TMI Blog2022 (1) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... tarting from financial year 2009 to 2011 which was shown as long term borrowings in the balance sheet of the assessee. Since advance sale consideration received from buyers of the undertaking is not a liability, but consideration received for sale of undertaking, same cannot be considered as liability for computing net worth of undertaking. Similarly, loans from directors as admitted by the learned DR, said liability is continued with the assessee even after sale of undertaking on slump sale basis, because said liability has not been taken over by the buyer. Once liability was not part of sale arrangement for undertaking, then said liability cannot be considered for computing net worth of undertaking. Deferred tax liability - Assessee has rightly not considered deferred tax liability for computing net worth, because it is only notional entry created in the books of account for timing difference in taxes on income, but not liability which can be paid immediately. Therefore, it cannot be considered as liability for ascertaining net worth of undertaking. CIT(A) after considering relevant facts has rightly held that long time borrowing includes advance sale consideration rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80,90,740/-, which includes business loss of ₹ 2,33,381/- and balance amount of ₹ 7,78,57,355/- towards short term capital loss arising out of transfer of an undertaking on slump sale. As per short term capital loss computation filed by the assessee, it was noticed that the assessee has transferred an undertaking on slump sale for a consideration of ₹ 4,80,75,931/- and the cost of transfer of asset claimed is ₹ 12,59,33,286/- and thus, net result being a sum of ₹ 7,78,57,365/- has been declared as short term capital loss. The assessee has filed Form 3CEA from an Accountant as required under law in support of computation of short term capital loss, as per which aggregate value of assets has been considered at ₹ 13,28,34,472/- and as against this aggregative value of liability has been considered at ₹ 69,01,185/-. The difference between aggregate value of assets and aggregate liability has been worked out at ₹ 12,59,33,287/-. The Assessing Officer, during the course of assessment proceedings, called upon the assessee to justify computation of short term capital loss in light of financial statements in terms of provisions of section 50B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion received from buyer of undertaking and also share application money and thus, both cannot be considered as liabilities for purpose of determination of net worth. The assessee also seeks to exclude deferred tax liability on the ground that it is only notional entry created in books of account on taxes payable by the entity/undertaking and thus, it cannot be considered as liability for computing net worth. The learned CIT(A), after considering relevant submissions of the assessee and also taken note of facts brought out by the Assessing Officer deleted additions made by the Assessing Officer towards recomputation of long term capital gain by holding that certain liabilities were not taken over by the buyer and further, major liabilities like long term borrowings and deferred tax liability totaling to ₹ 12,00,76,390/- is not a liability, but consideration received for transfer of undertaking and share application money received pending allotment, which has been subsequently converted into share capital by allotment of equity share capital. Therefore, he opined that the Assessing Officer has erred in recomputing long term capital gain on transfer of undertaking u/s. 50B of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order should be upheld. 7. We have heard both the parties, perused material available on record and gone through orders of the authorities below. There is no dispute with regard to transfer of undertaking for consideration of ₹ 4,80,75,931/- and consideration of aggregate value of assets for purpose of computing net worth of undertaking in terms of provisions of section 50B of the Income Tax Act, 1961. The only dispute is with regard to liabilities considered for computing net worth of undertaking. The assessee has considered liabilities to the extent of ₹ 69,01,185/-, which includes other long term liabilities being sundry creditors and expenses payable, however, not considered long term borrowings being loans from directors and loans advances from related parties. The explanation of the assessee before authorities below was that long term borrowings includes loans and advances from related parties being share application money received pending allotment amounting to ₹ 3,12,55,200/- and sale consideration received for transfer of undertaking from prospective buyer of the undertaking amounting to ₹ 4,80,75,931/-. According to the assessee, share applica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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