TMI Blog1995 (2) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... otel building Rs. 15,00,000 (iii) Furniture, borewell, pump, etc. (as per detailed fist) Rs. 2,00,000 In the assessment order passed on 12-3-1987, the ITO took the view that the provisions for taking capital gains, would not apply to a transfer of a business lock, stock and barrel. He stated that the sale of the business as a whole includes sale of the capital assets of the business and the gain arising on such sale attributable to the capital assets, is to be considered as a capital gain. He took into consideration the two decisions of the Supreme Court in the cases of Killick Nixon Co. v. CIT [1967] 66 ITR 714 and CIT v. Mugneeram Bangur Co. (Land Deptt.) [1965] 57 ITR 299 and ultimately came to the conclusion that inasmuch as the business of the assessee had been sold as a going concern, the excess of sale consideration over the cost would be taxable as capital gains only and not as business profit. 2. In his impugned revisionary order under section 263, the CIT considered the aforesaid order of the ITO to be erroneous and prejudicial to the interests of revenue. He found out that the sale price in the instant case had been fixed separately for the building, furniture, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liabilities and all the assets of the business are sold to the transferee. We disagree with the above view taken by CIT and agree with the contention of the assessee that in the instant case, the facts as stated above and the points as raised by the learned counsel for the assessee clearly show that in essence this was a case of transfer of the entire business undertaking of the assessee as a going concern. The want of transfer of some assets and liabilities cannot vitiate the position. The learned counsel for the assessee has thereafter argued that in view of the above position, the ITO's order in charging the entire surplus out of the sale as capital gains was right. He has relied on the following decisions in support of his contention in this regard : (i) Mugneeram Bangur Co. 's case (ii) CIT v. West Coast Chemicals Industries Ltd [1962] 46 ITR 135 (SC) (iii) Artex Mfg. Co. v. CIT [1981] 131 ITR 559 (Guj.). 4. In the case of Mugneeram Bangur Co. (LandDeptt.), the entire business of the assessee was sold as a going concern alongwith its goodwill and all stock-in-trade etc., to a company promoted by the partners of the assessee-firm. The amount of consideration was det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of West Coast Chemicals Industries Ltd, the question to be decided was whether the sale in that case was a realisation sale or a sale in the course of business of chemicals and materials used in the manufacture of matches. It had been found that the sale was only of the type of winding up sale to close down the business although even after the date of sale, the assessee in that case ran the business for quite some time but on behalf of the purchaser. No detailed prices in respect of different items of assets comprised in the sale were fixed in the sale arrangement. The Department merely tried to allocate the sale price amongst the different items in its own way. The Supreme Court held that in view of the sale having been of the nature of a winding up sale and slump price having been fixed, it would not be possible to take into consideration the profits arising out of sale of individual items of assets. It is, therefore, clear that the facts of this case are quite different from those of the present case inasmuch as in the present case, sale arrangement itself has fixed the price for the different items of assets sold. 6. In the case of Artex Mfg. Co. also, the sale was of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness concern may be sold as a going concern and in that way the sale as such can be considered as a slump sale but it is not necessary that there will be a slump price fixed for that sale. If there be arrangement for fixation of itemised prices for the different assets sold, it would be a case of a slump sale of the business without a slump price. The instant case is an example of that type. 9. Finally, we also like to examine the other decision of the Karnataka High Court as cited by the learned DR in the case of Syndicate Bank Ltd v. Addl. CIT [1985] 155 ITR 681. It is found that in that particular case also, it was clearly held by the Karnataka High Court as below : " If there is a transfer of a whole concern and no part of the agreed price is indicated against different and definite items having regard to their valuation on the date of sale, the agreed price cannot be apportioned on capital assets, in specie." It is clear from the above decision that there need not be a slump price in every case of realisation or winding-up sale. Only where a slump price is mentioned for the sale of the entire concern, without apportioning the same in an itemised manner, the case would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for the two depreciable assets viz., building and furniture etc., had clearly been specified and separately mentioned. At page 1 of the said order also, he had mentioned--- " The price is paid item-wise... The sale price is fixed separately for the building, furniture, goodwill etc. and hence the difference between the actual cost of the assets and the WDV should have been assessed as profit under section 41(2). . . ." Ultimately, in the operative portion of his order also, the CIT stated as below : " On a consideration of the facts of the case, it is clear that the assessee has sold depreciable assets like building, furniture, etc. after specifying the cost of each item. The sale also cannot be regarded as having been made for a slump consideration. Therefore, the provisions of sec. 41(2) are clearly attracted." It is found that here, the CIT did not at all mention about the slump sale but simply stated that this was not a case of a slump consideration. We have already seen above that actually, the facts are so. We have also seen above that there may be cases of slump sale of the business concern without there being a slump consideration. The present case falls into suc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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