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2015 (4) TMI 972 - ITAT CHENNAI

2015 (4) TMI 972 - ITAT CHENNAI - TMI - Computation of Capital gain - Disallowing the claim of the assessee as 'slump sale' - No evidence on records to show entries regarding transfers of current assets & liabilities - Held that:- The assessee put a contention that the he had sold all the assets and liabilities including current assets and liabilities in respect of business of processing of profile grinding operations to M/s. S.R.P. Tools Limited and being so it is considered as ôslump s .....

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the details of the same.

Being so, in our opinion evidence brought on record does not clearly suggest that this is 'slump sale'. Hence, it is appropriate to remit the issue in dispute back to the file of the Assessing Officer with a direction to examine the books of accounts of the assessee so as to verify whether all the assets and liabilities including current assets and liabilities have been duly transferred to the purchaser as per MOU dated 03.10.2005 and also examine rele .....

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ari, ACCOUNTANT MEMBER This appeal by the assessee is directed against the order of the Commissioner of Income Tax -V, Chennai, dated 17.10.2013. 2. The only grievance by the assessee in this appeal is with regard to computation of capital gain. Disallowing the claim of the assessee as slump sale , the Assessing Officer added back a sum of ₹ 38,69,919/- as short term capital gain. 3. The brief facts of the case are that the assessee had filed its return of income for the assessment year 20 .....

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0B. Proceedings u/s.263 was initiated and the CIT-III vide order in C.No.3033/12/III/2010-11 dated 07.03.2011 directed the Assessing Officer to set aside the original assessment order and pas a fresh order in accordance with law. In order to complete the assessment proceedings u/s.263 a notice u/s.143(2) was issued. During the course of assessment, when M/s. SRP Tools Ltd was asked to furnish the details relating to purchase of land, building, plant and machinery and other assets from M/s. Profi .....

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5,16,750/- which has been registered vide doc No.354 & 355/05 dated 03.10.2005). In accordance with such document, the sale value of land at Kari Village was ₹ 12,98,000/- and ₹ 42,18,750/- in respect of land at 32 Sidco Industrial Estate, Ranipet. Therefore, it is very clear that both the parties have mutually agreed valued each asset and adopted the same in the respective Balance Sheet. In view of the above, the assets taken have to be considered as Short Term Capital Gain and .....

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) confirmed the order of the Assessing Officer. Against this, the assessee is in appeal before us. 4. The ld. Authorised Representative for the assessee submitted that entire assets were taken over by M/s. SRP tools as a whole. According, to him, only purchasing company valued the said assets and there is no evidence in the hands of the Assessing Officer to establish that the assessee had sold the assets on individual basis. Further, he submitted that assignment of values for land and building f .....

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ding of the above Explanation suggest that the assignment of value for the purpose of registration shouldn t be regarded as assignment of value to individual asset to determine the nature of transaction as a slump sale or not. Further, it is to be noticed that there is no provision in the Income Tax Act 1961 which restricts the adoption of registration value as the value of land and building for the purpose of books of accounts in the buyers' book. He submitted that the Assessing Officer too .....

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submitted that the Assessing Officer relied upon the judgment in the case of Anand Electric Co. Ltd vs. Commissioner of Income Tax 237 ITR 587 (Bombay High Court). However, the facts and circumstances in the above mentioned case is completely different from the facts and circumstances of the present case as the former deals with the takeover of an entire business as a going concern and the sale consideration was arrived at by taking into consideration the value of the plant, machinery and dead s .....

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depreciation allowance is the cost to the assessee and not the person who makes the sale. In view of the above submissions it can be said that the total consideration should be apportioned on the basis of fair market value of the assets as on the date of sale and depreciation should be available on such apportioned cost. According to him so far as slump sale is concerned, a view could be taken that apportionment of slump consideration on the basis of fair values of various assets is possible and .....

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mercial man would misunderstand. A reference to accounting standard-10 issued by the Institute of Chartered Accountants of India can be made where under para 15.3 it has been stated where several assets are purchased for a consolidated price, the consideration is apportioned to the various assets on a fair basis as determined by competent valuers, for the purpose of accounting in the books of the buyer. He also relied on the order of the Tribunal in the case of Coromandel Fertilisers Ltd vs. DCI .....

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atus of a body of individuals . (ii) that in the agreement of sale, there was no reference to the value of the plant, machinery and dead stock. But on the basis of the information that was furnished by the assessee before the Income-tax Officer it became evident that the amount of D11,50,400/- had been arrived at by taking into consideration the value of the plant, machinery and dead stock as assessed by the valuer at ₹ 15,87,296/-. Section 41(2) was applicable. (iii) that the liability un .....

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s, the Tribunal has stated that one of the circulars related to the tax liability of surplus in the case of nationalized banks and it had no application to the present case and that the second circular was based on the decision in Mugneeram Bangur (1965) 57 ITR 299 (SC), and since the said case dealt with the provisions of section 10(2) (vii), proviso (ii), of the 1922 Act prior to amendment, the said circular had no application and that the matter was governed by the decision in B.M. Kharwar (1 .....

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a show cause notice on the assessee for treating the slump sale consideration as Short Term Capital Gain. There was no response from the assessee company except defining what is slump sale and undertaking. The purchasing company of the assets belonging to the assessee had valued each assets which are included in its Annual Report and claimed depreciation to the extent of ₹ 1 crore being the purchase price. The purchasing company sold the entire land along with building for a consideration .....

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fic value for each asset. Thus, the assessee s claim of income under the head Long Term Capital Gin and deduction u/s.54EC is not correct. Thus, the Assessing Officer has made an addition of ₹ 38,69,919/- as Short Term Capital Gain and added to the income of the assessee. 6. We have heard both the parties and perused the material on record. The contention of the assessee is that the assessee sold entire business including all assets and liabilities as a going concern being so it has fulfil .....

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