9911796707
TMI Blog2023 (1) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Income Tax Act, 1961 (herein after the 'Act'), vide order dated 26.12.2016. 2. The only issue in this appeal of assessee is as regards to the revision order of PCIT revising the assessment framed by the AO u/s.143(3) of the Act by directing the AO to treat the negative net worth of Rs.1,83,92,317/- for the purpose of computation of capital gains arising out of slum sale of Medical Ventilator Division of assessee company, as the assessment framed is erroneous and prejudicial to the interest of Revenue. 3. Brief facts are that the assessee company is engaged in the manufacturing of drive instruments panel etc., including medical ventilators. The assessee company filed its return of income on 30.09.2014. Subsequently, the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, the capital gain on the profit of sale to the tune of Rs.1,83,92,317/- should have been taxed. According to PCIT, the AO has framed assessment u/s.143(3) on 26.12.2016 without proper verification of this aspect of negative net worth and hence, the assessment order is erroneous and prejudicial to the interest of Revenue. Accordingly show cause notice was issued. 4. The PCIT noted the above f acts and after discussing various case laws and more particularly the ITAT, Mumbai Special Bench in the case of DCIT vs. Summit Securities Ltd., [2012] 135 ITD 99 (Mumbai) (SB) observed that the amount of net worth will be negative figure of Rs.1,83,92,317/- and the same amount will be chargeable to tax under the head 'capital gains'. For this, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Ventilator Division which has been shown as Exceptional item was filed before the AO during the assessment proceedings. He took us through the assessee's paper-book page 2, wherein Form No.3CEA dated 28.11.2014 is enclosed and the date of slump sale of the undertaking or division referred to in item No.2 i.e., manufacturers of medical ventilators / respirators / accessories is 14.11.2013, which is falling in the FY 2013-14 relevant to this AY 2014-15. The ld.AR stated that amount of consideration received for slump sale is zero and hence, net worth of undertaking or division referred to in item 2 above is a negative net worth i.e., (-)1,83,92,317/-. The ld.AR referred to the following item 6 of Form No.3CEA:- 6 Net worth of the underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low cost Medical Ventilators, Skanray Technologies Private Limited, Mysore took over the Medical Division on a Slump Sale Basis at Zero Value taking over all the assets and liabilities "as is where is" basis as on 14.11.2013. The Assessee, considering cash losses that were being incurred, decided to transfer the Division without any further liability. The total value of the assets of the Division was Rs.17.123 Mn. and the total liability of the Division was Rs.35.516 Mn. The difference of Rs.18.392 Mn. was the gain on Slump Sale of the Medical Ventilator Division which has been shows as exceptional item. With regard to its treatment for the purpose of Income-Tax, the provisions of Section 50B and Section 115JB are applicable. As far as Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th cannot be ignored while working out capital gain but in case, the figure is '0' as in the present case in regard to consideration, the computation of income will fail, which is not the case in the case of Summit Securities Ltd., supra. The ld.AR took us through the para 20 of Summit Securities Ltd., and the relevant part he stated that the resultant amount of capital gain in that case was Rs.300 crores because the consideration was Rs.300 crores on the slump sale which is to be treated as long term capital gains of slump sale i.e., Rs.143 crore + negative net worth of Rs.157 crore. The ld.AR stated that he is arguing the matter on merits and on merits even if negative worth of Rs.1,83,92,317/- will be added to the sale consideration of ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bench, what is the sale consideration, he admitted that it is zero and what is to be deducted from zero i.e.,(-) net worth or negative net worth of Rs.1,82,93,317/- then what will be chargeable to capital gains, he could not answer. Rest of the arguments were on the erroneous order but he could not specify what is prejudice cost to the Revenue because there is no tax liability or capital gain tax liability on the above transaction because net consideration of slump sale is zero. 7. We noted from the above facts which are clear that admittedly the slump sale consideration declared by assessee is '0' i.e., 'nil' and admittedly there is negative net worth because the assessee had incurred loss continuously. The negative net worth is Rs.1,82 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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