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DCIT, Circle-7, Kolkata Versus Shri Bhagirath Agarwal And Vice-Versa

2016 (5) TMI 1262 - ITAT KOLKATA

Addition made u/s.50B holding the tea estate as slump sale - CIT(A) deleted the addition - Held that:- We find that assessee has sold two tea estates as going concern but after assigning the value to the individual asset and without transferring all the liabilities.

We find that similar issue was also decided by this Tribunal in the case of DCIT v. M/s Tongani Tea Co. Ltd. [2015 (11) TMI 925 - ITAT KOLKATA ] wherein Tribunal has decided the issue in favour of assessee wherein held th .....

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me parity of reasons the present case is decided in favor of assessee. - ITA No. 79/Kol /2013 & C. O. No. 27/Kol /2013 - Dated:- 27-5-2016 - Shri Waseem Ahmed, Accountant Member And Shri S. S. Viswanethra Ravi, Judicial Member For the Assessee : Shri S. K. Tulsiyan, Advocate For the Respondent : Shri Sudipta Guha, JCIT, SR-DR ORDER Per Waseem Ahmed, Accountant Member This appeal by the Revenue and Cross Objection (CO) are arising out of order of Commissioner of Income Tax (Appeals)-VIII, Kolkata .....

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CIT(A) erred in deleting the addition made by Assessing Officer u/s.50B of the Act by holding the tea estate as slump sale. 3. Facts in brief are that assessee in the present case is a partnership firm and owns two tea estate namely - Suboang & Hatticherra Tea Estates. During the year assessee has sold both the tea estates to M/s Prithvi Tea Co. Pvt. Ltd. for a total consideration of ₹3,58,66,118/-. The tea estates were comprised of land and plantations, common factory building and pl .....

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from the assessee for the applicability of the provision of Sec.50B of the Act. In compliance to the notice, assessee submitted that all the assets were sold after assigning the value to the individual assets including specified liability which does not include any market liability or liabilities arising out of any loan or advance that might have obtained by vendor running the tea estate. However, AO disregarded the claim of assessee by holding that tea estates were sold as going concern. There .....

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ra Tea Estates when the same was not a sump sale as shall be evident from memorandum of sale dated 11.08.2008. After carefully going through the submission of the appellant along with the case laws relied upon and detailed furnished, perusing the facts of the case including the impugned assessment order and the remand report, the relevant provisions of law and the other materials brought on record, this 1st revised Ground of the appeal regarding applicability of section 54B of the Act to the cas .....

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mp; 2nd Schedule of the memorandum of sale. The appellant has also transferred the liabilities mentioned in the memorandum of sale and accodingly0 the net consideration was arrived at ₹ 2,83,00,000/-. The appellant has not transferred all the assets of the Tea Estate (undertaking) but has retained some of the assets mentioned in clause 1 and 2.1 of the memorandum. (ii) That section 2(42C) of the Act define slump sale as under:- (42C) slump sale means the transfer of one or more undertaking .....

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Hon'ble Supreme Court in the case of PNB Finance (20080 307 ITR 75 and Bombay High Court in the case of Premier Automobiles Ltd. v. ITO (2003) 264 ITR 193 and CIT v. Polychem (2012) 343 ITR 115. (iv) In the case of the appellant the value has been assigned to the individual assets in the memorandum of sale dated 11.08.2008 hence the sale transaction between the appellant and Prithvi Tea Company P Ltd cannot be termed as slump sale and accordingly this ground of appeal is decided in the favou .....

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ted that the impugned tea estate sold as going concern and as is where as basis. As per agreement, assessee is not assigned the individual value to the assets of the tea estates and it was sold for a lump sum consideration. Ld. DR stated that Ld. CIT(A) has deleted the addition made by Assessing Officer after having reliance on the memorandum of sale which was not produced by assessee while framing of assessment proceedings and vehemently relied on the order of AO. On the other hand, Ld. AR subm .....

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of the Act is not applicable to the instant case. On rejoinder Ld. DR stated that memorandum of sale was not produced before AO at the time of framing assessment. Contrary to that Ld. AR submitted that same was made available to AO at the time of remand report and he relied on the order of Ld. CIT(A). 5. We have heard rival contentions and perused the materials available on record. We find that assessee has sold two tea estates as going concern but after assigning the value to the individual as .....

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levant extract is reproduced below:- 17. In view of the above facts and circumstances of the case, we find that Section 50B of the Act provides that any profit or gain arising from the slump sale effected in the previous year shall be chargeable to income-tax as capital gain arising from the transfer of long-term capital assets and shall be deemed to be the income of the previous year in which the transfer took place. Further, Section 2(42C) of the Act defines 'slump sale' as a transfer .....

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ity taken as a whole, but does not include individual assets or liabilities or any combination thereof not constituting a business activity. The Explanation 2 to section 2(42C) of the Act further provides that the determination of the value of an asset or liability for the sole purpose of payment of stamp duty, registration fees or other similar taxes or fees shall not be regarded as assignment of values to individual assets or liabilities. 18. The admitted facts of the case are that the assesse .....

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eration paid by vendee was for specific assets mentioned in the agreement and which were purchased/acquired for specific consideration. We find that this estate had been sold on the basis of detailed agreement executed between the vendor and the vendee. The total consideration stipulated for the transfer of the estate had been split over different assets, both movable and immovable enumerated in different schedules and annexure. The assessee had assigned specific consideration/value for the tea .....

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by the assessee. The assessee had assumed all the liabilities including the statutory liabilities till the date of transfer. Therefore, it could not be said that the transfer was a slump sale only for the reason that the rubber estate was transferred to the buyer as a 'going concern. 19. Even though the expression "going concern" is a functional qualification as far as the estate is concerned, the said functional qualification was not sufficient enough to decide the exact legal cha .....

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contract without having a clear understanding on the engagement of labour deployed. Therefore, the agreement with the buyer that the new owners would absorb the existing labour force was not a salient feature to decide whether the sale was a slump sale or not. The meaning of the expression 'going concern' has to be understood in the light of the peculiar nature of the property tram/erred in the instant case. What was transferred in the instant case was a tea estate. The activities in a .....

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reate any legal proposition in the context of the sale deed. Therefore, the AO and CIT(A) had been carried away by the commercial expression reflected in the agreement like 'going concern'. Therefore, the said expression is not a test to be relied on to decide the exact nature of the transaction for the purpose of income-tax matters. 20. In the instant case, the items sold did not include liabilities. The sale agreement did not include investments and deposits. Accordingly, all the inves .....

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ce, assets and liabilities. It was not a case of sale by lock, stock and barrel. The assessee had made conscious exclusions. The assets sold by, the assessee had been listed out in different Schedules and Annexures. The consideration had been specifically assigned to the sale of immovable property by way of Tea estate. Separate consideration had been assigned to the sale of movable properties including vehicles and properties. Therefore, it was not a case of slump sale for a lump sum amount of c .....

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