TMI Blog2020 (9) TMI 542X X X X Extracts X X X X X X X X Extracts X X X X ..... argument of the Revenue in this regard. Slump Sale or not - Existence of monetary consideration - Held that:- to bring the transaction within the definition of Section 2(42C) of the Act as a slump sale, there should be a transfer of an undertaking as a result of the sale for lump sum consideration. - Therefore, necessarily the sale should be by way of transfer of ownership in exchange of a price paid or promised or part paid and part promised and the price should be a money consideration. If there is no monetary consideration involved in the transaction, then it would be not possible for the Revenue to bring the transaction done by the assessee within the definition of the term slump sale as defined under Section 2(42C) of the Act. - mere use of the expression consideration for transfer cannot be said to be a transaction as a sale. - Decision in the case of Motors and General Stores (P.) Ltd. [ 1967 (5) TMI 3 - SUPREME COURT] followed. Scope of the term purchase - Held that:- The Constitution Bench of the Hon ble Supreme Court in the case of Devi Das Gopal Krishnan Vs. State of Punjab [reported in [ 1967 (4) TMI 131 - SUPREME COURT] , whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of Sub-Section (1) of Section 143 of the Act. The case was selected for scrutiny and a notice under Section 143(2) of the Act was issued on 05.10.2007. The case was transferred to the Large Taxpayer Unit (LTU) and an opportunity of being heard was provided to the assessee by issuance of a notice under Sections 143(2) and 142(1) of the Act and subsequently on 28.7.2008. 5. Though there were several issues, which were the subject matter of assessment, in this appeal, we are concerned with the disallowance under Section 54EC of the Act. 6. During the course of scrutiny assessment, a questionnaire was issued to the assessee calling for certain clarifications. The assessee, by their letter dated 23.7.2009, stated that they had transferred their non Transmission and Distribution business (non T D business) to their subsidiary company namely M/s.Alstom Industrial Products Limited and that the entire non T D business was transferred for a total consideration of ₹ 413 million being the fair value of the non T D business as determined by the valuers by their joint report dated 05.1.2006. The assessee further stated that the net worth of the undertaking worked out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee that the same should not be regarded as transfer as per the said decision of the Mumbai Bench of the Tribunal in the case of Avaya Global Connect Ltd., could not be accepted. The Assessing Officer stated that the assessee had not claimed the same during the original return as well as in their revised return, that in terms of the decision of the Hon ble Supreme Court in the case of M/s.Goetze India Ltd. Vs. CIT [reported in (2006) 284 ITR 323], the claim should be made by filing the return of income or by filing revised return of income, that since the assessee had not claimed the same by way of return of income, the submission of the assessee could not be accepted. Accordingly, the Assessing Officer taxed the assessee on the long term capital gains by way of slump sale of its non T D business as per the provisions of Section 50B of the Act and the assessment was completed by order dated 29.12.2009. 11. Aggrieved by the said order of assessment, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), LTU, Chennai-101 [hereinafter called the CIT(A)] and it was dismissed by order dated 31.1.2011 virtually on the same lines as don ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal gains tax. 14. The first aspect, which we need to consider, is as to whether the assessee was estopped from raising the contention by way of an alternate plea. The fundamental legal principle is that there is no estoppel in Taxation Law. It is beneficial to refer to the decision of the Division Bench of the Delhi High Court in the case of CIT Vs. Bharath General Reinsurance Co. Ltd. [reported in (1971) 81 ITR 303]. The relevant portion of the decision of the Delhi High Court reads thus: It is true that the assessed itself had included that dividend income in its return for the year in question but there is no estoppel in the Income-tax Act a nd the assessed having itself challenged the validity of taxing the dividend during the year of assessment in question, it must be taken that it had resoled from the position which it had wrongly taken while filing the return. Quite apart from it, it is incumbent on the income-tax department to find out whether a particular income was assessable in the particular year or not. Merely because the assessed wrongly included the income in its return for a particular year, it cannot confer jurisdiction on the department to tax tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each in the transferee company at a premium of ₹ 96/- per share. The value of the share worked out to ₹ 106/- multiplied by 39,00,000 equity shares, which, in turn, again worked out to ₹ 413 million (₹ 41.3 crores). Clause 8 of the statement filed under Section 393 of the Companies Act further stated that in terms of the scheme, the non T D business would be transferred to the transferee company for a total consideration of ₹ 413 million to be discharged by the transferee company by issue and allotment of equity shares credited as fully paid up as mentioned in the statement and the said consideration for the arrangement had been fixed on a fair and reasonable basis and on the basis of the joint valuation report of M/s.N.M.Raiji Co. and M/s. Bansi S.Mehta Co., Chartered Accountants with regard to the fair value of the non T D business and the report of M/s.Muku Associates, Chartered Accountants on the issue of shares and capital structure of the transferee company. 18. Schedule 1 of the scheme of arrangement contains the statement of assets and liabilities (audited) of the non T D business as on 31.12.2005, which shows the total net assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that the transfer of non T D business was by way of a scheme of arrangement approved by the High Court of Calcutta under Sections 391 and 394 of the Companies Act and therefore, it could not be considered as a sale of business and would not qualify as a slump sale because what were issued were equity shares and no monetary consideration was paid. 22. Unfortunately, the Assessing Officer, the CIT(A) and the Tribunal did not adjudicate this issue on the ground that the assessee was estopped from raising such a contention. We have held that the assessee could not be held to be estopped from raising such a legal contention and the Authorities below as well as the Tribunal fell in error in not adjudicating the issue. Therefore, we are required to consider as to whether the submission of the assessee raised as an alternate plea merits consideration. 23. Section 50B of the Act is a special provision for computation of capital gains in case of slump sale. Sub-Section (1) of Section 50B of the Act reads as follows : Any profits or gains arising from the slump sale effected in the previous year shall be chargeable to income-tax as capital gains arising from the transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined under Section 2(10) of the Sale of Goods Act, 1930 to mean money consideration for the sale of goods. 30. Therefore, to bring the transaction within the definition of Section 2(42C) of the Act as a slump sale, there should be a transfer of an undertaking as a result of the sale for lump sum consideration. Therefore, necessarily the sale should be by way of transfer of ownership in exchange of a price paid or promised or part paid and part promised and the price should be a money consideration. If there is no monetary consideration involved in the transaction, then it would be not possible for the Revenue to bring the transaction done by the assessee within the definition of the term slump sale as defined under Section 2(42C) of the Act. 31. Section 118 of the Transfer of Property Act, 1882 defines the term exchange by stating that when two persons mutually transfer the ownership of one thing for the ownership of another, neither thing nor both things being money only, the transaction is called an exchange. 32. The legal issue, which arises for consideration before us, was considered by the Bombay High Court in the case of CIT Vs. Bharat Bijlee Ltd. [r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer of Property Act, 1882, and the Sale of Goods Act, 1930. The hon'ble Supreme Court then referred to the definition of the term exchange as appearing in the Transfer of Property Act, 1882. It then rejected the contention of the Revenue that the transaction of February 20, 1956, was a sale. The hon'ble Supreme Court held that it was a transfer but by way of exchange. The hon'ble Supreme Court then held thus (page 699) : We pass on to consider the argument of Mr. Narasaraju that in revenue matters it was the substance of the transaction which must be looked at and not the form in which the parties have chosen to clothe the transaction. It was contended that, in the present case, there was in substance a sale of Sree Rama talkies by the assessee- company for a money consideration of ₹ 1,20,000 though the mode of payment was by transfer of shares and the resolution of the board of directors dated September 9, 1955, clearly indicated that the inten tion of the assessee company was to sell Sree Rama talkies along with its equipment concerned for a consideration of ₹ 1,20,000. In the present case, however, there is no suggestion behalf of the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action of a different legal character. With regard to the supposed contrast between the form and substance of the arrangement, Lord Russell of Killowen stated at page 524 as follows : 'If all that is meant by the doctrine is that having once ascertained the legal rights of the parties you may disregard mere nomenclature and decide the question of taxability or non-taxability in accordance with the legal rights, well and good. That is what this House did in the case of Secretary of State in Council of India v. Scoble [1903] AC 299; 4 TC 618 (HL) ; that and no more. If, on the other hand, the doctrine means that you may brush aside deeds, disregard the legal rights and liabilities arising under a contract between parties, and decide the question of taxability or non-taxability upon the footing or the right and liabilities of the parties being different from what in law they are, then I entirely dissent from such a doctrine.' In a later case-Commissioners of Inland Revenue v. Wesleyan and General Assurance Society [1948] 16 ITR (Suppl.) 101 (HL)- Viscount Simon expressed the principle as follows (page 103) : 'It may be well to repeat two propositions which are we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also inapplicable. 19. We are of the opinion that the findings of fact rendered by the Tribunal from paragraph 40 and in relation to ground No. 2 are thus rendered by applying the legal principles to the facts and circumstances of the assessee's transaction. In the given facts and circumstances and going by the clauses of the scheme and reading them harmoniously and together, the Tribunal held that the transfer of the lift division comes within the purview of section 2(47) of the Act but cannot be termed as a slump sale. 20. This finding of fact cannot be said to be perverse or based on no material. It also cannot be said to be vitiated by an error of law apparent on the face of the record. It is in these circumstances, we find that this appeal does not raise any substantial question of law. 21. It also does not raise any substantial question of law because the alternative argument, though formulated for consideration before the Assessing Officer and covered by question No. 4(iii), is not pressed before us. 22. Before us, the emphasis of the Revenue is on the applicability of section 2(42C) of the Income-tax Act, 1961. 23. Before parting, we must mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had no application as the scheme of arrangement is not a slump sale. 26. It is in dealing with that argument and in the peculiar facts that the Delhi High Court held that the petitioner's contentions cannot be accepted. The petitioner before the Delhi High Court had admitted that there was a monetary consideration in the scheme of arrangement. The money was paid and additionally shares of a third company were issued in favour of the assessee. Thus, the consideration was in money as also shares and not shares or bonds exclusively. The transfer could not be termed as an exchange but a sale. In that light the Delhi High Court held that the consideration of ₹ 375 lakhs was received on transfer of the project finance business of the assessee's subsidiary including its shareholding in another company. Therefore, the transaction itself was by way of a sale and not an exchange. 27. There is no necessity for us to analyze the circumstances in which section 50B was inserted in the statute book. Before us, the issue as to whether the conclusions reached by the hon'ble Supreme Court in the case of Motors and General Stores (Pvt) Ltd. (supra) would still hold g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suggestion on behalf of the Revenue of bad faith on the part of the assessee company nor it was alleged that particular form of the transaction was adopted as a cloak to conceal a different transaction. In the case before us also, there is no such allegation made by the Revenue against the assessee company. Thus, this decision will clearly support the case of the assessee and mere use of the expression consideration for transfer cannot be said to be a transaction as a sale. 37. To the same effect is the decision of the Hon ble Supreme Court in the case of CIT, Bombay Vs. Rasiklal Maneklal (HUF) [reported in (1989) 177 ITR 198] wherein it was held that the allotment of shares could not be construed to be a transfer. 38. Another important aspect, which needs to be noted, is the effect of approval of the scheme of arrangement by the High Court of Calcutta. This issue was considered by the Bombay High Court in the case of Sadanand S. Varde Vs. State of Maharashtra [reported (2001) 247 ITR 609] wherein after referring to various decisions, it has been held that there is overwhelming authority of precedents suggesting that when an amalgamation takes place, the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for sale for cash or deferred payment or other valuable consideration otherwise than under a mortgage, hypothecation, charge or pledge. It was argued that the definition of the word purchase is more comprehensive within the definition of the word sale under the Indian Sale of Goods Act and therefore, the State Legislature was incompetent to make a law in the Entry Sale or Purchase in List II of the Seventh Schedule to The Constitution. The Constitution Bench referred to the decision in the case of State of Madras Vs. Gannon Dunkerley Co. (Madras) Ltd. [reported in 1959 SCR 379] wherein it has been held that in order to constitute a sale, it was necessary that there should be an agreement between the parties for the purpose of transferring title to goods, which, of course, presupposed capacity to contract, that it must be supported by money consideration and that as a result of the transaction property must actually pass in the goods and unless these elements were present, there could be no sale. Thus, if merely title to the goods passed but not as a result of any contract between the parties, express or implied, there was no sale. 42. The above judgment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in AIR 2004 SC 326], which pertains to levy of stamp duty on the order of amalgamation passed under Section 394 of the Companies Act and while considering the said issue, the Court analyzed as to what was the effect of the scheme of amalgamation and the entire discussion proceeded with regard to the effect of the order of the High Court approving the scheme of amalgamation qua the provisions of the Indian Stamp Act. We are of the view that this decision is distinguishable on facts. 47. In the case on hand, the Tribunal, in paragraph 13.2 of its order, while discussing this issue, referred to the valuation arrived by the accountants at ₹ 41.70 Crores. However, this valuation does not pertain to the assessee, but pertains to the valuation of the T D business of the assessee whereas the case before us relates to a non T D business and in the valuation report submitted by M/s.A.F. Fergusaon Co., dated 17.5.2004, in the summary of valuation, the value of T D business units worked out to ₹ 417 million (₹ 41.70 Crores). Thus, the Tribunal appears to have committed a factual mistake in referring to a valuation report not concerning the transaction, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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