TMI Blog2000 (10) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... tinued. (iv) The ld. CIT(A) ought to have allowed the carry forward and set off of unabsorbed losses as claimed by the appellant, and (v) Without prejudice, the disallowances as confirmed by the ld. CIT(A) is excessive and ought to be reduced substantially. 2. Sri Parthasarathi, the ld. counsel for the assessee while reiterating the grounds of appeal submits that the assessee-firm had gone into liquidation, it was slump sale which does not suffer capital gain tax; the consideration paid was for long term capital gain; the provision of section 50B of the income-tax Act were prospective in nature before that corresponding provision of section 40 of the Act were in operation; land price was much higher than the price taken; section 50B of the Act has been introduced for such a situation of slump sale; an advertisement for out right sale was given and tender was called for in response to which maximum offer of Rs. 8.01 crores came forward; since it was a slump sale, no capital gain can be assessed; it was cost and not a sale price; the assets were not being sold in piecemeal but entire set up was sold; the business as a whole was asset, which was in existence for 20 years and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the factory assets was handed over to the said purchaser on 12-4-1996 on the basis of which revenue consequence of the transaction has arisen in the assessment year 1997-98; as per Clause-I of the said agreement, the purchaser agreed to pay for the sugar factory together with all the assets of the factory, movable and immovable which have been mentioned in brief note in Annexures 1 to 6 and in the schedule of machinery enclosed to the agreement makes the liquidator responsible for all the liabilities of the factory up to the date of entry into the factory by the purchaser; Clause-14 provides that while it was agreed to transfer the entire assets of the factory, the deposits made by the assessee with banks, Karnataka Electricity Board and the Water and domestic gas authorities and investment in the shares of the BDCC Bank, Bellary may be retained by the erstwhile factory and a discussion shall be held on this subject between the liquidator and the purchaser for an amicable settlement; thus the price of Rs. 8.01 crores did not include the price of these deposits and investment, the transfer thereof would be settled separately. 5. The reliefs claimed by the assessee are based on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s excluding investment and deposits was sold and the liabilities remained with the assessee. In the cited cases of the Supreme Court, the sale of business as a running concern had involved both assets and liabilities. We agree with the view of the CIT(A) that in a case of slump sale of running business, there is always been a difficulty in applying the provision of section 41(2) as well as those of capital gains in respect of depreciable assets, it is because in such cases of sale of assets with liabilities, to determine precisely what asset was sold and what consideration was attributable to that asset posed a moot point and when the business is sold as a running concern what possess on is the assets tagged with liabilities i.e., the net worth. This net worth is the benefit comprising the excess of assets over the liabilities which may or may not be a positive figure unless the assets are revalued upward. The Legislature has now removed this difficulty by inserting w.e.f. 1-4-2000, section 50B of the Act providing for the levy of capital gains in case of slump sale and also section 2(42C) defining "slump sale". According to the section 2(42C), slump sale means the transfer of one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars as quantified in the assessment year 1996-97 against the assessee's income of this year is concerned, the contention of the assessee that unabsorbed loss and depreciation should have been allowed against the total income including capital gains computed in this year because business as a whole was sold, does not hold water, as business losses cannot be set off against capital gains and deeming capital gain under section 50 of the Act is only regarding the capital gain being short term capital gain and business income is not deemed as capital gains under section 50 of the Act. We agree with the view of the CIT(A) that capital asset as defined under section 2(14) of the Act means property of any kind whether or not connected with business. Thus business assets are also capital assets giving rise to capital gains on their sale under the charging section 45 of the Act which refers to transfer of a capital asset. Prior to 1-4-1988 and also after 1-4-1998 in respect of assets power sector, a component of capital gains arising from the sale of business assets was made business profit by the legal fiction of section 41(2), while section 50 charges the whole amount under the head 'capit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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