TMI Blog2014 (1) TMI 1600X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 2(42C) of the Act so as to attract the liability of the capital gain under section 50B of the Act – the order of the CIT(A) upheld – Decided against Revenue. - ITA No.275/Hyd/2013 - - - Dated:- 21-8-2013 - Chandra Poojari And Saktijit Dey, JJ. For the Appellant : Shri M H Naik, DR For the Respondent : Shri Inturi Rama Rao, AR ORDER:- PER : Saktijit Dey: This appeal is filed by the Revenue against the Order of the CIT(A)-IV, Hyderabad dated 10.12.2012 for the assessment year 2007-2008. 2. Briefly the facts are that the assessee-company earlier known as M/s. GVK Novapan Industries Pvt. Ltd. is a Private Limited Company. For the impugned assessment year, the assessee filed its return of income declaring NIL income. Initially, the return was processed under section 143(1) on 05.02.2009. Subsequently, action was initiated under section 147 of the Act by issuing a notice under section 148 calling upon the assessee to submit a return of income. In response to such notice, the assessee filed a letter dated 30.12.2010 requesting the Assessing Officer to treat the return filed originally as a return in response to the notice under section 148 of the Act. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustries Limited is a slump sale attracting liability under section 50B(1) of the Act and therefore, to be charged to capital gains tax. The Assessing Officer, accordingly, proceeded to determine the capital gain by adopting the sale consideration for the purpose of computing capital gain, the share capital allotted and the value of investment transferred to the assessee by the amalgamated company M/s. Novapan Industries Limited amounting to Rs.6,28,07,500/- and Rs.25,24,05,000/- respectively totalling to Rs.31,52,12,500 /- and after reducing the cost of acquisition of Rs.6,81,22,000/- determined long term capital gain at Rs.24,70,90,500/-. The assessee being aggrieved of the assessment order, preferred appeal before the CIT(A). 4. In the course of hearing of the appeal, it was submitted by the assessee that the assessee company as well as the transferee company were engaged in manufacturing and sale of particle boards upto 31.03.2006 and therefore, the management of the two companies felt it would be economical and effective to combine their operations. Accordingly, as per a scheme of arrangement under section 391/394 of the Companies Act, duly approved by the Hon ble High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 394 of the Companies Act was not a sale. Consequently, it did not fall within the definition of a slump sale u/s. 2(42C), and therefore, the provisions of sec.50B did not apply to the transaction in question. 5. Being aggrieved, the department is in appeal before us. The learned D.R. supporting the conclusion arrived at by the Assessing Officer submitted that demerger is nothing but slump sale coming within the ambit of section 2(42C) of the Act. He, therefore, contended that the Assessing Officer was correct in treating the transfer as a slump sale and bringing it to tax under the head Capital Gain under section 50B of the Act. . 6. The learned A.R. on the other hand, at the outset, submitted that the grounds raised by the department are not on the issue in dispute as they relate to demerger only whereas, the Assessing Officer has completed the assessment by treating it as a slump sale under section 50B of the Act. Hence, the grounds cannot be entertained. He further submitted that the assessment was completed under section 143(3) read with section 147 of the Act. In the reasons recorded, the Assessing Officer has made no reference to demerger. It is also admitted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused the materials on record. We have also carefully examined the decisions relied upon by both the parties. On perusal of the assessment order, it is very much clear that the entire assessment is based on the fact that the Assessing Officer has treated the transfer of assets to M/s. Novapan Industries Ltd. as a slump sale attracting the provisions of section 50B of the Act. In this scenario, we have to confine ourselves to the issue as to whether the transfer of the manufacturing division M/s. Novapan Industries Ltd. is a slump sale within the meaning ascribed under section 2(42C) of the Act so as to attract the provisions of section 50B of the Act. It is undisputed that under the scheme of amalgamation approved by the Hon ble High Court of A.P. under section 391 and 394 of the Companies Act, the manufacturing division of the assessee company was transferred to M/s. Novapan Industries Ltd. with all its assets and liabilities as per the terms of the scheme of amalgamation approved by the Hon ble High Court. The assessee in return for the transfer of the assets received the investments of Rs.25,24,05,000/- besides allotment of 38 equity shares of Rs.10/- each to the shareholder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company in consideration of allotment of shares, it would be a case of exchange but not of sale. The ITAT, Mumbai Bench in the case of Avaya Global Connect Ltd. vs. ACIT 26 SOT 397 (Mum.) after following the decision of the Hon ble Supreme Court in the case of CIT vs. Motor General Stores Pvt. Ltd. (supra) and the decision of the Hon ble Bombay High Court in the case of Sadanand S. Varde vs. State of Maharashtra 247 ITR 609 held as under : 30. In the light of the principle laid down in the aforesaid judicial pronouncements, we are of the view that the transfer of TTD by assessee to ITEL consequent to scheme of amalgamation approved by Hon ble Bombay High Court cannot said to be a sale of undertaking by the assessee. Consequently, the transfer could not be said to be as a result of sale and therefore the provisions of section 2(42C) of the Act did not apply. The provisions of section 50B were also not therefore applicable to the facts and circumstances of the present case. 11. Therefore, considering the facts of the present case in the light of ratio laid down as above by the Hon ble Supreme Court and the Tribunal since there is no monetary consideration involved in transf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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