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The Deputy Commissioner of Income Tax Versus M/s DRS Industries Limited

2017 (2) TMI 546 - ITAT CHENNAI

Addition of sale of undertaking as slump sale - Held that:- It is not disputed by the Revenue that M/s SKODA Auto India Pvt. Ltd. had not approved the transfer of dealership from the assessee to M/s Miracle Cars India Pvt. Ltd. It is also not disputed that there was a clause in the agreement which required approval of M/s SKODA Auto India Pvt. Ltd. for transfer of dealership from the assessee to M/s Miracle Cars India Pvt. Ltd. Even the part consideration received, was held by one Shri D. Sivaku .....

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n, the CIT(Appeals) was justified in taking the view that there was no slump sale and there was no occasion for making an addition - Decided in favour of assessee. - ITA No. 2727/Mds/2016, C.O. No. 176/Mds/2016 - Dated:- 3-2-2017 - Shri N. R. S. Ganesan, Judicial Member And Shri Abraham P. George, Accountant Member Appellant by : Shri Shiva Srinivas, JCIT Respondent by : Shri G. Ramaswamy, CA ORDER Per Bench This appeal and cross-objection of the Revenue and assessee respectively, are directed a .....

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rtaking as slump sale for the impugned assessment year. 5. Facts apropos are that the assessee carrying on a business of SKODA Car dealership, had filed return for the impugned assessment year, declaring NIL income under normal provisions of Income-tax Act, 1961 (in short 'the Act') and book profit of ₹ 1070/- under Section 115JB of the Act. During the course of assessment proceedings, it was noted by the Assessing Officer that the assessee had entered into a Memorandum of Understa .....

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was of the opinion that the sale had to be considered as slump sale within the meaning of Section 2(42C) of the Act. According to him, by virtue of Section 50B(1) of the Act, profit arising from slump sale was chargeable to tax as capital gains arising from transfer of long-term capital assets. The A.O. also noted that the assessee had not filed audit report in Form No.3CEA as mandated under Section 50B(3) of the Act. In reply, assessee stated that the agreement was for transferring SKODA Car De .....

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o the assessee. Contention of the assessee was that the agreement had expired within three months of entering into it by virtue of clause 4 therein. Assessee also stated that there was individual valuation of assets and since individual values were assigned, Section 2(42C) could not be applied. Reliance was also placed on the judgment of Hon'ble Apex Court in the case of E.D. Sassoon & Co. Ltd. v. CIT (1954) 26 ITR 27. However, the A.O. did not accept these contentions. According to him, .....

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considering the submissions of the assessee, held as under, at para 6.1 of his order:- 6.1. From the submissions made by the appellant it is seen that an amount ofRs. 1,38,78,000/- was given only to Mr. D. Sivakumar, Director of M/s DRS Industries Ltd., the appellant herein, to complete the formalities. Hence the transfer of the unit for a value specified could be only after the approval from the principal i.e. M/s SKODA. Hence, the appellant submitted there was neither transfer and nor slump sa .....

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ed that the transfer of dealership was subject to approval by SKODA Auto India (P) Ltd. and accrual of income arises only at the point of approval from principal i.e., M/s SKODA. Thus it is seen that the appellant had not entered into an enforceable agreement to transfer the SKODA car dealership and hence there was no change of dealership. Thus the factual position has been misinterpreted by the A.O. in the impugned assessment order. Further, the A.O. in the subsequent assessment year 2012-13 vi .....

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