TMI Blog2005 (9) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the assessee by another Ahmedabad Tribunal decision in Industrial Machinery Associates v. CIT [2001] 81 ITD 482 , and, therefore, there will be no capital gain exigible to tax; section 50B applies from assessment year 2000-01 and not the assessment year herein concerned 1996-97. 2. The facts of the case are that the assessee-firm was engaged in the business of manufacture of bulk drugs and pharmaceuticals up to 31-12-1995. The firm is comprised of two partners namely Shri Janak K. Seth and Smt. Manjula K. Seth each having 50 per cent share. On 31-12-1995 the assessee-firm sold the business to M/s. Century Pharmaceuticals Limited as a going concern at a slump price of Rs. 3,64,00,000 as per agreement dated 19-12-1995 and 8-6-1996. As per the agreements the two partners of the assessee-firm became the directors of the said company. The relevant details regarding the consideration paid are as under : Shares Number Value Unsecured Loan Total Janak K. Seth 17,00,000 170,00,000 3,53,685 173,53,685 Mrs. Manjula 17,50,000 175,00,000 15,46,375 190,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal vide its order in ITA No. 1453/A/99 directed the Assessing Officer to take into account the order of the Civil Court while considering the capital gain. The above order of the Tribunal has been accepted by the parties and therefore, the Assessing Officer while passing the order in pursuance to the order of the Tribunal, had no jurisdiction to ignore the order of the Civil Court. He further contended that once the order of the Civil Court is taken into account, there is no capital gain. 4.1 The learned counsel for the assessee further submitted that the assessee has sold the entire business as a going concern. In support of this argument, he referred to the agreement between the assessee and M/s. Century Pharmaceuticals Limited and pointed out that the entire business as a going concern including all tangible and intangible assets (except cash and NSCs) was sold as a going concern. That the Ahmedabad Bench of Tribunal in the case of Industrial Machinery Associate s ( supra ) and in the case of Rakshak Chemicals (P.) Ltd. v. Joint CIT [IT Appeal No. 1527 (Ahd.) of 2001] has taken the view that the assessee is not liable for capital gain tax when there was slump sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale was not slump sale because the two assets were left out viz., Kisan Vikas Patra/NSC worth Rs. 7,000 and cash in hand amounting to Rs. 1,517. He further contended that the assets were revalued at market value and on the basis of such revaluation of assets, the sale consideration was fixed. The valuation was done by a qualified Engineer asset-wise and therefore, it is evident that all the assets except KVPs and cash, were sold and it is not the case of slump sale of business as a going concern. In view of above facts the decision of the Tribunal in the cases of Industrial Machinery Associates ( supra ) and Rakshak Chemicals (P.) Ltd. ( supra ) relied upon by the learned counsel for the assessee, would not be applicable. The learned DR, on the other hand, relied upon the following decisions : - Kishorchand K. Bansal v. Dy. CIT [2002] 80 ITD 585 (Ahd.) - Kampli Co-op. Sugar Factory Ltd. v. Joint CIT [2002] 83 ITD 460 (Bang.) - CIT v. Artex Mfg. Co. [1997] 227 ITR 260 (SC) 6. We have carefully considered the arguments of both the sides and perused the material placed before us. As we have noted earlier, this is second round of appeal. In the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l gains on the sale of the industrial undertaking by the assessee. We have no hesitation in holding that the subsequent events which have taken place culminating in the passing of an order by the Civil Court reducing the value of sale consideration have a vital bearing on the present controversy before us. The subject-matter of the present appeal is obviously levy and computation of short-term capital gains in respect of the transaction of sale of the industrial undertaking by the assessee to the company. The subsequent events whereby the Civil Suit has been filed by the company alleging manipulation of accounts and consent decree has been passed by the Civil Court directing refund of the excess sale consideration to the extent of Rs. 203.50 lakhs by the partners has in our opinion a direct bearing on the adjudication of the dispute before us. In our opinion, no additional disputes or controversies are being raised by filing the additional ground which are outside the domain of the subject-matter of the present appeal. The basic question is whether the Tribunal has jurisdiction to admit additional evidence regarding a subsequent event. In our considered opinion, the Tribunal ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 203.50 lakhs by the partners has a direct bearing on the adjudication before the Tribunal. Again it was stated that the events of filing of Civil Suit and passing of the order by the Civil Court cannot be brushed aside as irrelevant for the adjudication of present issue and at last in para 10 it was concluded that the order of the Civil Court would constitute relevant evidence for considering and deciding the matter under the Income-tax Law even though the Income-tax Department is not a party to such proceedings. The above order of the Tribunal has been accepted by the revenue and therefore, the Assessing Officer while giving effect to the order of the Tribunal, cannot take a view contrary to the above observations of the Tribunal. The Assessing Officer has ignored the order of the Civil Court mainly on the ground that obtaining of the decree was a collusive and pre-planned with the only motive of evasion of tax. We find that similar arguments were already raised before the Tribunal, by the learned DR in ITA No. 1453/Ahd./99. The Tribunal did not accept the above arguments of the learned DR and held that the order of the Civil Court is relevant evidence for considering the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected to refund the sum of Rs. 2,03,50,292 which has been refunded by the partners of the assessee-firm by surrender of 20,35,020 equity shares of Rs. 10 each. The refund of sale consideration directed by the Civil Court is equal to the capital gain worked out by the revenue. Therefore, once the sale consideration is reduced by the sum of Rs. 2,03,50,292, there would remain no capital gain. 9. Once there is no capital gain, the argument whether the sale by the assessee is slump sale and liable to capital gain tax or not, has become academic and need no adjudication. In view of above, we delete the addition of Rs. 2,03,50,292. 10. Ground Nos. 4 to 6 of the appeal read as under : 4.The CIT(A) erred in rejecting the contention that the assessee will be entitled to the deduction of Rs. 42,76,197 under section 80HHC. 5.The CIT(A) erred in holding that interest on the margin money kept with the banks in connection with the export obligation will not be business income eligible to 80HHC relief. 6.The CIT(A) erred in holding that the export loss is to be deducted from 90 per cent of the export incentive and on the balance only 80HHC relief will be available. The recent Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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