TMI Blog2019 (8) TMI 659X X X X Extracts X X X X X X X X Extracts X X X X ..... been fixed at a slump price of ₹ 70.00 Crores without specifying any specific value to any asset. The assets transferred includes tangible as well as intangible asset. Moreover, the seller i.e. the assessee has also agreed for not carrying on the similar business of manufacturing and marketing of urea fertilizer for a period of 10 years. Hence, it is a case of slump sale of undertaking as a going concern and not the sale of depreciable assets within the meaning of Section 50. Taking everything into account, the conclusion reached by the tribunal is a plausible one. It does not call for any interference. The learned tribunal also held that since the collection of assets of the undertaking included intangibles like goodwill, intellectual property etc. their cost of acquisition could not be determined. This was also a finding of fact which is a plausible one. We do not wish to interfere with the same. Gain or profit would be computed as a short term capital gain or a long term capital gain or something else - Section 45 provides that profits or gains from the transfer of a capital asset would be chargeable to income tax as capital gains. This gain is deemed to be the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s shall not be regarded as assignment of values to individual assets or liabilities. In understanding the sub-section one has to read the explanation which says that an undertaking shall have the same effect assigned to it in Explanation 1 of clause 19AA (of Section 2). Explanation 1 is as under:- Explanation 1.- For the purposes of this clause, undertaking shall include any part of an undertaking, or a unit or division of an undertaking or a business activity taken as a whole, but does not include individual assets or liabilities or any combination thereof not constituting a business activity. The above definition of slump sale was incorporated into the statute with effect from 1st April, 2000. Section 50B also effective from 1st April, 2000 enacts that any profit or gain from slump sale shall be treated as capital gains from the transfer of a long term capital asset and assessable to capital gains tax. But if the sale is of an undertaking as a capital asset owned and held by the assessee for not more than 36 months before the date of transfer, then it shall be treated as capital gains from short term assets. This case pertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets and liabilities relating to these businesses had also been transferred. The left out assets were bank balance and the outstanding insurance claim. It opined: Merely because these two assets have been excluded from the assets transferred, it cannot be said that it is not the transfer of the undertaking as a going concern Land, building, plant and machinery, raw material, industrial licences, technology, trade mark have been transferred to CCFC. The employees of the assess working in fertilizer business have also been taken over by the CCFC. All current liabilities relating to fertilizer business has been taken over by CCFC. The sale consideration of the undertaking as a whole has been fixed at a slump price of ₹ 70.00 Crores without specifying any specific value to any asset. The assets transferred includes tangible as well as intangible asset. Moreover, the seller i.e. the assessee has also agreed for not carrying on the similar business of manufacturing and marketing of urea fertilizer for a period of 10 years. Relying on the case of Coromondal Fertilisers Ltd. Vs. DCIT reported in (2004) 84 TTJ 370 (Hyd.), it held that the transaction was a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the consideration of ₹ 10.20 crores amongst various assets of the undertaking. Consequently, and became the assets including intangible assets like gradually value of licences, manpower etc. could not be determined, the cost of acquisition and cost of improvement could not be determined. Since this could not be done the charging Section 45 of the said Act for computation of capital gains did not apply. Hence, it was not possible to compute capital gains. Therefore, ₹ 10.20 crores was not taxable under Section 45 of the said Act. This submission was upheld by the court. Mr. Justice Kapadia delivering the judgment and referring to Commissioner of Income Tax Vs. Mugneeram Bangur Co. reported in (1965) 57 ITR 299(SC) and Commissioner of Income Tax Vs. Artex Manufacturing Co. reported in (1997) 227 ITR 260(SC). The case was different from Commissioner of Income-Tax Vs. Artex Manufacturing Co. reported in (1997) 227 ITR 260 (SC), according to his lordship. It is now very important to know the issues before the tribunal. The first issue was whether the alleged agreement of transfer was a genuine one or an eyewash. The second issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned tribunal also held that since the collection of assets of the undertaking included intangibles like goodwill, intellectual property etc. their cost of acquisition could not be determined. This was also a finding of fact which is a plausible one. We do not wish to interfere with the same. Now I come to the law points. Section 45 of the said Act provides that profits or gains from the transfer of a capital asset would be chargeable to income tax as capital gains. This gain is deemed to be the income in the financial year in which the transfer was effected. Undoubtedly, the transfer of the undertaking in question was a transfer of a collection of almost the entire assets of the undertaking and hence transfer of capital. The question is whether this capital gain was to be taken as long term capital gain or short term capital gain and if it was impossible to calculate capital gain, was it to be taken as something else? Mr. Bajoria has relied on a single decision of the Supreme Court in PNB Finance Ltd. Vs. Commissioner of Income-Tax reported in (2008) 307 ITR 75(SC). We have discussed the ratio of that decision. The facts of this ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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