TMI Blog2018 (9) TMI 1813X X X X Extracts X X X X X X X X Extracts X X X X ..... our of the Revenue and against the assessee. Sale of Boyce Estate to be treated as capital gain u/s 50B - Sale of going concern or slump sale - HELD THAT:- The liabilities were not sold and the sale agreement did not include investments and deposits was the clear finding of the Tribunal. All the investments, deposits, receivables, stock and such other current assets in the form of financial and other assets remained with the assessee Company along with the liabilities. Only those assets enumerated in the Schedules and Annexure were sold to the vendee. The consideration had also been specifically assigned to the sale of immovable property and separate consideration has been assigned to the sale of movable properties including vehicles, buildings and so on and so forth. We do not find any reason to interfere with the finding of fact by the Tribunal that there is no case of slump sale for a lumpsum consideration. However, the consideration is not attributable to any particular item of asset. We hence decline to answer the question framed for reason of the findings of facts being unassailable raising no question of law. Speculation loss allowability - Tribunal found that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and then before the Tribunal. Under Clause (c) of Explanation to Section 263(1) since the issue was subject matter of appeal, there could not have been any suo motu power exercised by the Commissioner under Section 263. We are in agreement with the findings of the Tribunal and we answer the question of law against the Revenue and in favour of the assessee. Disallowance under Section 14A - As already held, following the decision of the Hon'ble Supreme Court in Essar Teleholdings Ltd., that the same would be applicable only from 2007-08. We, hence, answer the said issue in favour of the assessee and against the Revenue. Expenditure incurred in connection with the transfer of shares - HELD THAT:- Tribunal has found that as a matter of fact the said expenses have been incurred in connection with the maintenance of share-holders' register. The Tribunal has relied on the instructions issued by the CBDT, vide F.No.10/25/63-IT(A.a) dated 18.06.1964, wherein it was clarified that "the remuneration paid by the Company to its Registrar for performing duties in connection with the Company's legal obligations to be discharged under the Company Law, should be regarded as revenue expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. The contention raised before the Division Bench of this Court was answered in 2011 (203) Taxmann 63 [Commissioner of Income Tax, Cochin v. Thiruvambadi Rubber Factory Limited], where it was argued that the sale of agricultural land is excluded from the computation of capital gains under Chapter-IV of the Act and in any event, it would be agricultural income. The Division Bench answered both the questions against the assessee following the judgment of the Honourable Supreme Court in (2002) 255 ITR 273 [Appollo Tyres Ltd. v. Commissioner of Income Tax]. The Division Bench found that the proceeds of old and unyielding rubber trees cannot be agricultural income, especially when the assessee does not have a case that the same has been returned as agricultural income before the State, which is competent to assess agricultural income tax. Rubber tree was held to be an agricultural asset from which income was derived for 20 to 25 years; the sale of which, on becoming old and unyielding, cannot give rise to agricultural income. As to the contention that the exemption to capital gains should apply in the computation of book profits under Section 115JA, the Division Bench held that what is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the questions raised on computation of book profits, including the consideration received from the sale of Boyce Estate under Section 115JB was answered by the Tribunal in favour of the assessee. The alternate question on the consideration received from the sale of Boyce Estate arises from the order of the CIT Appeals, which directed the same to be treated as capital gains under Section 50B of the Income Tax Act, [1961, for brevity, the Act] for reason of there being sale of a going concern. There was also disallowance made with respect to the claim raised under Section 36(1)(va) of the Act on the contributions made to Provident Fund and other labour welfare funds for reason of it being not within the due date of contribution as per the labour welfare statutes. The next question answered in favour of the assessee by the Tribunal is on the further direction of the CIT Appeals to treat the loss suffered on sale of shares of a subsidiary Company to be treated as speculation loss and not long-term capital loss. The Tribunal, while allowing the said claim, reversed the order of the CIT appeals and also directed set off of long-term capital gains on sale of land with long-term capital l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ft open. We find that the Tribunal has elaborately considered the agreement, by which the plantation was sold. The break-up of consideration is available in the order of the CIT appeals, which is as follows: Land (Rs) Buildings and other assets (Rs) Sale Proceeds 330000000 3000000 Less:- Cost of Land 3151357 --- Less:-WDV of buildings and other assets --- 3253892 Net sale proceeds 326848643 253892 Profit on sale of property as per Profit Loss Account. 326594751 13. On a reference to the agreement, the Tribunal had also noticed that the transfer specifically excluded various items being the rubber manufactured, stored or in stock or in the process of manufacture upto the date of sale, the rubber tapped from the said estate prior to the date of sale, benefit of all contracts in so far as they were referable to sale or production of the rubber for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tributable to any particular item of asset. We hence decline to answer the question framed for reason of the findings of facts being unassailable raising no question of law. 15. The next question is on the speculation loss found by the CIT appeals, which was overturned by the Tribunal in its order. The assessee had purchased shares in one M/s.Harison Universal Flowers Limited [HUFL] by way of direct subscription; which was a subsidiary of the assessee Company. The direct subscription of shares was carried out in the accounting periods from 1995-1996 to 1998-1999. In the subject year, ie.2005-2006, there was a sale of share effected, on which a loss was suffered, which was returned by the assessee under the head long-term capital gains. The Assessing Officer assessed it as capital gains, while the CIT appeals directed it to be treated as speculation loss. The Tribunal found that the assessee had held the shares as an investment and not as a stock in trade. The loss arising out of the sale of shares would hence be in the nature of capital loss and not in the nature of speculation loss, was the clear finding. There was also no evidence on record to show that the assessee was indulg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the Tribunal, which interfered with Annexure-B order of the Commissioner under Section 263 of the IT Act. The issues dealt with under Section 263 were (i) the income from the sale of old rubber trees, (ii) indexation allowed in the case of sale proceeds of Grevellea trees, (iii) proportionate interest paid relatable to the investment in subsidiary companies dis-allowable under Section 14A and (iv) dis-allowance of expenses claimed under the head share transfer expenses . 21. As far as income from the sale of old rubber trees, the decision to treat it as subjected to Central Income Tax would go contrary to the findings of a Division Bench of this Court in CIT v. Thiruvambadi Rubber Company [(2011) 203 Taxmann 63]. We, hence, do not think that any interference can be caused to the order of the Tribunal on that count. 22. With respect to the issue of indexation allowed of sale proceeds of Grevellea trees, the Tribunal has found that the said issue was the subject matter of an appeal before the CIT (Appeals) and then before the Tribunal. Under Clause (c) of Explanation to Section 263(1) since the issue was subject matter of appeal, there could not have been any suo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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