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2016 (5) TMI 264

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..... eyance. The conclusion drawn by the AO and CIT(A) are as per material on record, therefore, did not require any interference on our part. Accordingly, we uphold the addition made by the AO u/s.50B on account of gain arising from transfer of BOPP Films Undertaking. Computation of deduction u/s.80HHC - reducing 90% of receipt on account of sundry receipts including sale of empty bags, cartons, octroi/BPT/insurance premium and excise/sales-tax refunds from the business profits as contemplated in explanation (baa) to section 80HHC while calculating the deduction under section 80HHC - Held that:- Similar issue was dealt with by the Tribunal in assessee’s own case in the assessment year 1998-99 and restored the matter to the file of the Assessing Officer with the directions n the light of the following principles: (1) Net income, which is assessable under section 28 of the Income Tax Act, will not be eligible for inclusion ill the profits of the business for computing the relief under section 80HHe. Therefore, items like dividend income, profit on sale of investments, etc., which are not assessable under section 28, will have to be excluded while computing the profits of the bus .....

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..... le. It was contended before the AO that the impugned sale can be treated as slump sales only if no value is ascribed to any individual asset/liability. It was argued in course of assessment that as per the BTA, the current assets and liabilities were to be taken over by XIL at a mutually agreed amount for which value of individual assets was to be determined at the time of conveyance. The AR of the assessee referred to Article 2.3, 4.3 and 5.26 of the BTA in support of this contention that the net current asset were to be valued individually and payment for the same was to be made over and above the lump-sum consideration. The AR submitted before the AO the details of individual items of assets and liabilities which were taken over by the XIL at mutually agreed price and it was accordingly argued that since individual values had been assigned to assets and liabilities, the BTA agreement for sale of the BOPP undertaking should not be treated as slump sale and accordingly, no capital gains will arise in respect of such transaction. 4. The AO however, after a detailed examination of the.BTA rejected the submission on the ground that the BTA clearly provided for sale of the entire u .....

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..... sion of the ITAT, Hyderabad Bench in the case of Coromandel Fertilisers Ltd. 90 ITD 344 (Hyd) in which an identical issue came up for consideration of the ITAT wherein the value of the current assets were ascribed after the date of agreement and on that ground itself, it was claimed by the department that it was not a slump sale. The ITAT has clearly held that special procedures stipulated in the agreement for valuation of certain items do not detract from the concept of slump sale. It has further been observed by the ITAT that there is an intervening period between the sale agreement and the date of transfer. During this period, the value of items of current assets may fluctuate widely and it is to guard against such fluctuations that the agreement stipulated special procedures for valuation of such items just before the date of conveyance. Such valuation, it was held by the ITAT would not detract from the fact that it was a slump sale of the unit as a whole and as a going concern. On the basis of these arguments as well as judicial pronouncement discussed above, the AO rejected the contention of the appellant that the sale of the BOPP undertaking was not a slump sale and accordin .....

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..... P undertaking have also been transferred to the buyer. The AO has rightly applied the ratio of the decision of the Bombay High Court in the case of Premier Automobiles Pvt. Ltd. vs. ITO 264 ITR 193 to the facts of the case for determining whether the impugned sale is slum sale or not. As discussed in para 3.8 of the assessment order, the facts of the present case fully satisfies the tests laid down by the jurisdictional high court for determining whether a transaction is a slum sale or not. As regards the objection of the appellant that the transfer of BOPP undertaking is not a slump sale as value of individual net current assets have been ascribed, I fully agree with the AO that issue is squarely covered by the decision of the ITAT, Hyderabad Bench in the case of Coromondal Fertilizer Pvt. Ltd. 90 ITD 344 (80AD(Hy). In that case also, value had been ascribed to net current assets and after considering this aspect of the transaction, the Hon'ble ITAT, Hyderabad Bench observed that when tangible asset situated at farflung areas are involved, , it would be nitpicking to say, on the basis of the valuation of few ancillary items, that the sale is not a slump sale. The Hon'ble I .....

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..... the date of actual transfer cannot be determined at the time of entering into contract, which is usually much earlier than the date of conveyance. We found that even assignment of individual value to net current asset was only for the purpose of ascertaining the change in the value of such assets in the intervening period i.e. the date of agreement and the date of conveyance. The CIT(A) has also analysed the terms of BTA agreement and after applying the verdict of Hon ble Supreme Court in the case of Artex Manufacturing Co. 227 ITR 260 and Electric Control Gear Manufacturing Co., 227 ITR 278, reached to the conclusion that these cases were pertaining to the period prior to introduction of Section 50B in the Income Tax Act and were with reference to section 41(2) of the Act. The decision relied on by the ld. AR in the case of Bharat Bijlee Limited (supra) is distinguishable on facts, insofar as assessee has transferred its one of its division of undertaking under scheme of arrangement without any monetary consideration. Transfer was in exchange for issue of preference share and bonus. The Hon ble High Court held that it was an exchange and not a sale. Thus, this decision is of no h .....

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..... is quite clear in that the first limb covers only operational business income, which comes out of export turnover while the second limb refers to non-operational business income, which is in the nature of independent income having 170 element of export turnover. Explanation (baa) also makes it quite clear that any income which is not assessable under section 28 or which does not arise out of export business cannot be taken into account for working out the profits of the business for availing the relief under section 80HHC The view that we are taking in the matter is supported by the judgment of the Hon'ble Bombay High Court in the case of CIT vs. Bangalore Clothing Co., reported in 260 ITR 371 (Born). 8. Next issue that comes for adjudication is as to whether 90% of net receipts falling tinder clause (baa(I) should be excluded or 90% of gross receipts should be excluded. In this connection also the judgment of the Hon'ble Bombay High Court in the case of Bangalore Clothing Co. (supra) is relevant. In the case of Bangalore Clothing Co. supra, it has been held that as some expenditure might be incurred in earning the incomes referred to in clause (baa)(I), an adhoc 10% d .....

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