TMI Blog2021 (11) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... racted as this section contains special provision for computation of capital gains in case of slump sale. Respectfully following the above judgement of the Hon ble Supreme Court, we set aside the order of the CIT(A) and direct the AO to delete the addition made by the AO treating the same as long term capital gains - Decided in favour of assessee. Disallowance of expenditure - AO found that the assessee could not furnish bills and vouchers towards administrative and selling expenses claimed in the return of income filed - HELD THAT:- As revenue authorities have made the disallowance on the ground that the AR of the assessee agreed for the same during the course of assessment proceedings. Whereas, the AR of the assessee submitted that the assessee has not authorized its AR for agreed addition. In view of the contrary submissions, we remit this issue to the file of the AO with a direction to redecide the issue after examining the material put-forth by the assessee before him in accordance with law after providing reasonable opportunity of hearing to the assessee in the matter. The assessee is directed to substantiate its claim by way of documentary evidence at his own risk and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... misplaced by one of office staff, caused the impugned delay in filing of the instant appeals. Case law Collector Land Acquisition vs Mst. Katiji Ors, 1987 AIR 1353 (SC) and University of Delhi Vs. Union of India, Civil Appeal No. 9488 9489/2019 dated 17 December, 2019, hold that such a delay; supported by cogent reasons, deserves to be condoned so as to make way for the cause of substantial justice. We accordingly hold that assessee s impugned delay is neither intentional nor deliberate but due to the circumstances beyond its control. The same stands condoned. Case is now taken up for adjudication on merits. 3. Briefly the facts of the case are that the assessee company, engaged in the business of trading of automobiles and servicing of motor vehicles, filed its return of income for the AY 2014-15 on 30/09/2014 admitting loss of ₹ 4,08,54,293/- under normal provisions and admitted book profit u/s 115JB of ₹ 36,28,980/-. Subsequently, the case was selected for scrutiny through CASS and statutory notices were issued, against which, the AR of the assessee furnished the information as called for. 3.1 During the course of assessment proceedings, the AO observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions of the assessee, referring to the provisions of section 50B and considering the decisions of the Hon ble Supreme Court, the CIT(A), confirmed the action of the AO, inter-alia, observing as under: 7.6.14 In the instant case, there is no dispute with regard to quantum of LTCG computed. On the other hand, the only, contention of the assessee is that certain assets still exist in its balance sheet after the sale, I have examined the same and found that such assets have no nexus with the transfer of the business of passenger car dealership of TATA motors of the assessee inasmuch as all the assets pertaining to that business have been transferred to JAPL as evidenced by MOU and the agreement (supra). At this juncture, it is also important to note that the assessee is carrying on other business activities i.e., supporting auxiliary transport activities and activities of travel agencies, and by virtue of which the assessee is deriving income, even after transfer of business of passenger car dealership of TATA motors to JAPL. Accordingly, the assessee company is having certain assets relating to such existing business. However, the important fact to be noticed is that al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wards transfer of goodwill of the company. As such, there is no dispute that the difference amount of ₹ 3,68,33,000/- has been received towards sale/transfer of goodwill. But, the only contentious issue is whether consideration received towards sale/transfer of goodwill is taxable as per the provisions of the Act or not. In this regard, it is worthwhile to examine the legislative history on taxability of goodwill. 7.7.3 The Hon'ble Supreme Court, in the case of CIT Vs B.C. Srinivasa Setty [1981J 128 ITR 294 has held that goodwill generated in a business cannot be described as an asset within the meaning of section 45 of the Act and, therefore, the transfer of goodwill initially generated in a business doesn't give rise to a capital gain for the purposes of Income Tax. While doing so, the Hon'ble Supreme Court has observed that the cost of acquisition of a self generated asset is indeterminate and, therefore, capital gains cannot be computed when a self generated asset is transferred. 7.7.4 However, it is interesting to note that the ratio laid down by Hon'ble Supreme Court in the case of CIT Vs B.C.Srlnlvll$a Setty (supra) has been overruled by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port of assessee s case, the ld. AR relied on the following case law: 1. Vatsala Shenoy Vs. JCIT, [2017] 80 Taxmann.com 351(SC) 2. Shiva Distilleries Ltd., [2020] 116 Taxmann.com 929 3. Sanmar Speciality Chemicals Ltd., Tax case (Appeal) No. 42 of 2018. 4. DCIT Vs. Tongani Tea Co. Ltd., [2015] 63 Taxmann.com 149 5. Vegetable Products Ltd., [1973] 88 ITR 192 (SC) 9. The ld. DR, on the other hand, relied on the orders of revenue authorities. 10. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. We find that as per the agreement, the price consideration for the undertaking and assets to be bought and sold (business) is ₹ 14,00,00,000/- as set out in the schedule attached as annexure A quoted supra. Therefore, the case in hand is squarely covered by the judgment of the Hon ble Supreme Court in the case of Vatsala Shenoy Vs. JCIT, 80 taxmann.com 351 (SC) wherein the Hon ble Supreme Court has held as under: It was noticed that the firm was dissolved on 6-12-1987 by efflux of time. This event happened as per the terms stipulated in the partnership deed itself. The necessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recording the value of the assets of the firm after deducting the liability of the said nine partners. The net value of the assets so arrived at was distributed among the nine partners. [Para 23] What follows from the aforesaid facts is that the firm stood dissolved with effect from 6-12-1987; the company petition had to be filed by two partners in view of eruption of disputes among the partners; the business was carried on by the partners with controlling interest as an interim arrangement; the income was assessed in their hands as AOP and not in the hands of the firm which had already been dissolved; assets of the company were put to sale in accordance with clause 16 of the Partnership Deed of a dissolved firm, though as a going concern; and outgoing partners (assessees herein) received their net share of the value of the assets of the firm out of the amount received by way of sale of the assets of the firm as per clause 16 of the Partnership Deed. On the aforesaid facts, it becomes clear that asset of the firm that was sold was the capital asset within the meaning of section 2(14). It is not even disputed. Once it is held to be the capital asset, gain therefrom is to be tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s triggered the provisions of section 45 and making the capital gain subject to the payment of tax under the Act. [Para 28] Insofar as argument of the assessees that tax, if at all, should have been demanded from the partnership firm is concerned, it may be stated that on the facts of this case that may not be the situation where the firm had dissolved much before the transfer of the assets of the firm and this transfer took place few years after the dissolution, that too under the orders of the High Court with clear stipulation that proceeds thereof shall be distributed among the partners. Insofar as the firm is concerned, after the dissolution on 6-12-1987, it had not filed any return as the same had ceased to exist. Even in the interregnum, it is the AOP which had been filing the return of income earned during the said period.The High Court has touched upon this aspect in greater detail and held that the order passed by the Assessing Authority confirmed in the first appeal and by the Tribunal (Special Bench) holding that the assessee's as erstwhile partners are liable to pay capital gain on the amount received by them towards the value of their share in the net assets o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t at the cost of repetition the value was assigned to individual assets, as per Annexure A, which is placed at page No. 48 of the paper book and liabilities were taken over by the purchaser. It is important to refer to the agreement made between the parties dated 28th March 2014 placed at paper book page No. 39 to 48 of para No. 3 Transfer , which is as under: 3.1 The Transferee agrees to buy and the Transferor agrees to sell to the Transferee as a going concern all the undertaking and assets owned by the Transferor in connection with the Business carried on by the Transferor as on the Transfer Date including without limiting the generality to the foregoing: a) All Land and Building including leasehold improvements {except land and buildings situated at Benz circle R.S.No. 122 and R.S. No. 120/5 situated at Patamata village, Vijayawada and at D.No. 54-15-5, Srinivas Nagar, Bank Colony, N.H-5, Gundala, Vijayawada), all plant and machinery, furniture fixtures, office equipment, capital work in progress, office vehicles and all other fixed assets. b) All stock of spare parts and supplies relating to the business other than fiat car parts and supplies. c) Debtors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es debited to the P L Account. Accordingly, the assessee produced the same for verification. After having examined the bills and vouchers produced by the assessee, the AO found that the assessee could not furnish bills and vouchers to the extent of . ₹ 12,14,253/-towards administrative and selling expenses claimed in the return of income filed. In view of this, the AO disallowed the same and added back to the total income. 11.1 In this regard, the AO had recorded in the assessment order that during the course of hearing conducted on 08.11.2016, the AR of the assessee agreed for the said disallowance of ₹ 12,14,253/- and the same had been incorporated in the order sheet noting dated 08.11.2016. The relevant portion of the assessment order this regard is reproduced below for ready reference: During the course of scrutiny proceedings assessee was asked to furnish bills and vouchers for administrative and selling expenses. Ca verification of the same it was found that bills . and voucher are not available to the extent of' ₹ 12,14,253/-. Hence an amount of ₹ 12,14,253/- of administrative and selling expenses is disallowed and added back to the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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