TMI Blog2017 (1) TMI 982X X X X Extracts X X X X X X X X Extracts X X X X ..... s,that the assessee was to receive the amount from the Escrow a/c.after a period of 2 years,that a liability amounting to ₹ 2.79 crores arose and was settled during the year,that the assessee had filed a revised return and made the claim about it, that there is no doubt about the incurring of the expenditure.The assessee had produced necessary evidences in that regard and same were found to be genuine by the FAA. In these circumstances,we are of the opinion that there is no need to interfere with the order of the FAA. Treating the short term capital gains(STCG) as long term capital gains (LTCG) - Held that:- As referred to proviso (1) of section 50B of the Act if assets were to be assessed under the head STCG all should have existed below 36 months,that even if one of the assets existed for a period more than three years same has to be treated as Long term asset. There is no need to interfere with the order of the FAA,as four hospitals of the assessee were owned by it for a period of more than 36 months and that it is a case of slump sale.Upholding his order,we dismiss Gr.No.2. Disallowance u/s 14A - Held that:- We find that assessee had not earned any exempt income dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... special bench of the Tribunal and held that if the negative net worth was there same was to be added to the full value of consideration for computing the capital gains.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority (FAA),who upheld the order of the AO. 3. During the course of hearing before us,the Authorised Representative (AR)fairly considered that issue stands covered against the assessee by the above referred order of the Summit Securities Ltd.(supra).We are reproducing the relevant portion of the order and it reads as under: (ii) That the Assessing Officer had observed that the sale consideration of ₹ 143 crores was not at arm's length and that was why he adopted the figure at ₹ 300 crores adding the negative net worth to the declared sale consideration. By expressing the opinion that the value of undertaking at ₹ 143 crores as agreed to between the assessee and transferee was not appropriate, he had indirectly resorted to the substitution of fair market value of the undertaking in place of the amount received or accruing . The Assessing Officer had not even embarked upon determining ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net worth should be restricted to zero, ran contrary to the argument that the words as reduced by can never mean that the value of liabilities will be more than the aggregate value of the assets. (iv) That the Commissioner (Appeals) was not correct in coming to the conclusion that the negative figure of the net worth of ₹ 157 crores should be ignored for working out the capital gains in case of a slump sale. The net worth would be a negative figure of ₹ 157 crores and not zero. Resultantly the amount of capital gains chargeable to tax would be ₹ 300 crores and not ₹ 143 crores as declared by the assessee. Respectfully,following the above,first ground of appeal is decided against the assessee. 4. Ground number two deals with levy of interest u/s. 234B of the Act and same is consequential in nature. ITA/7021/Mum/2013: 5. Ground 1.a.,raised by the AO,is about deleting the disallowance,amounting to ₹ 18.43 crores.During the assessment proceedings,the AO found that the assessee had claimed expenditure of ₹ 18,43,30,378/- under the head expenses incurred in connection with slumpsale. He held that section 50B of the Act was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for determining the income chargeable under the head capital gains in accordance with the mode of such computation as prescribed therein. The modus operandi to compute capital gain from the transfer undertaking thus provides for reducing the cost of acquisition and cost of improvement of the capital asset from the full value of consideration received or accruing as a result of the transfer of capital asset. Coming back to the nature of capital asset being undertaking, which comprises of all assets minus all liabilities of the undertaking, the amount of capital gain means reducing the net worth, being cost of acquisition. and cost of improvement of all assets minus all liabilities of the undertaking from the full value of consideration of all assets minus all liabilities of the undertaking. (f) In computing the net worth of the undertaking or the division, as the case may be, the benefit of indexation as provided in the second proviso to section 48 has been withheld. The possible reason may be quid pro quo. By extending the benefit of lower rate of taxation on long term capital gain as provided under section 112 to the undertaking as a whole notwithstanding the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. 6.2. Before us,the DR stated that matter could be decided on merits. The AR supported the order of the FAA.We find that the assessee and FHL had entered into a business agreement, that as per the agreement excess liabilities arising during the transition period had to be adjusted from the lump-sum amount of ₹ 186.58 crores,that during the process of transact - tion liability of ₹ 43.36 crores arose.In these circumstances,the FAA had rightly held that lump-sum consideration received by the assessee had to be taken at ₹ 143.1 crores [Rs.1 86.58 crores(-) ₹ 43. 36 crores].We are of the opinion that the order of the FAA does not suffer from any factual or legal infirmity.Therefore, upholding the same we decide ground 1.b(i) against the AO. 7. Ground 1.c is about allowing deduction of ₹ 2.79 crores from lump-sum consideration received by the assessee. During the assessment proceedings, the AO found that the assessee had claimed some of ₹ 2.79 crores in the computation of income.He held that the amount in question was lying in escrow account,that by claiming the deduction the assessee had claimed double deduction as it had already been ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al gains (LTCG).During the assessment proceedings,the AO found that the assessee owned 12 hospitals and 2 Nursing schools,that out of the 12 hospitals four were owned over a period of 3 years and rest of the hospitals were owned for a period less that 3 years,that it had claimed LTCG arising out of the slump sale for transferring the hospitals and nursing schools to FHL. The AO treated the entire gain on slump sale as STCG,instead of LTCG as claimed by the assessee. 8.1. During the appellate proceedings,before the FAA,the assessee stated that the AO had wrongly considered the period of holding of each hospital individually rather than considering the period of holding of the entire undertaking,as envisaged by the provisions of section 50B of the Act.It referred to various clauses of the transfer agreement as well as the provisions of section 2(42C)of the Act.After considering the available material,the FAA held that as per the provisions of 50B holding period of the assets sold on a lump sum basis had to be considered as a whole unit,that holding period of each asset was to be ignored.He referred to proviso (1) of section 50B of the Act and held that if assets were to be assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hasing the shares of Kanishk Housing Development Co.Pvt. Ltd.(Kanishka),that Kanishk was a subsidiary company of the assessee.The AO held that though no exempt income was earned by the assessee the investment made by it were capable of earning exempt income in the future.Invoking the provisions of Rule 8D(2)of the Rules, he made a disallowance of ₹ 48,71,169/-. 9.1. Before the FAA,the assessee argued that it had not earned any exempt income during the year under consideration,that it had not claimed any expenditure, that it had made strategic investment by purchasing shares of sister concern. 9.2. Referring to the case of EIH Associated Hotels Ltd.(ITA/1503/Mds./2012)of the Tribunal,the FAA allowed the appeal of the assessee . 9.3. Before us,the DR stated that matter could be decided on merits. The AR supported the order of the FAA.We find that assessee had not earned any exempt income during the year, nor had it claimed any expenditure against any tax free income.Thus,the twin pre-condition for invoking the provisions of section 14A r.w.r.8D of the Rules i.e.,earning of exempt income and claiming expenditure to earn the same,are missing.Therefore,confirming order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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