ITR 491, the facts and circumstances of the present case being akin to the facts and circumstance of those cases and the ratio being made applicable, it was necessary to ascertain the capital gains and for such purpose it has remanded to the Assessing Officer for computation of capital gains. 69. We also notice that the Supreme Court allowed the assessee's appeal in the case of P.N.B. Finance Ltd. v. CIT [2008] 307 ITR 75 and reversed the judgment of the Delhi High Court as per its judgment in the case of P.N.B. Finance Ltd. v . CIT being of the view that the sale price including the value of intangible assets like goodwill, tenancy rights, manpower and value of banking licence are all fact finding and that it was not possible to earmark a separate price or value in respect of such intangible assets, the machinery section of 48 fails due to inability for computing the capital gain in respect of the value of each such item and in turn the charging section 45 also falls. 70. What is of significance to be noticed in this decision is that in all the situations, the question as to whether the sale is a slump sale and if so, a further question as to whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itional substantial questions of law, one has already been considered and the other question is relating to the finding of the Tribunal as to whether the Tribunal was right in holding the transaction was in the nature of a "slump sale". 74. It is on this question, the assessee has filed I. T. A. No. 325 of 2004, raising a further question that the Tribunal was not right in concluding that though the transaction was in the nature of a slump sale, it was nevertheless taxable even by identifying the value of the individual assets and remanding the matter to the Assessing Officer for such purpose. 75. However, in the assessee's appeal (I. T. A. No. 325 of 2004), the assessee has presented the question in a slightly modified form for our examination as a substantial question of law, pointing out that the transaction is in the nature of a slump sale, reducing the taxable income has become a reality only with effect from April 1, 2000 on the introduction of section 50B of the Act and as such the relevant provision was not applicable to the assessee's case, as the slump sale transaction was during the previous year relevant for the assessment year 1999-2000 and for this reason, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entire amount shown as surplus as a result of the sale of the unit to be capital gain and has added it to the income of the assessee, even while computing the book profit for the purpose of section 115JA, the Tribunal has remanded the matter to the Assessing Officer the recomputed the capital gain and then on such premise redetermine the tax liability of the asessee for the year, even assuming that the transaction is in the nature of a slump sale, but nevertheless, resulting in capital gains, the actual amount of capital gain is required to be determined. It is this finding of the Tribunal which as given rise to filling of appeals both by the Revenue and the assessee, with the Revenue contending that the Tribunal is not correct in holding that it was slump sale and the assessee contending that when once the Tribunal records a finding that the transaction is in the nature of a slump sale, the further question of determining the capital gain does not arise and further that redetermination of the book profits in terms of the order passed by the Assessing Officer is wrong in law, on the authorities in the case of Syndicate Bank Ltd. V. Addl. CIT [1985] 155 ITR 681 (Karn) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d even before the transaction took place ascertained the value of the individual assets and that factor having gone into the fixing the final price of the unit, the sale cannot be taken to be a slump sale in the sense of the phrase, particularly for the purpose of holding that it is a sale in which the value of the individual assets cannot be ascertained and secondly to contend that the correction carried out by the Assessing Officer for arriving at the proper value of the book profit for the purpose of section 115JA of the Act was warranted and is in fact, in terms of the provisions of section 115JA of the Act and not at variance with the statutory provisions; that the authorities that have come into existence in the context of the interpretation of the provisions of section 115J of the Act cannot be ipso facto be accepted to be authorities or the law declared by the Supreme Court for the purpose of section 115JA of the Act; that in so far as the declaration of law in terms of article 141 of the Constitution of India is concerned, the provisions of section 115JA of the Act have to be taken to be uncharted area and therefore it is open to this court to examine the implications of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a compendious sale of a business or industrial undertaking and normally an undertaking which is a going concern being sold or transferred for a price fixed for the entire unit and not necessarily with reference to the individual or component assets of the transferred unit. 85. Further significance is only in the context of transfer of a capital asset if it can give rise to profits and gains. It becomes chargeable to tax as income in terms of section 45 of the Act. The computation of capital gains is as provided under section 48 of the Act and is arrived at by deducting from the full value of consideration received or accruing as a result of the transfer of the capital asset the expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the asset and the cost of any improvement thereto. 86. The purpose of the income-tax Act is to levy tax on income and to raise revenue to the State and the categories of receipts which come within the scope and meaning of income have been increased and capital gain is taken to be income and therefore chargeable to tax. The charge created under section 45 of the Act is to be effectuated by comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 88. If there is such a possibility with reference to any transfer of capital asset including the slump sale, to that extent it can definitely be worked. 89 It is on such principle that the Assessing Officer was of the view that the value of several capital assets was ascertainable with reference to the transaction between the parties and with reference to the developments that had taken place between the seller and buyer which material has thrown light on the possible value of the individual assets though the price fixed for the whole unit did not make a reference to the individual assets, the basis on which the Assessing Officer had brought to tax capital gains resulting from the transfer of the unit as a going concern. 90. In so far as this finding is concerned, all the authorities below have taken the view that such is the possibility for ascertaining the capital gains resulting from the sale of unit as a whole but with reference to definite component capital assets of the entire unit. 91. The Assessing Officer was of the view that the facts of the present case, the transaction in question cannot even be termed as a "slump sale" as it was possible to ascertain th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax based on the facts and figures of individual assets as was otherwise available from the records though the assessee as such did not make it available. On such premise, the Assessing Officer concluded that the capital gains can be ascertained and brought to tax. The Assessing Officer based on such premise had for the purpose of computation of total income in terms of section 115JA of the Act added to the book profits of the assessee the entire amount of Rs. 43, 16, 50, 812 which the assessee itself had shown as surplus on account of sale of the unit computed income under section 115JA of the Act and brought to tax 30 per cent.. There of and interest under section 234B of the Act and arrived at the total tax liability after payment of advance tax. 92. The first appellate authority for the very reasons and agreeing with the view taken by the Assessing Officer felt that the transaction is not a "slump sale" as it did not envisage the sale of all assets and liabilities of the under-taking of the unit. The computation of capital gains was determined on such premise and therefore agreeing with the Assessing Officer opined that the benefit of the ratio of the judgment by the Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60A of the Act and even it should be considered as a question of law, it goes against the assessee for the reason that on the facts all the three authorities have recorded the probability of ascertaining gains attributable to transfer of individual assets though comprised in the compendious sale of selling the entire unit as one unit and without necessarily indicating the price at which the individual assets have been sold. 96 . Accordingly, this question has to be necessarily answered in favour of the Revenue and against the assessee and in the positive manner. 97. The next question to be examined is the correctness or otherwise of the ascertainment of the book profits of the assessee for the purpose of section 115JA of the Act and as to whether the Assessing Officer should have accepted the book profits as computed by the assessee and indicated in the return, or as to whether the Assessing Officer was justified in not only rejecting this ascertainment of book profit by the assessee itself but also in arriving at the book profits of the assessee at a different figure for the purpose of section 115JA of the Act. 98. On this question the disputed area is the surplus amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the question of computation of the book profits of the assessee for the purpose of section 115JA of the Act is concerned, while both learned counsel for the Revenue and the assessee would not dispute that the book profits for the purpose of section 115JA of the Act may not be necessarily the same as book profits as ascertained or computed in the normal course of the practice of book keeping and accountancy and the manner in which the profits of the company are computed, particularly, in the wake of the provisions of the Explanation to sub-section (2) of section 115JA of the Act and in the present case what is relevant being if at all clauses (a) to (f) of the Explanation providing for addition of the amount covered under clauses (a) to (f) to the book profits as already ascertained in terms of sub-section (2) which in turn only says that the assessee should first prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956, and even in respect of the book profits as ascertained under the main provisions of section 115JA(2), further modifications as envisaged under the Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofits as indicated by the Assessing Officer and rejecting the return filed by the assessee is only for the reason that there was scope to operate the provisions of clauses (a) to (f) of Explanation to sub-section (2) of section I15JA of the Act, particularly, clause (b) which indicates that the amount carried to any reserve by whatever name called and the admitted case of the assessee also being this surplus amount of Rs.43,16,50,811 .69 being the result of the transfer of the soft drink unit of the assessee as a going concern and on a lump sum price and even the assessee itself having indicated to its shareholders in terms of the twentieth annual report for the assessment year 1998-99 that the net profit for the year was a sum of Rs.4,20,34,196 etc., and there also being a clear admission that there was surplus of Rs.43,16,50,811.69 which is nothing but the gains attributable to the disposal of the soft drink undertaking as a going concern for a slump price and in fact such a revelation in the annual report and also virtually an admission in annexure B to the report filed by the assessee in terms of the note at the bottom of the sheet of computation of total income which read a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the difference between the actual cost and written down value of the assets when the surplus is in excess of the written down value and actual cost, the amount which is over and above the difference between the actual cost and the written down value has to be brought to capital gain and in the instant case, the assessee having not claimed any deduction in respect of section 41(2) of the Act, but having treated the entire capital receipt by not showing it in the profit and loss account, but by carrying the surplus amount as a result of slump sale to the capital reserve account, the capital gain amount was very much ascertainable and at any rate it is the amount forming part of the transfer of the unit as a slump sale and there fore would contend that when the authorities under the Act, particularly, the assessing authority was able to reasonably ascertain the capital gain attributable to the identified assets forming part of the slump sale and with reference to the cost of initial acquisition or the written down value of the asset and the sale price attributable to that particular asset with reference to the report of the valuer who had been appointed by the buyer which can form a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dited to the profit and loss account: Provided that, where this section is applicable to an assessee in any previous year (including the relevant previous year), the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1 st day of April 1997, but ending before the 1st day of April 2001, shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation; or (ii) the amount of income to which any of the provisions of Chapter III applies, if any such amount is credited to the profit and loss account; or (iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less, as per books of account. Explanation - the purposes of this clause,- (a) the loss shall not include depreciation ; (b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depredation, is nil; or (iv) the amount of profits derived by an industrial undertaking from the business of generation or generation and distribution of po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te assessees and very popular is only for the reason that if the transaction is to be characterized as a slump sale it can result in avoiding charge under section 45 of the Act by demonstrating the non-workability of the computation provision, namely, section 48 of the Act in the facts and circumstances of a given case. While it is no doubt that the exercise on the part of the assessee is to avoid the liability as a result of capital gains and the assessee may claim such possibility by claiming that it is impossible to work the provisions of section 48 of the Act to ascertain the capital gain, when the provisions are examined cannot be from such background, but from the angle of as to whether the provision can be made workable or otherwise or if it is possible to ascertain the gains even otherwise also. 111. In the present case, we find that the assessee on its own computation has made a clear admission even in terms of the note appended to the return that the transaction of slump sale has resulted in a surplus of Rs.43,16,59,811.69. It is also the undisputed position that the amount has been carried to the capital reserve account. In the wake of such admitted position, it is v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then the Assessing Officer should proceed on the premise that the surplus amount itself is the gain attributable to the transaction of transfer of the bottling plant as a going concern even in terms of section 48 of the Act and to proceed to compute the overall taxable income of the assessee and thereafter to ascertain as to whether the taxable income of the assessee computed on such premise is still found to he less than 30 per cent. of the book profits of the assessee, in which event, to apply the provisions of section I15JA of the Act to arrive at the taxable income of the assessee in terms of the provisions of section 115JA and to determine the precise tax liability of the assessee for the assessment year in question. This direction holds good at all places where we have made reference to the capital gain of the assessee being the surplus amount of Rs.43,16,59,811.60, even as indicated by the assessee in its books of account and also in the return as had been filed by the assessee. 113. When such is the possibility on the strength of the authority of the judgment of the Supreme Court in Artex Manufacturing Co.'s case [1997] 227 ITR 260, in respect of the entire transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of gains for transfer of these assets which is an exercise though cannot be totally characterized as an erroneous or an illegal exercise but nevertheless the question being as to whether it was necessary at all if the capital gain is the amount of surplus as admitted by the assessee itself and as a result of the transfer of the unit as a going concern and if the total income on such premise if should have fallen short of 30 per cent. of the book profits in terms of the provisions of section 115JA of the Act, then alone the requirement of section 115JA of the Act arising, we are of the view that examining the various contentions put forth on behalf of the assessee in the context of the principles of accountancy and book keeping to ascertain as to whether there was a debit to the profit and loss account or not, is an exercise wholly unnecessary, but in the circumstances the matter is required to be remanded to the Assessing Officer for redetermining the tax liability of the assessee, particularly, on the basis of the surplus as indicated in the note to the return filed by the assessee to be the capital gain for the relevant accounting period and to find out as to whether such t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slum (sic) sale, when the individual valuation of the assets has been made by the expert valuer before arriving at the total sale consideration for transfer of the unit? While the question whether a sale is a slump sale or otherwise is essentially a question of fact, in the present case the transaction being a slump sale does not make much difference to the tax liability of the assessee having regard to our opinion that even a transaction in the nature of a slump sale can attract tax liability, for statistical purpose this question is answered in the affirmative, as we are not inclined to disturb the finding recorded by the Tribunal for the reason indicated hereinbefore. (d) Whether the Tribunal was correct in holding that there was no default under section 208 of the Act in not paying the advance tax on the ground that entire transaction of sale was a slum (sic) sale and no capital gains are chargeable when the levy of interest under section 234B of the Act was mandatory? No, not correct, for the reason that the operation of the provisions of section 208 of the Act is not dependent on a sale transaction being a stump sale or otherwise and even when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Parts II and III of Schedule VI to the Companies Act, 1956 and by examining the applicability of each clause in the Explanation to sub-section (2) of section 115JA of the Act. (e) Whether the surplus on the sale of the undertaking as a whole requires to be credited to the profit and loss account in accordance with Parts II and III of Schedule-VI to the Companies Act? The question as posed is not apt. While in the preparation of profit and loss account as per the main part of sub-section (2) of section 115JA of the Act, it has to be only in terms of the provisions of Parts II and III of Schedule VI to the Companies Act, 1956, the computation of book profits for the purpose of this section, of which 30 per cent, constitutes deemed income of the assessee for the relevant period, is only by operating the Explanation to sub-section (2) of section 115JA of the Act. (f) Whether the Tribunal is justified in law in holding that the decision of the Supreme Court in case of Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273 is not applicable to the appellant's case? The Tribunal is justified in holding that the decision of the Supreme Court in the case of Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 234B of the Act cannot be levied against the assessee as the computation of income has been made section 115JA of the Act The Tribunal is not correct in holding that interest under section 234B of the Act cannot be levied against the assessee as the computation of income has been made under section 115JA of the Act. The question is answered in the negative, in favour of the Revenue and against the assessee. (b) Whether the Tribunal was correct in taking into consideration irrelevant circumstances like "bona tides of the assessee", "whether the default was committed deliberately, in failing to pay advance tax under section 208 of the Act when section 234B interest is levied automatically as there is no discretion? Not correct. The question is answered in the negative, in favour of the Revenue and against the assessee. In the result, the appeals of the Revenue in I. T. A. No. 320 of 2004, 2971 of 2005 are allowed, and the orders of the assessing authority levying interest under section 234B of the Act in respect of the delayed remittance of advance tax is restored. The appeals filed by the assessee in I. T. A. Nos. 325 of 2004 and 597 of 2004 are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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