TMI Blog2002 (11) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case we set aside the issue to the file of the Assessing Officer to re-examine the matter in the light of the reconciliation statement. 2(a). Ground No. 1 of the assessee s appeal reads and under: The Income Tax Authorities have erred in law and on the facts of the case in taxing ₹ 46,78,000 under Section 41(1) of the Act . The learned counsel of the assessee contended that the amount of ₹ 46,78,000 has been offered to tax, and has been taxed, in the assessment year 1996-97. It is contended that the said amount is wrongly taxed in the year under appeal. The learned counsel pointed that for both assessment years 1995-96 and 1996-97 the assessee had filed loss returns but for both the assessment years assessments were completed at positive figures. It is stated that it is a case of double taxation. The assessee had no objection if the amount is taxed in any of the two years. The Assessing Officer is directed to verify these facts and to delete the impugned amount in the year under appeal if the same has been taxed in assessment year 1996-97. 3. Ground Nos. 3 and 4 are connected and they are extracted here for immediate reference: 3. The Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to give asset-wise breakup of consideration, despite various opportunities given to it. Therefore, M/s Pal-Peugeot Limited was requested to submit the treatment given by it in its books of account to these particular transactions. The details show that the figure of total consideration is at variance with the figures given by the assessee in the assessment proceedings. The Transferee Company has taken into account the entire price paid to the assessee by dividing it between fixed assets and current assets on the basis of valuation report. (iii) The contention of the AR that no specific price has been charged for any particular asset, is not correct. The sale of part of Kalyan Unit has been a long drawn process over a number of years which itself shows that the price has been fixed for every asset during the course of above period. This fact gets further confirmed by the valuation report furnished by the purchaser wherein the price of each and every asset was separately mentioned giving complete and proper description. (iv) The assessee did not produce fixed asset register. Though the assessee company says that the agreement is for transfer of land, factory building, plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each item, including value column, with make and year of purchase. The assessee has kept value column blank deliberately. Since the assessee failed to produce documents in original, it is difficult to ascertain the real affair in this matter. (vii) For transfer of immovable property assessee obtained tax clearance certification under section 230A of the Act. Column 15 of the proforma for 230A application reads as under: (I) Full value of consideration for which the property or the right, title or the interest to or in the property is purported to be transferred; and (II) If the transfer is to be without consideration, the value for the purpose of stamp duty. The assessee kept column No. 2 vacant and the value was put against column No. 1 which indicates the sale price of immovable property. However, the contention of the assessee that the price was mentioned in that application only for the purpose of obtaining tax clearing certificate, shows that the intention of the assessee is far from honest and the assessee has been indulging in make believe stories at the various stages of the transaction. Though the assessee stated that the land and building has been v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een determined at the time of agreement but copy furnished to the Assessing Officer is without such value. 5. It was thus concluded by the Assessing Officer that it is not a slump sale but the assessee has merely adopted the device to avoid payment of tax. He, therefore, proceeded to tax the profit under the head long term capital gains, short term capital gains and business profit, by taking the value of each asset as declared by the transferee in its record as the sale price. 6. Aggrieved, assessee preferred an appeal before the CIT(A). Detailed Written submissions dated 3-11-1998 along with several compilations containing copies of various agreements in support thereof were filed before the CIT(A). It was contended that the various additions made by the Assessing Officer were illegal. The assessee-company had two plants for manufacturing cars i.e. one at Kurla and another at Kalyan. Premier - Padmini cars were manufactured at Kurla plant whereas 118 NE cars were manufactured at Kalyan plant. During the previous year relevant to the year under consideration the company sold its running business of manufacturing of 118 NE cars together with all the assets of Kalyan business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount received on slump sale was taxable, a detailed statement was submitted which according to the assessee should be the basis for levying tax. 7. The Assessing Officer has submitted his comments vide his letters dated 17-12-1998 and 23-12-1998 in support of his claim that additions made in the assessment year is in accordance with law and facts. It was contended that there is sufficient evidence on record to prove that the assets were evaluated at the time of sale and further stated that the basis for bifurcation of slump consideration was the balance sheet of Pal-Peugeot drawn on 31-3-1995 and the valuation report which gives the values as on 29-9-1994. It was also pointed out that some of the Directors in both companies were common at the relevant point of time and hence it would be really difficult to say that the deal was at arms length. In other words, the Assessing Officer was of the view that it was a premeditated design to create a subterfuge of slump sale with the sole purpose of evading tax. The Assessing Officer further pointed out that in respect of all the three units the schedule of fixed assets is common. The assets reflected in the schedule are land, buildi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecific assets whereas in the assessee s case there is a clear stipulation regarding verification of individual assets in the MOU. 9. When the same was put to the assessee, the learned counsel submitted that no separate price was attributable to different assets and it was the purchaser who bifurcated the price as per the valuation report obtained by them more than one year after the close of this deal. It was also submitted that the assessee did not reduce the WDV of fixed assets in its account because it did not know as to how much of ₹ 210 crores is attributable to each asset. Regarding the valuation of land it was submitted that registration authority desired a valuation of land and building which was obtained by the purchaser in November 1995. Again the Assessing Officer was called upon to state this case and the contents of the letters written by the Assessing Officer was again put to the assessee s counsel and thus the matter was heard at length. 10. On a detailed consideration of the matter the learned CIT(A) came to the conclusion that the impugned sale cannot be treated as a slump sale. In this regard he observed that sale agreement should not be viewed in iso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT(A) on the ground that such sales are assessable to tax even earlier in the light of the decision of the Hon ble Supreme Court in the case of CIT v. B.M. Kharwar [1969] 72 ITR 603. Thus, learned CIT(A) concluded that it was not a case of slump sale. 13. With regard to the sale price attributable to each item the learned CIT(A) observed that the Assessing Officer was justified in taking the sale price as recorded in the transferee s book. In this regard he observed as under : Since the prices of land and building were known and were also evidenced by the registered sale deed, it becomes absolutely clear that the transfer could not be treated as a case of slump sale. In the circumstances the Assessing Officer was perfectly right in examining the accounts of the transferee as well as other evidences to determine the consideration for other assets transferred by the appellant and thereafter to tax the gains or profits arising out of such a transfer . 14. With regard to the cost of acquisition of land the Assessing Officer observed that the assessee has not disclosed the date of acquisition of the land though it was stated that the same had been acquired before 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. Aggrieved by the order of the learned CIT(A), The learned counsel prepared the summary of the Assessing Officer/CIT(A) s objections and explained therein, the case of the assessee. Since the assessee s case is summarized in the said statement the same is reproduced here for quick reference : S.No. Assessing Officer s objections Para of A.O. s Order Assessee s submissions 1. The assessee failed to give asset-wise break-up of consideration. 10.7 Assessee did not sell any asset separately for a price. It sold the entire Kalyan business which included many assets like land, building, plant and machinery etc., etc., for a slump price. As such, Assessee does not have any break-up and cannot give what it does not have. 2. The above submissions becomes factually, incorrect due to the fact that transferee company has in its books has taken into account the entire price paid to you by dividing it between fixed assets and current assets on the basis of valuation report. 10.7.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot apportion ₹ 210 crores to any asset. 8. The certificate under section 230A has been obtained under the letter dated 24-4-96 and as per assessee s own admission, the transferee company has got the valuation in September, 1996. This disproves the contention of the assessee and goes to prove that there exists a complete valuation report of all the assets but the same is not furnished to the Department to avoid correct taxation of income. 11.5 No such deduction is possible. 9. The valuation has not been done by the transferee on its own but it has been done as per the understanding with the assessee company. 11.5 The Assessing Officer has no evidence for such a statement. 10. Since the assessee is not giving the respective separate sale consideration for the obvious reasons even though , it knows the separate value of each asset comprised in the total consideration, which is evident from the discussion in the paragraphs to follow, it would be reasonable basis. 11.5 Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Kalyan which did not form part of Kalyan business. Those were not sold. 3. The company did not part with all the assets of Kalyan business. 99 Factually wrong. There is no evidence with the Commissioner of Income-tax (A) to make such astatement. 4. A close look at the documents clearly show that show that prices had been fixed for specific assets after proper valuation 100-103 Factually wrong. There is no evidence with the Commissioner of Income-tax (A) to make such a statement. Sr. No. Objections Relevant Paragraphs of CIT(A) s order Assessee s comments 5. The conduct of the appellant shows that the transfer was not a genuine slump sale. 105 No such inference can be drawn by any reasonable person on the facts of the case. 18. At the time of hearing the learned counsel submitted that the assessee-company had three factories during the relevant previous year. The factory at Pune was man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cannot be doubted merely on surmises and suspicion. Kalyan Unit was capable to producing 60,000 cars in a year and both the parties i.e., AP and PAL sat together to decide at a price, looking at the manufacturing potential of the plant, and thus arrived at a price of ₹ 210 crores for the sale of the entire unit. Such being the case, the Revenue should not import their views about the probable nature of deal, by ignoring what is apparent, from the agreements. He again reiterated that the assessee has not got individual assets valued before the sale of Kalyan Unit. The assets sold to JV included many intangible assets which were also not valued and thus it was a sale of running business out of which the assessee made a profit of ₹ 81 crores only. He also relied upon the decision of the Hon ble Supreme Court in the case of Electric Control Gear Mfg. Co. (supra) wherein their lordship have explained and distinguished the case of CIT v. Artex Mfg. Co. [1997] 227 ITR 260 (SC) decided by the same Bench wherein a different view was taken. He thus sought to reconcile both the decisions by contending that the facts of the assessee s case are similar to the case of Electric Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of slump sale. 20. With regard to the alternative contention, arising out of ground No. 4 the learned counsel submitted that the Assessing Officer was not justified in arriving at the long term capital gain on transfer of land at ₹ 20.49 crores. However, since the learned CIT(A) has set aside this issue to the file of the Assessing Officer for determining the value of land as on 1-4-1981 and to re-compute the capital gains, the learned counsel did not press this issue. As regards the addition of ₹ 91,28,51,794 the learned counsel submitted that the value of the assets such as technical know-how and capital work-in-progress was not taken into consideration by the tax authorities. With regard to the addition of ₹ 1.84 crores, the learned counsel submitted that this valuation was done at the instance of the transferee-company one and half years after the agreement of sale but no addition can be made merely on such valuation because there is no profit element. 21. Ground No. 5 which is connected to Ground Nos. 3 and 4 reads as under: Gr. No. 5 The Income-tax Authorities have erred in law and on the facts of the case in allowing depreciation only at ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orkshop to be transferred from Kurla . 11.4 Cost of the project : - Subject to further examination and validation by the parties, the project cost for the vehicles is expected to aggregate around 960 million French Francs ( MF ) equivalent (at the present exchange rate) to around 5, 6 billion Indian Rupees ( BR ), the indicative breakdown of which is as follows : MF BR (1) existing Kalyan facilities 370 2, 1 (2) imported investment 150 0, 9 (3) local investment 205 1, 2 (4) transfer of tooling 125 0, 7 (5) know how and technical assistance 110 0, 6 Total 960 5, 6 The parties shall also simultaneously undertake a verification process ( Industrial due diligence ) for verification of principle items of the assets (to be transferred by PAL to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee did not put the value of each asset in the columns provided therein. Relevant paragraphs of this agreement reads as under : The due diligence exercise of KMCL shall have been carried out by AP in a satisfactory manner i.e., AP shall be satisfied that all conditions determined the Slump Sale Agreement in relation to the Sale of Kalyan Business have been fulfilled and furthermore that the Kalyan Business is free from all encumbrances liens, claims, and debts created by PAL pertaining to Kalyan Business. The scope of the due diligence exercise to be thus conducted by AP is described in Schedule III . 24. The Learned DR also referred to Clause (G) at page 110 of the PB(1) of the assessee to reiterate that the assessee sold its undertaking in bits and pieces and hence it cannot be considered as a sale of going concern. In other words, it does not have the character of a slump sale. He has also referred to pages 112, 116 Clause 2A(i), Clause 2A(ii), page 123 (Clause 2C), 125, Clause 3.4(d), 130 (Clause 3.7.5), 131 Clause 3.8(b) 140 (Clause 3.22 and 3.23) and page 144 (Clause 4.3 to 4.6) in support of his contention that it was not a sale of a going concern and therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and referred to as DEPB(I) and DEPB(II). He referred to pages 1, 2, and 10, 12, 13 and 14 of DEPB-II submit that the entire Unit was not sold as a going concern. Para 10 of the letter addressed by the AR dated 9-12-1997 (pg. 2 of DEPB-II) is extracted for immediate reference. After the transfer, some portions of land, plant and machinery, dies and jigs are remaining with our clients. The details and the book value of the assets are enclosed herewith. The learned DR highlights that some portion of the plant and machinery etc. still remains with the assessee and thus it was not a slump sale of a going concern. The term slump sale implies sale of going concern lock, stock and barrel and the sale should be on as is and where is basis , whereas the assessee sold in bits and pieces. 26. The learned DR also referred to pages 17 to 60 of DEPB(II) to submit that the assessee claims that valuation of each asset has not taken place whereas the transferee has claimed depreciation on each asset. In support of the observations of the tax authorities that the transaction was not at arms length, the learned DR adverted our attention to pages 5 and 11 of PB(I) of assessee which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to assess the capital gains under section 45 of the Act. Section 50 of the Income-tax Act, refers to the computation of capital gains in the case of depreciable assets which form part of block of assets and this section does not speak of transfer/sale whereas section 45 read with section 48 uses the expression transfer . Since, it was not a slump sale section 50(2) was not invoked. He relied upon the following decisions in support of his contention that in the given circumstances reasonable bifurcation of the cost of each asset is permissible : (i) Killick Nixon Co. v. CIT [1963] 49 ITR 244 (Bom.) (ii) Killick Nixon Co. v. CIT [1967] 66 ITR 714 at 720 (SC) (iii) Narkeshari Prakashan Ltd. s case (supra) (iv) CIT v. Vimal Chand Golecha [1993] 201 ITR 442 (Raj.) (v) CIT v. Dr. D.L. Ramchandra [1999] 236 ITR 51 (Mad.) (vi) CIT v. V. Prakashan [1995] 211 ITR 119 (Ker.) (vii) Dasaprakash Bottling Co. v. CIT [1986] 159 ITR 6901 (Mad.) (viii) CIT v. Karvalves Ltd. [1992] 197 ITR 952 (Ker.) He further submitted that section 50B inserted by Finance Act, 1999 deals with slump sale but it is not applicable retrospectively because a highly artif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was thus, contended that the tax authorities were justified in rejecting the claim of the assessee that it is slump sale and were also justified in taking cost of each asset as per the books of transferee. The Departmental Representatives thus, strongly supported the orders of the tax authorities. 29. Joining the issue, the learned counsel submitted that the Departmental Representatives have introduced an altogether new case. He submitted that the contention of the learned DRs that the assessee did not give required information, is factually incorrect because the officer did not point out specifically as to which information was not furnished. He also submitted that the Assessing Officer has proceeded with a prejudiced mind and observed that the assessee gave a wrong copy to him (page 46 para 11.13 of Assessing Officer). He then adverted our attention to page 34 para 66 of the order of CIT(A) to show that the various schedules in original were furnished before the CIT(A) and in the presence of the Assessing Officer the documents were verified and it was found that the column for value was left blank even in the original schedules. He further submitted that till date the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned counsel further submitted that the JV was interested in obtaining loans and it is the botheration of JV to value the properties for obtaining such loans. Thus there was no compulsion on the part of assessee to value the properties before sale. Regarding the interpretation of the term due diligence exercise , the contention of the DR was that it includes valuation of each asset, whereas the learned counsel submits that this is an academic, fictional and theoretical question. The tax authorities have not made out a case that the assessee connived with AP. The learned counsel adverted our attention to page 74 of DEPB(II) to submit that no value was mentioned in any of the documents and thus it has proved enough to show that no value was attached to individual assets by either party and in the absence of any proof to the contrary the tax authorities were not justified in assuming that the assessee was aware of the values of each asset though it was not mentioned in any of the documents. He further submitted that the assessee carried on different activities in Kalyan out of which only the Kalyan plant was sold. There was a 12 ft. high boundary wall around the Kalyan plant and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has to see whether value of each item was taken into consideration at the time of fixing the sale price or not. When PAL-PEUGEOT filed its return it was clarified that the value of each asset was not fixed at the time of sale, but only for the purpose of apportionment and for claiming depreciation valuation was got done. He referred to page 39 of DEPB(II). He thus reiterated that the tax authorities have proceeded on surmises and suspicion without bringing any material on record to justify their conclusion. 30. We have carefully considered the rival submissions and perused the record. Several case law were cited before us. Before we appreciate the contentions of the parties. It may be necessary to briefly set out the facts and the principles laid down in the decided cases relied upon by both the parties. 31. In the case of Mugneeram Bangur Co. (supra), the assessee which was carrying on the business of land development had transferred the assets of the firm to a company in which the partners of the assessee firm would be allotted shares. This agreement is dated July 7, 1948. In the schedule the cost of each item was mentioned. The issue raised by the AO was that a sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was nationalized in the year 1970 and the entire banking business of the assessee was taken over by the Government. It was contended before the AO that the compensation amount received was not assessable to tax because it was a lump sum compensation for the transfer of the business undertaking as a whole and it is not possible to split it up and apportion the same to a particular asset taken over by the government. Considering the facts and circumstances of the case, the Hon ble High Court observed that it is not possible to apportion the lump sum compensation on item-wise basis and the banking companies (Acquisition and Transfer of Undertaking) Act, 1970 also does not give any indication to that effect. Therefore, it was held that the undertaking was transferred as a going concern in which event no part of the slump price is attributable to the cost of the land and hence not assessable to capital gains tax. The learned DR contends that in the case of Syndicate Bank Ltd. (supra) the banking business was taken over by the gover- nment lock, stock and barrel and has not indicated the price paid for each item but merely paid compensation for acquisition of business undertaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has not mentioned the value of the plant and machinery and dead stock separately. Since the income was held to be chargeable to tax under section 41(2), the same is not assessable to tax under section 45. The Hon ble Court observed that under section 41(2) the amount of surplus to the extent of difference between the WDV and the actual cost has to be considered and if surplus exceeds difference between the WDV and the actual cost, the same has to be treated as a capital gain for the purpose of taxation. 36. In the case of Electric Control Gear Mfg. Co. (supra), the assessee firm transferred the entire assets of business together with liability as going concern to a Limited Company, for a consideration of Rs. .....lakhs. The Partners of the assessee firm were allotted the shares of the same value in the profit sharing proportion. The AO sought to invoke section 41(2) of the Act in addition to section 45 of the Act. The assessee challenged the liability to tax under section 41(2) as well as section 45. The following questions were referred for the consideration of the Hon ble Supreme Court. Question No. 2 : Whether, on the facts and in the circumstances of the case the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is whether any portion of the slump price is attributable to the assets transferred and if, on the basis of the facts, it can be found that a particular price is attributable to a particular item, the excess amount is chargeable to tax under section 41(2) of the Act. It is in the light of the test laid down by the Supreme Court that the factual situation of this case has to be considered and, therefore, it is not necessary to consider in detail all case-laws cited by both the parties, as the test is a common test and only on the application of the said test, there is a divergent view on the topic. By applying the said test the Hon ble Court observed that on the facts of the case, the compensation received by the assessee can be attributable to the various assets taken over by the Government of Tamilnadu and it is also possible to attribute the compensation to the particular items of assets taken over by the Government. Thus it was held that sections 41(2) and 45 of the Act are applicable. 39. Various other decisions cited by both the parties conform to the same test i.e., even in the case of a slump sale, if the price of each asset is ascertainable, the assessee would be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he first column speaks of the value of the consideration for which the property is purported to be transferred and column No. 2 speaks of the valuation for the purpose of stamp duty if the transfer is made without consideration. The assessee chooses to write consideration against column No. 1 which indicates that the assessee knew the sale value of land and building. Above all there is evidence in the form of registered sale deed dated 27-5-1996 which recorded that transfer of land and building was for a consideration of ₹ 43.44 crores. If it was a real slump sale for which no specific consideration was received by the assessee with regard to land and building, it would have been stated clearly before registering authority and Income Tax Authority. 42. It may also be noticed that in most of the cases cited by both the parties, it was either compulsory acquisition by the Government or a case where all the properties were transferred by converting the partnership firm into a company and so on. Under such situations the Courts have held that the firm or any other such entity had no necessity to value the properties before transferring them to another entity. However, in the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale and the price of each asset could be ascertained from the facts on record. Consequently, the AO has committed no error in taking into consideration the cost of each asset as recorded in the books of transferee. 45. The main plank of the contention of the assessee is that there is no evidence to show that the assessee has valued each asset before settling for the price of ₹ 210 crores. It was also contended that original schedules were verified by the CIT(A) in the presence of the AO which clearly shows that the column for value was left blank even in the original schedules annexed to the Slump Sale Agreement. In our considered view the parties to the agreement would not have allowed a column to be retained if it is of no consequence to the deal. Therefore the tax authorities were correct in assuming that the value of assets were not mentioned deliberately in the slump sale agreement in order to evade tax, particularly in the light of the fact that the assessee has not given a justifiable reason as to why the sale value of land and building was mentioned in the section 230A application and sale deed instead of stating therein that it was a slump sale and hence no cost c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the price to be paid by the Transferee Company to the assessee-company as a consideration, which includes an amount to be determined after execution date corresponding to the value as of sale date of the acquired current assets and acquired current liabilities. The AO, therefore, concluded that the price for the sale was to be determined as per the report of the auditors. The value of the net current assets was claimed to be ₹ 36 crores as per the assessee whereas net price of the current assets has been shown by the Transferee Company at ₹ 37.84 crores. The AO, therefore, included the difference of ₹ 1.84 crores in the absence of proper explanation by the assessee. The learned CIT(A) set aside the issue for proper examination, vide para 111 of his order. Upon careful consideration of the submissions we find no infirmity in the order of CIT(A). 49. Vide Ground No. 5, the assessee contends that the tax authorities erred in allowing depreciation of ₹ 7,56,263 only in place of the correctly allowable depreciation of ₹ 9,99,66,820. 50. This issue was discussed in para 11.27 of the order of the AO, which reads as under : Furniture - Sale price of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came to an end. Out of the three units the assessee company was running before this sale, the assessee company was left with only two units as everything connected with the third unit was transferred for a fixed price and every facility connected with the manufacturing of 118 NE cars was transferred to another entity for a slump price. 4. The price of the undertaking s fixed-assets was fixed at ₹ 210 crores in March, 1993 when the first Memorandum of Understanding was entered into between the assessee company and M/s. PEUGEOT of France. Any evidence of the valuation of individual asset known to the assessee is relevant only if the valuation is prior to March, 1993. There is no such evidence on record. The subsequent valuation for land and building involved in the sale got done in September, 1995 was only for the purpose of stamp duty. The next valuation got gone by the transferee in September, 1996 was for the purpose of apportioning ₹ 210 crores amongst the various fixed assets purchased by the transferee company. Even in the application under section 230A of the Income-tax Act, the assessee company made it very clear that it had transferred land and building as pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aluation in March, 1993. Similarly, the valuation got done by the transferee company in September, 1996 for apportioning the slump price in various fixed assets in its Books of Account cannot by any stretch of imagination imply that the assessee knew of these figures in March, 1993. The non-selling of one or two machines does not, in my view, affect the true nature of the transaction. The forms used for Due Diligence Reports by the officers of the transferee company are standard forms. The fact that in hundreds of such forms the value column is blank goes to prove that no value was attached to each asset. Even the application made by the assessee in April, 1996 under section 230A was accompanied by a covering letter dated 24th April, 1996 wherein the assessee s authorised representative clearly stated that Our clients have sold their Kalyan business as a going concern at slump price. The value of land mentioned in the Conveyance Deed is only for the purpose of Stamp Duty. I am of the considered view that the true nature of the transaction is that of a slump sale. There are some aberrations. But these petty aberrations do not, in my opinion, affect the true nature of the transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and business income? 2. It will be pertinent to note here that there is no difference of opinion between the learned Judicial Member and the learned Accountant Member so far as the facts narrated in the speaking order of the learned Judicial Member. The facts are that the assessee was having two manufacturing units at Mumbai and Pune and it had three business premises, i.e., Kurla (Mumbai); Kalyan (District Thane) and Chinchwad (Pune). The case of the assessee is that the factory at Kalyan was sold to M/s. Kalyan Motors Co. Ltd., now known as PAL PEUGEOT Limited (PPL for short), where 118 NB Cars were being manufactured, for a slump sale price of ₹ 210 crores in respect of fixed assets and a price of ₹ 36.18 crores for the net current assets. Since separate consideration was not charged for different fixed assets, it was claimed to be a slump sale. PAL PEUGEOT Pvt. Ltd. was incorporated as per the certificate of incorporation of the Additional Registrar of Companies, N.C.T. of Delhi Haryana dated 25-7-1994. There is a second certificate of incorporation dated 25-7-1994 in which the word Private has been deleted with effect from 22-8-1994. There is yet anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t produce the fixed asset register. Though the assessee-company claims that the agreement is for transfer of land, factory building, plant, machinery, etc. at Kalyan and other locations, details of locations were not furnished. (v) The total consideration for the sale is mentioned at ₹ 24,613.97 lakhs, which is again incorrect as could be seen from page 11 of the agreement dated 6-1-1995, relevant portion of which reads as under: 2B1. The price to be paid by the company to PAL as consideration for the sale will be the aggregate of: (a) an amount of ₹ 210,00,00,000 (Rupees two hundred ten crores) corresponding to the value of the acquired immovable assets and the acquired movable assets. (b) An amount to be determined after the execution date corresponding to the value as of the sale date of the acquired current assets and acquired current liabilities i.e., of all elements corresponding to the categories listed in schedule 2C. Such value shall be determined according to the procedure set out hereinafter. The above clauses indicate that the assessee had undertaken the process of item-wise break-up of sale consideration of various assets. (v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was far from honest and the assessee had been indulging in make believe stories at the various stages of the transaction. Though the assessee stated that the land and building had been valued by the transferee company for the purpose of stamp duty, it was not found to be correct. Certificate under section 230A of the Act was obtained under a letter dated 14-6-1996, whereas as per assessee s own admission, the transferee company had got the valuation done in September, 1996, which proves that there existed a complete valuation report of all the assets even before September 1996, but the same was not furnished to the department to avoid correct taxation. (viii) Assessee failed to submit complete and proper details and, therefore, the issue needs to be decided on the basis of details available on record. The recitals in the MOU, supplementary Memorandum of Understanding and sale deed clearly indicate that there had been internal and external valuation of assets and liabilities. The supplementary MOU refers to valuation report, i.e., industrial due diligence for the verification of the assets. Copy of the Due Diligence Report was not furnished by the assessee on the ground tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lectric Control Gear Mfg. Co. (supra) for the proposition that the department has no power to bifurcate slump sale into different components unless there is evidence to show that different assets were evaluated before the date of sale. The Assessing Officer was also not justified in taking into consideration the valuation got done by the transferee company in September1996. Without prejudice to the above submissions, it was also contended that the computation of the capital gains was not in accordance with law. The Assessing Officer has taken the value of land at ₹ 20.42 crores; building at ₹ 23.02 crores and the other fixed assets at ₹ 167 crores. He made a mistake in not excluding ₹ 60,42,69,151 and ₹ 32,01,36,841 out of ₹ 167 crores as these amounts were spent by the assessee-company on capital work-in-progress and technical fees/miscellaneous expenses, capitalised in the books of account. Thus it was contended that only the balance of ₹ 75 crores has to be taken as the sale consideration for the other fixed assets. Further it was contended that the market value of the land as on 1-4-1981 should have been taken into consideration by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is claimed on the entire block of assets. In the subsequent years, despite sale of part of the assets in September 1994, the assessee continues to claim depreciation on the unreduced cost of assets on total disregard of the fact that the assets sold do not continue to be owned by the assessee. The Assessing Officer further mentioned that this strange feature is amply indicative of the manipulative approach of the assessee to somehow or the other to claim that the sale of assets was a slump sale. It is unimaginable that even after selling away part of the assets, the impact of such sale is not reflected in the block of assets. Against this, the records of the purchaser, PPL, for the same period ending on 31-3-1995 show that the schedule of assets forming part of the balance-sheet reflected headwise the assets purchased from the assessee in the block of assets with the cost of acquisition of each asset under the head Assets acquired as on 29-9-1994 . The purchaser has accordingly claimed depreciation on such assets. In other words, on the same assets sold, the assessee is claiming depreciation on one hand without owning them and at the same time the purchaser is also claiming deprec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other for the net current assets; (iii) Regarding the current assets, the net value is to be arrived after putting the value of individual assets and liabilities. The letter of the Assessing Officer was confronted to the assessee, who submitted its reply vide letter dated 21-4-1999. This related to the proposed amendments in the Finance Bill 1999 and the applicability of the decision of the Hon ble Supreme Court in the case of Electric Control Gear Mfg. Co. (supra). 7. On a detailed consideration of the matter, the CIT(A) came to the conclusion that the impugned sale cannot be treated as a slump sale. In this regard he observed that sale agreement should not be viewed in isolation and the agreement like MOU, joint venture agreement entered into prior to the sale agreement, registered sale deed executed on 27-5-1996 regarding transfer of land and building, etc. should also be examined to analyse whether it was a slump sale or not. In the opinion of the CIT(A) a perusal of all the agreements would lead to the conclusion that it was not a slump sale and the assessee had transferred specific assets on which it was liable to tax as per the provisions of Income-tax Law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nown and were also evidenced by the registered sale deed, it becomes absolutely clear that the transfer could not be treated as a case of slump sale. In the circumstances the Assessing Officer was perfectly right in examining the accounts of the transferee as well as other evidences to determine the consideration for other assets transferred by the appellant and thereafter to tax the gains or profits arising out of such a transfer. 11. With regard to the cost of acquisition of land, the Assessing Officer observed that the assessee had not disclosed the date of acquisition of the land though it was stated that the same had been acquired before 1968. The Assessing Officer, therefore, took the indexed cost at ₹ 12,27,960 and accordingly worked out the long-term capital gains. The CIT(A) observed that the value of the land as on 1-4-1981 has to be ascertained first and then the indexed cost has to be applied. He accordingly directed the Assessing Officer to determine the value of the land as on 1-4-1981. Short-term capital gains on transfer of building, as worked out by the Assessing Officer was found to be in accordance with law and, therefore, confirmed the same. 12. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in paragraphs 23 to 28 of the order of the learned Judicial Member. The reply of the learned counsel for the assessee is summarised in paragraph 29 of the order of the learned Judicial Member. After considering the submission of both sides, the learned Judicial Member came to the conclusion that it was not a case of slump sale. The price of each asset can be ascertained and it cannot be said that it was a case of sale of whole undertaking or a slump sale. He has also distinguished the case laws relied upon by the learned counsel for the assessee, for the detailed discussions contained in paragraphs 30 of 39 of his order. He discussed the various features for arriving at his opinion in paragraphs 40 to 44 of his order. 15. The learned Accountant Member held that the price of each asset cannot be ascertained and it can be said that it was a sale of whole undertaking for a lump sum consideration. The assessee-company s business of manufacturing 118NE cars came to an end. The price of the fixed assets of the undertaking was fixed at ₹ 210 crores in March, 1993 when the first MOU was entered into between the assessee-company and M/s. PEUGEOT of France. Any evidence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciation as a block of assets. Under section 50 any amount received on account of transfer of an asset goes to reduce the block and in case there has been addition, the block is increased. In this case sale price of the building was taken at ₹ 23.24 crores. Accordingly the short-term capital gains on the sale of building was worked out. In para 11.28, the Assessing Officer has given the reasons for arriving at the profit on account of the sale of plant and machinery at ₹ 64.39 crores and at para 11.29, the issue regarding profit on the sale of paint shop was considered. This issue was considered by the learned CIT(A) in para 110 of his order. The learned counsel has not given any specific explanation as to why it should not be included as short-term capital gains. We, therefore, reject the contention of the assessee. Under these circumstances, we affirm the order of the CIT(A). 48. With regard to the inclusion of ₹ 1.84 crores as business income, the Assessing Officer has discussed the issue in para 11.30. The slump sale agreement dated 6-1-1995 states the price to be paid by the transferee company to the assessee-company as a consideration, which includes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. I am, therefore, of the considered view that for the purposes of calculation of depreciation allowable to the assessee, the amount of ₹ 210 crores is to be split as per transferee company s allocation. This splitting is only for the purposes of calculating the allowable depreciation. That is how the difference of opinion has arisen, which has been referred to me by the Hon ble President under section 255(4) of the Act. 18. During the course of hearing before me, the learned counsel for the assessee tried to produce an affidavit of Shri Maitreya V. Doshi Managing Director of the assessee-company, to support his case without moving an application under Rule 29 of the I.T.A.T. Rules. This was strongly opposed by the learned Departmental Representative. Rule 29 of the I.T.A.T. Rules clearly states that the parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or, if the income-tax authorities have decided the case without gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in cause 8.1. The learned counsel for the assessee brought to my notice clause 15.3 of the agreement (page 103) more particularly Clause G thereof (page 110 of Vol. I), which reads as under: Under the provisions of the JVA, PAL agreed to transfer and sell to the company for the company to take over and run as a going concern its business at Kalyan constituting among other things some of PAL s assets including plants and machinery situated at Kalyan or in other locations to enable the Company to manufacture, assemble, sell and service the Premier 118 NE and 1.38D cars. He further brought to my notice the meanings of Acquired Intellectual Property ; Acquired net Assets ; Assumed Contracts and Transferred Employees in Clause (A) appearing at pages 110 to 113 of the paperbook. It was stated that what has been sold by the assessee-company was the running business of manufacturing 50-60 thousand cars and facilities sold included land, buildings, furniture, fixtures, plant machinery, intellectual property, benefits of contracts, trained labour force, current assets, current liabilities and that this business was capable of manufacturing 50 to 60 thousand cars per annum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence the Hon ble Judges of the Supreme Court brought out was that in the case of Artex Mfg. Co. (supra) there was evidence before the Assessing Officer supplied by the assessee itself, which proved that the assessee had valued its assets separately before the sale and had only aggregated the individual values of individual assets and thus termed the sale of assets as slump sale. The assessee was in possession of valuation of each of its assets prior to the slump sale. It was this prior valuation that the Hon ble Judges held was the cause for not accepting the assessee s case of slump sale. In the case of Electric Control Gear Mfg. Co. (supra) there was no such prior valuation and as such slump sale was accepted. Similarly, in the assessee s case there was no valuation prior to the sale. In fact, there is no valuation till date. Therefore, the assessee s case is on all fours with the case of Electric Control Gear Mfg. Co. (supra). 20. The learned counsel for the assessee pointed out that the authorities below and the learned Judicial Member have considered the following factors for coming to the conclusion that it was not a slump sale : (a)The transferee company has in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under section 230A of the Act on 24-4-1996 was as per the valuation report got done by the transferee company in November, 1995. Therefore, the assessee-company did have that information with it since November, 1995. As such, it did not show any separate valuation when it applied for certification under section 230A of the Act in April, 1996, and in the covering letter it was clearly stated that the land and building have been sold for a lump sum price. The difference in the net current assets valuation of ₹ 1.84 crores was because of the gap of approximately 18 months (March 1993 and September 1994). It was explained that the current assets change with every transaction and, therefore, there is nothing abnormal in the assessee-company s current assets as on 29-9-1994. Prior to March, 1993 and even prior to January, 1995, when the slump sale agreement was in fact executed, there was no valuation available neither with the transferor nor with the transferee. The land situated in Kalyan and not sold to the Joint Venture Company was not a part of the Kalyan business. Regarding Industrial Due Diligence it was submitted that the mere fact that there is a value column, canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartmental Representative, Shri S.D. Kapila, referring to the questions and the finding given by the learned Accountant Member, submitted that he, the learned Accountant Member, has not controverted a single finding of fact arrived at by the learned Judicial Member. On the other hand, he has stated in para 2 of his order that the learned Judicial Member has given the facts in a very apt manner and in detail. He has merely controverted the conclusion arrived at by the learned Judicial Member in a bland manner without bringing on record any other evidence or even inference to rebut the specific factual findings of the learned Judicial Member. Further, the order of the learned Accountant Member is totally silent on the alternative submissions on which the learned Judicial Member has held that even assuming it to be a case of slump sale, the surplus or gain arising on transfer is taxable under section 45 of the Act. He made submissions under the following heads : (i) Concept of Slump Sale. In this connection, it is submitted that slump sale implies of sale of a going concern lock, stock and barrel and the sale should be on as is and where is basis. In the case of a bran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Workshop, which comprises of a series of machines. Similarly a Gear Box Assembling Workshop from Kurla Unit was transferred. The assessee also transferred 116 NE and 137 Diesel Engine licence also. In this connection, reference was made to II.2. Facilities , of the MOU dated 11-3-1993. It is further pointed out that the assessee agreed that its contribution of capital would be in the form of Kalyan facilities, engine machine and gear box assembling unit, as described in articles II.2 and IV. In the supplemental MOU dated 17-5-1994 it was agreed that assets from other locations were also required to be transferred by the assessee to Kalyan Motors Co. Pvt. Ltd. (KMCPL). In this connection, my attention was invited to the said Clause and further submitted that the CIT(A) in para 50 of his order has clearly mentioned that the assessee did not furnish the details of assets transferred from other locations as also the current assets transferred by the assessee, whose value was reflected at ₹ 36.13 crores in the books of the assessee whereas the transferee-company had reflected it at ₹ 37.14 crores, deliberately. Shri Kapila drew my attention to Clause 2C of the agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 1-4-1994 to 31-3-1995. Further, the assessee also did not produce the fixed assets register before the Assessing Officer to substantiate that all assets relating to Kalyan Unit were transferred. The learned Judicial Member held that the assessee retained the excess land available at Kalyan undertaking. He further held that in the application made under section 230A of the Act, the assessee had mentioned specific value for the land and building at ₹ 43.44 crores in April, 1996 whereas the transferee valued the property in September, 1996. Thus the assessee was aware of the sale price of the land and building before the valuation of the properties by the transferee. There is a categorical finding by the learned Judicial Member that in the registered document dated 27-5-1996 the assessee recorded the sale consideration for transfer of the land and building. While dealing with the Government Department the assessee is expected to give true and correct statement and the statement given in the public proceedings has to be taken as true and correct unless proved otherwise. In the application under section 230A, item No. 15 contains two columns, one relating to the value of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le assets, movable assets, current assets and current liabilities. The assessee received ₹ 210 crores towards the value of immovable and movable assets. It separately received consideration for transfer of net current assets amounting to ₹ 37.84 crores, whereas it has accounted for in the books of account only ₹ 36.13 crores. Thus the total consideration received was ₹ 247.84 crores. This is also clear from assessee s letter dated 15-1-1998. This fact has been highlighted by the learned Judicial Member in paragraphs 45 and 46 of his order and the learned Accountant Member did not consider Clause 2.B of the Slump Sale Agreement to which my attention was also invited. It is submitted that there were three sales by the assessee. The first sale was net current assets for a sum of ₹ 37.84 crores; the second sale was of land and building for a consideration of ₹ 43.44 crores and the third sale was of plant and machinery, furniture and incomplete paint shop for a consideration of ₹ 166.56 crores. Therefore, the learned Departmental Representative, Shri Kapila, submitted that it was not a sale of going concern, but it was sale of various assets own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it is not in consonance with the registered sale deed dated 27-5-1996 and the assessee did not place any evidence to establish that the land and building was valued in September, 1995. The assessee filed application under section 230A of the Act in April, 1996 and the property was registered in May, 1996. The CIT (Appeals) has also held that the certificate under section 230A was obtained on 24-4-1996 and the transferee-company has got the valuation of plant and machinery done in September, 1996. Shri Kapila brought to my notice paragraphs 43 and 44 of the order of the learned Judicial Member and also Schedule 2B of the Slump Sale Agreement where it is clearly mentioned that price not included . With reference to the observations of the learned Accountant Member about the petty aberrations and the decision in the case of Electric Control Gear Mfg. Co. (supra) are concerned, it is submitted that the said findings are without any basis and he did not consider the various agreements entered into by the assessee. In this connection, he pointed out the different findings given by the learned Judicial Member in paragraph 36 of his order wherein it is mentioned that the issue as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of F.X. Periera Sons (Travancore) (P.) Ltd. (supra) for the proposition that when a business is sold as a going concern, it itself constitutes transfer of a capital asset as defined in section 2(14) of the Income-tax Act. It was submitted that the business undertaking as a whole would constitute capital asset within the meaning of section 2(14) of the Act. Reference was made to the decision of the Hon ble Delhi High Court in the case of P.N.B. Finance Ltd. v. CIT [2001] 252 ITR 4911 and to the decision of the Hon ble Supreme Court in the case of Artex Mfg. Co. (supra). It was submitted that the finding given by the learned Accountant Member is contrary to the facts and case-laws cited above. He also relied on the following decisions for the proposition that capital gain on such transfer is assessable under section 45 of the Act : (i) Killick Nixon Co. s case (supra) (ii) Artex Mfg. Co. s case ( supra) (iii) Electric Control Gear Mfg. Co. s case (supra) (iv) P.N.B. Finance Ltd. s case (supra) (v) Anand Electric Co. Ltd. s case (supra) (vi) Akola Electric Supply Co. (P.) Ltd. s case (supra) (vii) Nagpur Electric Light Power Co. Ltd. s case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, building and paint shop, the selling price was more than the opening written down value. Therefore, the Assessing Officer has rightly assessed the short-term capital gains arising from the transfer of various assets. 28. The learned Departmental Representative, Shri Kapila, made alternative submissions in regard to question Nos. 1 and 2. He submitted that on sale of assets of the Kalyan business, a profit of ₹ 1.84 crores will be brought to tax. Regarding land and building, it was submitted that these assets were sold by the sale deed dated 27-5-1995 and as per section 47 of the Registration Act it will relate back to the sale agreement dated 6-1-1995. In this connection, reliance was placed on the Full Bench decision of the Hon ble Gujarat High Court in CIT v. Mormasji Mancharji Vaid [2001] 250 ITR 5421 and the Supreme Court decision in the case of Gurbaxsingh v. Kartarsingh [2002] 122 Taxman 121. The sale deed was furnished in the course of assessment proceedings and, therefore, the valuation for consideration has to be given due cognizance. It was submitted that even where consideration was not ascertained, capital gain is chargeable in the year of transfer as contem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was physically impossible to obtain each depositor s consent for transferring the same. So also the liability of ₹ 13 crores was not transferred because the assessee-company had agreed to sell completed paint shop and ₹ 13 crores were expected to be spent to complete the paint shop. Regarding the encumbrances on the assets, it was submitted that the assessee-company owe some money to ICICI for which permission to sell was obtained and ICICI did not have any lien on this facility. With regard to the non-transferring of depreciation fund, revaluation of depreciation fund and revaluation reserve, it was submitted that they were not the liabilities and hence they were not transferred. It was pointed out that in all purchases of running business, liabilities known and recorded were taken over by the purchaser and they have not taken over unknown and unspecified liabilities and court cases. It is wrong to say that there were three sales. The company had made only one composite sale. The use of the word consideration in the conveyance deed was one step towards implementing the Slump Sale Agreement. Since immovable property cannot be transferred without payment of stamp duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation, the price may be split up and not for any other purpose. As regards the argument that on the balance fixed assets forming part of block assets depreciation was allowed it was submitted that this statement is not correct, because no depreciation was claimed on plaint shop. Similarly, there is no profit element in the sale of current assets. 30. The learned counsel for the assessee further tried to explain the decision in the case of F.X. Periera Sons (Travancore) (P.) Ltd. (supra). At the end it was submitted that the assessee had no objection to the amount being taxed in this year if it is taxable. However, the case of the assessee is that no part of ₹ 210 crores is taxable because it is not divisible. When it is not divisible, long-term capital gain or short-term capital gain cannot be worked out. It was further submitted that the cases relied upon by the learned Departmental Representative K.C. Pal Chowdhury s case (supra)and Alapati Venkataramiah s case (supra) are not applicable to the facts of the present case. 31. I have considered the rival submissions and have gone through the material available on record. The first question referred by the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be transferred from Pune and a gear box assembling workshop to be transferred from Kurla. Thus, it was not exclusive transfer of Kalyan unit, rather it was transfer of assets located at various plants of assessee. The supplementary MOU dated 17-5-1994 reveals that wherein it was agreed that assets from other locations were also required to be transferred after due verification process (industrial due diligence) for verification of principal items of the assets including plant and machinery situated at Kalyan or any other locations (Kurla, Pune and other locations) with a view to carry out broad verification of such items. Besides this, it is significant to note that clause 2.C of the agreement dated 6-1-1995 establishes the fact that the assessee transferred assets other than Kalyan undertaking because this clause stipulates the dismantling and transport cost of the assets to be borne by the assessee. This is clear from the following clause 2.C : 2C. It is agreed that : (i) All costs relating it dismantling and transportation of the Acquired Net Assets up to the site of Kalyan (whether such dismantling and transportation occurs on the sale date or at any other time as mut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable or entitled to take over the same and make any payment to PAL in respect thereof. However, the company shall at the cost and expenses of PAL assist PAL in the realization of the Accounts Receivable owed to PAL by their customers but without in any manner suffering any loss or detriment to the business taken over by the company. 35. As per agreement after transfer of the undertaking, there was an agreement whereby the business was run by the Directors of the assessee- company on behalf of Joint Venture Company. It is noteworthy that there common directors in the transferor and transferee-companies. The management of the transferee-company was carried on by the transferor- company in consultation with PAL PEUGEOT Ltd. All significant and material decisions relating to KMCL or transferee were taken by the assessee-company. The assessee-company deputed its officials to transferee-company for running the day to day business. Thus the assessee- company managed the business of transferee-company which is clear from clause 5 of MOU dated 11-3-1995, supplementary agreement clause 5 and joint venture agreement. The assessee-company transferred Kalyan unit including paint shop. At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreed to discharge such liability. Further, the assessee did not transfer depreciation fund to the tune of ₹ 35.02 crores. Revaluation of Depreciation Fund of ₹ 3.5 crores and Revaluation Reserve of ₹ 14.4 crores. The assessee did not transfer other liabilities attributable to residuary business, which is clear from clause 3.8 of slump sale agreement. All liabilities and pending court cases of the assessee prior to the date of sale deed were taken over by the transferor. The slump sale agreement stipulates the liabilities arising out of settlement with labour by the assessee pertaining to the period prior to the date of sale are with the assessee, which is clear from clause 3.7.5 of the slump sale agreement. In this way, the evidence at pages 127, 131 and 134 of the paperbook show the facts that all the liabilities were not transferred. 38. The learned D.R. has pointed out that the assessee did not receive single price for transfer of various assets, which is clear from clause 2B of the slump sale agreement. Similarly, it is pointed out that the first sale was for net current assets for a sum of ₹ 37.84 crores. The second sale was of land on 27-5-1996 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO, in common practice, would take action only on the basis of the contents furnished in an application under section 230A and the covering letter may not have been noticed. In the said application, the assessee chose to specify the transfer price of land and building at ₹ 43.44 crores against column(1), which speaks of the actual consideration for which the property was purported to be transferred. The fact that the same price is mentioned in the sale deed for the purpose of registration under the Stamp Duty Act wherein it was categorically mentioned without any iota of doubt that the assessee had agreed to sell the land and building at ₹ 43.44 crores and the purchaser had agreed to purchase the same at that price, indicates that the assessee had fixed the price for the transfer of land and building and it was not intended to be slump sale. A reading of section 230A application together with the sale deed would make it clear that the assessee was aware of the price at which the land and building were to be transferred and this substantial evidence proves that the assessee s intention was to give colour of slump sale, though, in fact, the price of each item transferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. 41. The totality of the facts and circumstances, evidence on record and preponderance of probabilities are in favour of holding that the price of each asset transferred by the assessee is known beforehand. In the instant case, the matter needs to be examined by taking into consideration the entire gamut of facts and circumstances of the case. It is well settled that men may lie but the circumstances may not . Sometimes, even after a careful tax planning, some narrow gaps are left which would hint at the real state of affairs proving the well-known saying that guilty conscious speaks of itself. Mention in some of the due diligence reports excluding price and the sale deed registered before the stamp duty authorities are the glaring circumstances, apart from other indications, to show that the transfer was not a slump sale. 42. The main contention of the assessee is that there is no evidence to show that the assessee has valued each asset before settling for the price of ₹ 210 crores. It was also contended that the original schedules were verified by the CIT(A) in the presence of Assessing Officer which clearly shows that the column for value was left blank even in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d stock having revalued at the time of agreement for sale, same has to be taken into consideration for the purpose of section 41(2) of the Act even though in the sale agreement the assessee has not mentioned the value of the plant and machinery and dead stock separately. Since the income was held to be chargeable to tax under section 41(2), the same is not assessable to tax under section 45. The court observed that under section 41(2) the amount of surplus to the extent of difference between the WDV and the actual cost has to be treated as capital gain for the purpose of taxation. 46. In the case of Electric Control Gear Mfg. Co. (supra), the firm transferred the entire assets of the business together with liabilities as a going concern to the limited company. The partners of the assessee-firm were allotted shares of the same value in the profit sharing proportion. Following questions were referred for the consideration of the Hon ble Supreme Court : (1) Whether on the facts and circumstances of the case, section 41(2) was applicable? (2) Whether on the facts and circumstances of the case, the Tribunal was right in holding the status of assessee-firm as Registered Firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the ratio laid down by the Hon ble Supreme Court is not applicable to the facts of the present case. 48. The learned Departmental Representative has made an alternative submission that, without prejudice to the arguments and conceding that it was a slump sale, the gain arising from the transfer of Kalyan business is assessable to tax under section 45 of the IT Act. In this connection, reliance was placed in the decisions of Kerala High Court in Kar Valves Ltd. (supra) and F.X. Periera Sons (Travancore) P. Ltd. (supra) and Delhi High Court in P.N.B. Finance Ltd. s case (supra) for the proposition that where the whole business together with its assets and liabilities was transferred for a consolidated price and not sold by any itemized value or item-by-item price fixed for different assets, any surplus will be capital gain. 49. I have considered the arguments of learned Departmental Representative in the light of above cited cases. It has been held that the gain or surplus arising from the transfer of an undertaking is chargeable to tax under section 45. The Hon ble Delhi High Court relied on the decision of apex court in the case of Artex Mfg. Co. (supra) and came to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets transferred included building situated at Kalyan and also plant and machinery. The assessee admittedly claimed depreciation on those assets, which was allowed in earlier years, and they were considered for depreciation as a block of assets under section 50. Any amount received on account of transfer of an asset goes to reduce the block and in case there has been addition, the block of assets has to be increased. In this case, sale price of the building was taken at ₹ 23.24 crores by the Assessing Officer. Accordingly, the short-term capital gain on sale of building was worked out at ₹ 20.61 crores. The Assessing Officer has also given the reason for arriving at profit on account of sale of plant and machinery at ₹ 64.39 crores. 52. The issue regarding profit on sale of paint shop was considered by CIT(A) at paragraph 110 of his order. The case of the assessee is that when ₹ 210 crores is the lump sum price, which is not divisible, long-term capital or short-term capital gain cannot be worked out. Since I have held that it is not a slump sale and assessee had claimed depreciation on building, plant and machinery and paint shop, the gain arising from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd Member has confirmed the findings of the JM on these two issues. In conformity with the view of the majority, we hold that the sale of assets termed by the assessee as the sale of Kalyan business is not a slump sale and the sale proceeds on the sale of assets to Kalyan Motor Co. Ltd. are assessable to tax. 3. At the time of hearing, Learned Counsel for the assessee filed an affidavit i.e., affidavit of Mr. Maitreya Doshi, Managing Director of the Premier Automobiles and a letter dated 19th April, 2002 addressed by General Counsel of PEUGEOT to the assessee-company wherein it was confirmed that there was no collusion with PAL and A.P. and the transaction between the two was a transaction of slump sale. Learned Counsel placed reliance on several decisions including the decision of Hon ble Allahabad High Court in the case of Jan Mohammed v. CIT [1953] 23 ITR 15 at 26 in support of his contention that the additional evidence can be considered by the Bench while giving effect to the order of the Third Member. We are unable to agree with the contention of the assessee. It may be noticed that this very evidence was furnished before the Third Member which was not admitted by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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