TMI Blog2020 (1) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... inate bench s decision in DCIT vs. M/s. Mcnally Bharat Engineering Ltd. [ 2020 (1) TMI 203 - ITAT KOLKATA] has already decided the issue against the department that such an amount does not partake the character of taxable income till the time mutual obligations are not fully satisfied. This first substantive ground is rejected therefore. Capital gains addition - Gain accrued in assessee s heads on accrual of transfer of plant and machinery of product division - HELD THAT:- Assessee had received consideration by way of equity shares only. Hon ble Bombay high court s judgment in CIT vs. M/s. Bharat Bijlee Ltd. [ 2014 (5) TMI 512 - BOMBAY HIGH COURT] has relied upon in the CIT(A) s order, holds that capital gains as slump rate do not arise in such an instance. CIT(A) has rightly deleted the impugned capital gains addition made by the assessing authority by invoking section 50B of the Act. The Revenue fails in its second substantive grievance as well. Provision for leave encashment disallowance - AO invoked section 43B(f) of the Act that such a provision is allowable only in case of actual payment - HELD THAT:- CIT(A) holds that hon ble jurisdictional high court s decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which had to be included in the Return of Income. She further proceeded to disallow the claim u/s. 115JB of the Income-tax Act, 1961. 7. The ld. A.R. of the assessee stated that the ld. A.O. has erred in making the addition. She stated that this aspect has been decided by the Calcutta High Court and Tribunal, She explained that retention money is not priced till the final execution of the work. Reliance was placed on decision of Calcutta High Court in Simplex Concrete Piles (India) P. Ltd. 8. I have gone through the order of the ld. A.O. and the submissions made by the ld. A.R. of the assessee. Undoubtedly, it is also observed that the Ld. CIT(Appeals)-22 had given relief to the assessee. The decision has also been in favour of the assessee in the case of Commissioner of Income Tax vs. Simplex Concrete Piles (India) Pvt. Ltd. 179 ITR 8 (Cal). Ld. A.R. has further given a list of cases where a decision has been made in favour of the assessee. Considering the fact that CIT(Appeals) has decided the case and that the jurisdictional High Court has also given a decision in favour of the assessee, on the same issue, I am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for which the company had received a consideration value and the transfer of asset had been to a subsidiary. 11. The ld. A.R. of the assessee vehemently stated that the plants of the Product Division (Kumardhubi), Asansol, Bangalore, etc. were hived of. In exchange, the assessee got equity shares of M/s. Mcnally Sayaji Engineering Ltd. This had been decided by the Hon'ble Calcutta High Court (Administered). In exchange, the assessee received equity shares of group company. She said that the ld. A.O. was wrong in considering the sale as slump sale. She relied on the order of Bombay High Court in Bharat Bijlee Ltd. 89 CCH 058 (MumHC). 12. I have considered the order of the ld. A.O. and the submissions made by the assessee. 13. The order of the Bombay High Court (Supra) has been considered by me. In that case the Bombay High Court had considered the matter in great detail and had followed the decision of High Court in the case of CIT vs. Motors General Stores. The said decision, it had considered all aspects of a slump sale as well as the transactions in consideration. The Hon'ble Bombay H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res (P) Ltd., reported in (1967) Vol.66 ITR 692. The Hon'ble Supreme Court referred to Section 10(2)(vii) of the Indian Income Tax Act, 1922. It. also referred to a transaction dated 21st February, 1956 which was the subject matter of the appeal. It also posed the question as to whether such a transaction as was subject matter of exchange deed could be termed as a sale and alternatively whether the consideration of the sale is not the market value of the shares as on the date of the transaction, namely, ₹ 95/- per share but the face value of the shares. 16 In answering this question, the Hon'ble Supreme Court held that, it is only if there is a sale of the cinema house and the other assets that the taxable profits and gains are to be computed under Section 10(2)(vii) as the amount by which the written down value exceeds the amount for which the assets are actually sold. The Supreme Court held that the word sale or sold have not been defined in the Indian Income Tax Act, 1922. These words, therefore, have to be construed by reference to other enactments. The Supreme Court then referred to the definition of the term sale as appearing in the Tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax cannot bring the subject within the letter of the law, the subject is free, however, apparently within the spirit of the law the case might otherwise appear to be. In Duke of Westminister's case deeds of covenant had been executed by the Duke in favour of the employees in such amounts that the receive respectively sums equivalent to their wages and salaries. If they left the service of the Duke the payments covenantees, if remaining in the Duke's service, would still have been due, but it was in nearly all instances explained to the employee that so long as the service continued, while the deed did not prevent his claiming ordinary wages. in addition, it was expected that It was argued for the Crown that he would not do so though in form a grant of an annuity, the transaction was in substance merely one whereby the annuitant was to continue to serve the Duke at his existing salary, so that the annuity must be treated as salary. Neither the Court of Appeal nor the House of Lords agreed with this contention. To regard the payments under the deed as in effect payments of salary would be to treat a transaction of one legal character as if it were a transaction of a different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent shows that the transfer of the undertaking has took place in exchange for issue of preference shares and bonds. It held that, merely because there was quantification when bonds/preference shares were issued, would not mean that the monetary consideration was determined and its discharge was only by way of issue of bonds/preference shares. In other words, the Tribunal held and as a fact that this is not a case where the consideration was determined and decided by parties in terms of money but its disbursement was to be in terms of allotment or issue of bonds/preference shares. In fact, all the clauses read together and the entire Scheme of Arrangement envisages transfer of the Lift Division not for any monetary consideration. The Scheme does not refer to any monetary consideration for the transfer. The parties were agreed that the assessee was to transfer the undertaking and take bonds/preference shares as consideration. Thus, it was a case of exchange and not a sale. Therefore, the Tribunal held that Section 2(42C) of the Act was inapplicable. If that was not applicable and was not attracted, then, Section 50B was also inapplicable. 19 We are o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 72 crores. An application was filed before the Settlement Commission for the two assessment years and disclosing additional income. The Settlement Commission passed an order and which is termed as final order in paragraph 4 of the judgment of the Delhi High Court, determining and deciding various questions which are raised in the writ petition. In the writ petition, the only aspect was that of taxability of ₹ 375 lacs under Section 5OB of the Income Tax Act as capital gains on 'slump sale' paid under the Scheme of Arrangement to the petitioner by its subsidiary. The Settlement Commission held that the amount of ₹ 375 lacs received by the petitioner from its subsidiary on transfer of its project finance business and assets based on financing business including its shareholding in SRIE Insurance Broking Pvt. Ltd. was taxable under Section 50B of the Act as a slump sale. 25 The argument of the petitioner was that this is a transfer under the Scheme of Arrangement but is not a sale. The Scheme of Arrangement was sanctioned by the High Court of Calcutta. The argument was that this is a transfer of a statutory interest and character. Section 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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