ACIT, Cochin V. M/s.Laxmi Starch Ltd, Cochin

ITA 218/COCH/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86428 (ITAT-COCHIN)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2015
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 11-12-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 13-05-2014
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND CHANDRA POOJ ARI, AM I.T.A. NO.195/COCH/2014 ASSESSMENT YEAR : 2004-05 M/S. LAXMI STARCH LTD., REP. BY OFFICIAL LIQUIDATOR (HIGH COURT OF KERALA), COMPANY LAW BHAVAN, THRIKKAKARA, KOCHI-682 021. [PAN: AAACL 3923E] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX,CIRCLE-1(2), KOCHI (ASSESSEE-APPELLANT) (REVENUE-RESPONDENT) I.T.A. NO.218 /COCH/2014 ASSESSMENT YEAR : 2005-06 THE ASSISTANT COMMISSIONER OF INCOME-TAX,CIRCLE-1(2), KOCHI VS. M/S. LAXMI STARCH LTD., REP. BY OFFICIAL LIQUIDATOR (HIGH COURT OF KERALA), COMPANY LAW BHAVAN, THRIKKAKARA, KOCHI-682 021. (REVENUE-APPELLANT) (ASSESSEE-RESPONDENT) REVENUE BY SHRI K.K. JOHN, SR. DR ASSESSEE BY SHRI VASUDEV RAJKUMAR N., CA DATE OF HEARING 11/12/2014 DATE OF PRONOUNCEMENT 06/03/2015 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE APPEALS FILED BY THE ASSESSEE AND THE REVENU E ARE DIRECTED AGAINST THE DIFFERENT ORDERS PASSED BY THE CIT(A)-II, KOCHI , FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 . I.T.A. NOS.195&218/COCH/2014 2 2. THE ASSESSEE IS IN APPEAL BEFORE US FOR ASSESSME NT YEAR 2004-05 WITH REGARD TO TREATING OF THE SALE OF PROPERTIES AT KUN DARA UNIT AND HYDERABAD UNIT AS SLUMP SALE AS DEFINED U/S. 2(42C) OF THE I.T. ACT, THOUGH THEY WERE SOLD IN DIFFERENT LOTS AND NOT ON LUMPSUM BASIS. THE REVE NUE IS IN APPEAL BEFORE US FOR ASSESSMENT YEAR 2005-06 WITH REGARD TO DELETION OF THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT OF SALE OF PROPERTY AT KUNDARA UNIT AND HYDERABAD UNIT AS SLUMP SALE AS DEFINED U/S. 2(42C) OF THE I.T. AC T. 3. SINCE THE ISSUE IS COMMON IN BOTH THE APPEALS, W E SHALL CONSIDER THE FACTS AS NARRATED BY THE CIT(A) IN THE ASSESSEE APPEAL IN I.T.A. NO. 195/COCH/2014 FOR THE ASSESSMENT YEAR 2004-05. THE ASSESSEE IS A DEFU NCT COMPANY AND IS IN LIQUIDATION. THE COMPANY WAS REPRESENTED BY THE OF FICIAL LIQUIDATOR, HIGH COURT OF KERALA. THE ASSESSMENT U/S. 143(3) R.W.S.147 WAS C OMPLETED ON 27/12/2006. THE CIT SET ASIDE THE ORDER AND DIRECTED THE ASSESS ING OFFICER TO REDO THE ASSESSMENT AS PER LAW BRINGING TO TAX THE CAPITAL G AIN. AS PER THE DIRECTION OF THE CIT, KOCHI, THE ASSESSMENT WAS COMPLETED U/S. 143(3 ) R.W.S. 263 ON 29/12/2008. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT AT A TOTAL INCOME OF RS.7,48,63,151/- BY ADDING INCOME FROM LONG TERM CA PITAL GAIN AT RS.7,48,00,321/- IN RESPECT OF SALE OF KUNDARA UNIT VIDE COURT ORDER DATED 22-07-2003 AND THAT OF HYDERABAD UNIT VIDE COURT ORDER DATED 23-05-2005 AN D THE SALE CONSIDERATION RECEIVED FOR THE KUNDARA UNIT WAS RS.3,25,00,321/- AND FOR THE HYDERABAD UNIT WAS RS.4,23,00,000/-. I.T.A. NOS.195&218/COCH/2014 3 3.1 THE ASSESSING OFFICER HAS MADE THIS ADDITION AS IT WAS FOUND THAT THE HIGH COURT OF KERALA VIDE ITS ORDER DATED 22/07/2003 AND 23/05/2003 HAS CONFIRMED THE ORDER OF SALE OF THESE CONCERNS. ACCORDINGLY THE A SSESSING OFFICER WENT INTO THE DETAILS OF THE SALE CONSIDERATION OF THESE CONCERNS AND ADDITION OF RS.7,48,00,321/- WAS MADE BY OBSERVING THAT DURING THE FINANCIAL YEA R RELEVANT TO THE ASSESSMENT YEAR 2004-05 THE ASSETS OF THE ASSESSEE COMPANY WAS SOLD BY THE OFFICIAL LIQUIDATOR AS PER THE ORDERS OF THE HIGH COURT OF K ERALA. THE DETAILS OF THE ASSETS ARE AS UNDER: I) LANDED PROPERTY EXTENDING 24.53 ACRES SITUATED AT PERINAD VILLAGE IN KUNDARA WITH ALL BUILDINGS THEREON; PLANT AND MACH INERIES LYING IN THE KUNDARA UNIT OF THE COMPANY. II) LANDED PROPERTY KNOWN AS COLONY LAND EXTENDING ABOUT 1 ACRE 80 CENTS SITUATED AT H.M.T. JUNCTION, HABSIGUDA IN RANGA RE DDY DISTRICT, HYDERABAD TOGETHER WITH ALL BUILDINGS AND FURNITURE THEREIN . 3.2 THE SALE OF THE KUNDARA UNIT WAS CONFIRMED BY T HE COURT VIDE ORDER DATED 22/07/2003 AND THAT OF HYDERABAD UNIT WAS CONFIRMED BY THE COURT VIDE ORDER DATED 23/05/2003, THE SALE CONSIDERATION RECEIVED F OR THE KUNDARA UNIT WAS RS.3,25,00,321/- AND FOR THE HYDERABAD UNIT WAS RS. 4,23,00,000/-. THE OFFICIAL LIQUIDATOR VIDE LETTER DATED 07/11/2007 HAVE FURNIS HED THE DETAILS OF BOOK VALUE OF THE ASSETS AND THE LIABILITIES AS ON DATE OF THE SA LE AS UNDER: I.T.A. NOS.195&218/COCH/2014 4 VALUE OF ASSETS KUNDARA UNIT RS.6,58,9 3.251 COLONY LAND RS.3,13,00.0 00 LIABILITIES I) DENA BANK RS.48,39 ,57,050 II) INDIAN BANK RS.27,2 2,65,337 III)WORKMEN RS. 3,6 6,29,740 3.3 THE ASSESSEE HAS FURNISHED THE AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT WITH THE INCOME TAX DEPARTMENT UP TO THE AS SESSMENT YEAR 1998-99 AND THEREAFTER, THE ACCOUNTS WERE NOT FURNISHED WITH TH E DEPARTMENT. AS PER THE AUDITED ACCOUNTS OF THE FINANCIAL YEAR 1997-98 THE DETAILS OF VALUE OF ASSETS AND THE LIABILITIES ARE AS UNDER: I) FIXED ASSETS AFTER DEPRECIATION AS PER BOOKS 962.31 LAKHS (AFTER REVALUATION IT IS INCREASED TO 1948.85 LA KHS) II) INVESTMENT 0.23 LAKHS III)LOAN LIABILITY 2609.25 LAKHS IV)NET OF CURRENT ASSETS(LIABILITY) (511.98 LAKHS) 3.4. ACCORDING TO THE ASSESSING OFFICER, AS PER SEC TION 50B(1) ANY PROFITS OR GAINS ARISING FROM THE SLUMP SALE EFFECTED IN THE P REVIOUS YEAR SHALL BE CHARGEABLE TO INCOME TAX AS CAPITAL GAIN ARISING FROM THE TRAN SFER OF LONG TERM CAPITAL ASSETS AND SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOU S YEAR IN WHICH THE TRANSFER TOOK PLACE AND ACCORDINGLY, HE DETERMINED THE LONG TERM CAPITAL GAIN AT RS.7,48,00,321/-. I.T.A. NOS.195&218/COCH/2014 5 4. BEFORE THE CIT(A), THE ASSESSEE OBJECTED TO THE WAY OF COMPUTING THE INCOME BY TREATING THE SALE AS SLUMP SALE AND SUBMI TTED THAT THE SALE OF PROPERTIES AT KUNDARA WAS MADE AS PER SALE DEED DATED 15/03/20 05 WHICH CANNOT BE TAXED IN THE ASSESSMENT YEAR 2004-05 AND THE POSSESSION W AS HANDED OVER TO THE PURCHASER THEREAFTER. ACCORDING TO THE ASSESSEE, TH E EXECUTION OF WRITTEN AGREEMENT AND HANDING OVER THE POSSESSION HAVE TO B E CUMULATIVELY SATISFIED IN ORDER TO BRING THE CASE WITHIN THE AMBIT OF SECTION 2(47)(V) OF THE I.T. ACT R.W.S. 53A OF THE TRANSFER OF PROPERTY ACT. THEREFORE, IT IS TO BE HELD THAT THE PROPERTY HAS NOT BEEN TRANSFERRED DURING THE ASSESSMENT YEAR 2004-05. SINCE THE TRANSACTION OF TRANSFER/SALE HAS NOT TAKEN PLACE IN THIS ASSESSMENT YEAR, THE PROCEEDS OF THE SAME CANNOT BE BROUGHT TO TAX DURIN G THIS ASSESSMENT YEAR. THE ASSESSEE RELIED ON THE FOLLOWING CASE LAW: 1). CIT VS. DELHI APARTMENT P. LTD. (2013) 352 ITR 322 (DEL.) 2) CIT VS. ARTEX MANUFACTURING CO. (227 ITR 260) ( SC). 3) CIT VS. ACCELERATED FREEZE DRYING COMPANY LTD. (2011) 337 ITR 440) (KER.) 4) JAYANTILAL BHOGILAL DESAI VS. CIT (1981) (130 I TR 655) (GUJ.). 5) WIEKFIELD PRODUCTS CO. (I) (P) LTD. VS. DY.CIT (2001) 71 TTJ (PUNE) 518. 6) SURAJ LAMPS AND INDUSTRIES P. LTD. VS. STATE OF HARYANA & ANR. (2012) 340 ITR1 (SC). 7) AVAYA GLOBAL CONNECT LTD. VS. ACIT (2009) 122 T TJ 300 (MUM. TRIB.). 8) SADANAND S. VARDE VS. STATE OF MAHARASHTRA (200 1) 247 ITR 609 (BOM.). 7) KTC TYRES (INDIA) LTD. VS. CIT (2003) 180 CTR 5 7 (KER.) 5. ACCORDING TO THE CIT(A), THE WORD SLUMP SALE MEA NS THE TRANSFER OF ONE OR MORE UNDERTAKINGS AS A RESULT OF THE SALE FOR A LUM PSUM CONSIDERATION WITHOUT VALUES BEING ASSIGNED TO THE INDIVIDUAL ASSETS AND LIABILITIES IN SUCH SALES. IN THIS I.T.A. NOS.195&218/COCH/2014 6 CASE, THE COMPANY WAS ORDERED TO BE WOUND UP BY THE ORDER OF THE HIGH COURT DATED 08-06-1999 AND THE OFFICIAL LIQUIDATOR WAS AP POINTED WITH DIRECTION TO TAKE CHARGE OF THE ASSETS, EFFECTS AND RECORDS OF THE CO MPANY. ACCORDINGLY, THE OFFICIAL LIQUIDATOR HAS TAKEN CUSTODY OF THE MOVABLE AND IMM OVABLE ASSETS OF THE COMPANY LYING AT KUNDARA UNIT AND HYDERABAD UNIT. DURING THE COURSE OF THE WINDING UP OF THE PROCEEDING, THE OFFICIAL LIQUIDAT OR DISPOSED OF ALL IMMOVABLE AND MOVABLE ASSETS OF THE COMPANY. 5.1. THE CIT(A) OBSERVED THAT FOR THE KUNDARA UNIT, VIDE HIGH COURT ORDER DATED 22-07-2003, THIS PROPERTY WAS SOLD BY WAY OF TENDER CONDUCTED BY OFFICIAL LIQUIDATOR. SUBSEQUENTLY, THE HIGH COURT ORDERED T HAT THE WHOLE UNIT BE TRANSFERRED TO SHRI A. ABDUL SALAM FOR A CONSIDERAT ION OF RS.3,25,00,321/- WHOSE BID WAS ACCOMPANIED BY EARNEST MONEY OF RS. 40 LAKH S. FOR THE PURCHASE OF ENTIRE ASSETS OF THIS UNIT, THE HIGH COURT SEGREGAT ED THE ASSETS AS UNDER: LOT NO. 1 - LAND AND BUILDINGS LOT NO. 2 TO 17 - MOVABLE ASSETS LOT NO.18 - ALL THE ASSETS DESCRI BED IN LOT NO. 1 TO 17 5.2 THE CIT(A) NOTICED THAT SHRI ABDUL SALAM WAS OF FERED THE HIGHEST PRICE FOR LOT NO. 18 AND THIS UNIT WAS SOLD WITH ALL THE ASSE TS INCLUDING LAND AND BUILDINGS AND MOVABLE ASSETS OF THE UNIT AS LOT NO. 18 AND IN CLUDED ALL THE ASSETS INCLUDED IN LOT NO. 1 TO 17. THUS, ACCORDING TO THE CIT(A) , THE ASSESSEES CONTENTION THAT I.T.A. NOS.195&218/COCH/2014 7 THE PROPERTY WAS SOLD IN DIFFERENT LOTS WAS NOT COR RECT AS BY WAY OF BID/TENDER, THE HIGHEST BID WAS GIVEN FOR ALL THE ASSETS AND THEREF ORE THIS WOULD CONSTITUTE SLUMP SALE IN THE HANDS OF THE ASSESSEE. 5.3 THE CIT(A) OBSERVED THAT THE ASSESSEE HAS CLAIM ED THAT ALTHOUGH THE ORDER OF THE COURT WAS DATED 22-07-2003 BUT THE SALE DEED OF PROPERTY WAS AFFECTED ON 15-03-2005 AND HENCE, THIS PROPERTY SHOULD BE ASSES SABLE IN THE ASSESSMENT YEAR 2005-06. IN THIS REGARD, THE ASSESSEE FURNISHED CE RTIFICATE OF THE OFFICIAL LIQUIDATOR WHICH SHOWED THAT THE SALE CONSIDERATION OF RS.3,25,00,321/- WAS REMITTED ON DIFFERENT DATES AS FOLLOWS: DATE OF PAYMENT MODE OF PAYMENT AMOUNT (RS.) 18/07/2003 BY DD 40,00,000 02/09/2003 BY DD 50,00,000 29/09/2003 BY DD 20,00,000 12/11/2003 BY DD 55,00,000 30/08/2004 BY DD 1,60,00,321 3,25,00.321 5.4 THE CIT(A) NOTICED FROM THIS CERTIFICATE THA T VARIOUS PAYMENTS HAD BEEN MADE BETWEEN 18/07/2003 TO 30/08/2004 AND THESE PAY MENTS DO NOT HAVE A SPECIFIC BIFURCATION OF LAND AND BUILDING OF RS.2 L AKHS OR OF THE MOVABLE ASSETS FOR RS.15 LAKHS, BUT RATHER THESE PAYMENTS HAVE BEEN MA DE IN A WAY THAT THE WHOLE KUNDARA UNIT HAS BEEN TAKEN OVER BY SHRI A. ABDUL S ALAM FOR A CONSIDERATION OF RS.3,25,00,321/-. HENCE, THE CIT(A) HELD THAT THE ASSESSEES CLAIM THAT THIS UNIT I.T.A. NOS.195&218/COCH/2014 8 WAS SOLD IN DIFFERENT LOTS WAS NOT CORRECT IN VIEW OF CONSOLIDATED PAYMENTS MADE FOR THE WHOLE CONCERN. 5.5 THE CIT(A) OBSERVED THAT THE ASSESSEES CON TENTION THAT THIS TRANSACTION SHOULD BE ASSESSED IN THE ASSESSMENT YEAR 2005-06 W AS ALSO NOT CORRECT AS IN THIS CASE THE SALE OF THE PROPERTY WAS CONCLUDED BY THE ORDER OF THE HIGH COURT DATED 08/06/1999 WHEREIN INITIALLY THE COMPANY WAS ORDERE D TO BE WINDED UP BY ORDER DATED 08/06/1999, THEREAFTER FOR THE SALE OF KUNDAR A UNIT, THE HIGH COURT CONFIRMED THE OFFER OF RS.3,25,00,321/- VIDE ORDER DATED 22/07/2003. THUS, ACCORDING TO THE CIT(A) EVEN THOUGH THE SALE DEED W AS MADE ON 15 TH MARCH, 2005, THE SALE WAS CONFIRMED BY ORDER OF THE HIGH C OURT IN JULY, 2003 AND THE PAYMENTS AGAINST THIS OFFER WERE MADE FROM JULY, 2 003 TO AUGUST, 2004. ACCORDINGLY, THE CIT(A) HELD THAT THE ASSESSING OFF ICER WAS RIGHT IN ASSESSING THIS PROPERTY IN THE ASSESSMENT YEAR 2004-05. 5.6. ACCORDING TO THE CIT(A), THE ASSESSEE HAS A LSO OBJECTED TO THIS TRANSACTION BEING CONSIDERED AS SLUMP SALE AS THE ASSESSEE HAS NOT TRANSFERRED THE LIABILITIES OF THE CONCERN AND THAT ONLY MOVABLE AND IMMOVABLE ASS ETS WERE TRANSFERRED AS A GOING CONCERN. THE CIT(A) RELIED ON THE FOLLOWING CASE LAW : 1) PREMIER AUTOMOBILES LTD. VS. ITO & ANR. 264 ITR 193 (BOM) II) CIT VS. MAX INDIA LTD. (319 ITR 68) (P&H) I.T.A. NOS.195&218/COCH/2014 9 5.7 THE CIT(A) OBSERVED THAT IN PREMIER AUTOMOBILES LTD. (CITED SUPRA), IT HAS BEEN HELD THAT IN THE CASE OF A SALE OF AN UNDERTAK ING AS A WHOLE, ON A GOING CONCERN BASIS, IF SOME ASSETS ARE RETAINED BY THE T RANSFEROR OR SOME LIABILITIES ARE NOT TAKEN OVER BY THE TRANSFEREE THIS FACT DOES NOT RENDER THE SLUMP SALE AS NOT A SLUMP SALE. ACCORDING TO THE CIT(A), THE WORD SLUM P SALE AS DEFINED IN SEC. 2(42C) MEANS TRANSFER OF ONE OR MORE UNDERTAKINGS AS A RESULT OF THE SALE FOR A LUMP SUM CONSIDERATION WITHOUT VALUES BEING ASSIGNE D TO ANY ASSETS AND LIABILITIES. THUS IN VIEW OF THE FOREGOING CASE LAW, THE CIT(A) HELD THAT EVEN THOUGH THE ASSESSEE HAS NOT SOLD THIS CONCERN ALONG WITH LIABI LITIES THE SAME CAN STILL BE CONSIDERED AS SLUMP SALE AND THEREFORE THE ASSESSIN G OFFICER WAS CORRECT IN ASSESSING THIS PROPERTY IN ASSESSMENT YEAR 2004-05 AS A SLUMP SALE IN THE HANDS OF THE ASSESSEE. THE ADDITION MADE BY THE ASSESSING OFFICER AT RS.3,25,00,321 WAS CONFIRMED IN THE A.Y. 2004-05. 5.8 REGARDING THE HYDERABAD UNIT, IN THIS CASE ALSO , THE SALE WAS AFFECTED DUE TO THE ORDER PASSED BY THE HIGH COURT ON 23/05/2003 FOR A CONFIRMED SALE CONSIDERATION OF RS.4,23,00,000/-. 5.9 ACCORDING TO THE CIT(A), IN THIS CASE, THE ASSE SSEE CONTENDED THAT THIS PROPERTY AND STRUCTURE WAS SOLD IN DIFFERENT SLOTS AND THEREFORE IT CANNOT BE CONSIDERED AS SLUMP SALE. HOWEVER, THE CIT(A) FOUN D FROM THE SALE DEED AND THE ORDER OF THE HIGH COURT THAT THE HIGH COURT ORDERED AND CONCLUDED THE SALE OF THE I.T.A. NOS.195&218/COCH/2014 10 PROPERTY BY WAY OF TENDER CONDUCTED BY THE OFFICIAL LIQUIDATOR ON 28/02/2003 AND ALTHOUGH THERE WERE DIFFERENT LOTS CATEGORIZED THE TOTAL SALE CONSIDERATION WAS RS.4,23,00,000/- FOR LOT NO. 1 IN FAVOUR OF K. SATH YANARAYANA & ASSOCIATES. ACCORDING TO THE CIT(A), THE VARIOUS AMOUNTS TOWARD S SALE CONSIDERATION THAT HAVE BEEN PAID BY THE ASSESSEE WERE CONSOLIDATED SUM OF RS.4,23,00,000/- PAID AS BELOW: DATE OF PAYMENT AMOUNT 27.02.2003 RS . 5,00,000 07.07.2003 RS .85,00,000 08.08.2003 RS .18,00,000 16.09.2003 RS .27,00,000 16.10.2003 RS .72,00,000 17.11.2003 RS .36,00,000 18.12.2003 RS. 45,00,000 19.01.2004 RS.1 ,35,00,000 RS.4,23,00,000 FROM THE DATES ON WHICH VARIOUS SALE CONSIDERATIONS HAVE BEEN DEPOSITED WITH THE OFFICIAL LIQUIDATOR AND ALSO IN VIEW OF THE CONSOLI DATED CONFIRMATION ORDER OF THE HONBLE HIGH COURT DATED 23/05/2003, THE CIT(A) HEL D THAT THIS TRANSACTION WOULD BE ASSESSABLE IN THE ASSESSMENT YEAR 2004-05 AS WAS DONE BY THE ASSESSING OFFICER. 5.10 ALTHOUGH THE ASSESSEE CONTENDED THAT SINCE T WO SALE DEEDS ONE FOR RS.1,75,50,000/- IN THE NAME OF CREATIVE HOMES PVT. LTD AND ANOTHER FOR RS.2,47,50,000/- IN FAVOUR OF M/S. UDAYA HOMES WERE SIGNED THEREFORE THESE ARE I.T.A. NOS.195&218/COCH/2014 11 TWO SEPARATE SALE CONSIDERATIONS AND HENCE CANNOT B E TREATED AS CONSOLIDATED SLUMP SALE, THE CIT(A) FOUND THAT THE ORDER OF THE HIGH COURT FOR SALE OF HYDERABAD UNIT WAS A CONSOLIDATED ORDER OF THE HIGH COURT AND IT WAS ONLY ON THE REQUEST OF THE BIDDER AFTER DEPOSITING THE COMPLETE SALE CONSIDERATION OF RS. 4.23 CRORES THAT HE REQUESTED THE OFFICIAL LIQUIDATOR VI DE LETTER DATED 19-01-2004 TO REGISTER TWO SALE DEEDS IN FAVOUR OF THEIR NOMINEE WHICH WAS APPROVED BY THE HIGH COURT VIDE ORDER DATED 23-05-2003. HOWEVER, T HE CIT(A) OBSERVED THAT THE OFFER OF BID WAS FOR CONSOLIDATED AMOUNT OF RS.4.23 CRORES AND THEREFORE, THE TRANSACTIONS HAVE TO BE TREATED AS CONSOLIDATED TRA NSACTION AND THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY TREATED THIS AS A SLU MP SALE IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, THE CIT(A) CONFIRMED THE ADD ITION OF RS.3,25,00,321/- RELATING TO KUNDARA PROPERTY AND THAT OF RS.4,23,00 ,000/- RELATING TO HYDERABAD UNIT TOTALING TO RS.7,48,00,321/-. 5.11 AGAINST THIS, FOR THE ASSESSMENT YEAR 2004-05, THE ASSESSEE IS IN APPEAL BEFORE US. HOWEVER, FOR THE ASSESSMENT YEAR 2005-0 6, THE CIT(A) HAS DELETED THE ABOVE ADDITION MADE BY THE ASSESSING OFFICER, SINCE THIS WAS SUSTAINED BY HIM FOR THE ASSESSMENT YEAR 2004-05. AGAINST THIS, THE REV ENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD AND GONE THROUGH THE ORDER OF THE LOWER AUTHORITIES AS WELL AS VARIO US JUDGMENTS CITED BY THE PARTIES. THE FACTS IN A NUTSHELL ARE THAT THE ASSE SSEE SOLD THE KUNDARA UNIT IN I.T.A. NOS.195&218/COCH/2014 12 ACCORDANCE WITH THE KERALA HIGH COURT ORDER DATED 2 2-07-2003. AS PER THE HIGH COURT ORDER, THE ASSET BELONGED TO THE ASSESSEE IN LIQUIDATION. FOR THE PURCHASE OF ENTIRE ASSETS OF THIS UNIT, THE HIGH COURT SEGREGAT ED THE ASSETS AS UNDER: LOT NO. 1 - LAND AND BUILDINGS LOT NO. 2 TO 17 - MOVABLE ASSETS LOT NO.18 -ALL THE ASSETS DESCRIBE D IN LOT NO. 1 TO 17 7. THE ABOVE ASSETS WERE SOLD TO ONE SHRI ABDUL SAL AM WHO HAS BEEN OFFERED THE HIGHEST BID IN LOT NO. 18 FOR WHICH THE SALE DE ED WAS ENTERED INTO ON 15 TH MARCH, 2005 FOR A CONSIDERATION OF RS.2,50,00,000/- AND THE CONSIDERATION WAS BIFURCATED AS RS.2 CRORES FOR THE PROPERTY (LAND) A ND RS. 50 LAKHS FOR STRUCTURES THEREIN. CLAUSE 1 OF THE SALE DEED STATES THAT THE ASSESSEE TRANSFERRED TO THE PURCHASER ALL THAT PIECE AND PARCELS OF LAND MENTIO NED AND FULLY DESCRIBED IN THE SCHEDULE. CLAUSE 3 OF THE SALE DEED STATES THAT TH E LIABILITIES OF THE COMPANY IN LIQUIDATION CHARGED OR OTHERWISE OVER SCHEDULED PRO PERTIES, IF FOUND WILL BE DISCHARGED BY THE OFFICIAL LIQUIDATOR IN ACCORDANCE WITH THE PROVISIONS OF THE COMPANIES ACT. CLAUSE 4 OF THE SALE DEED STATES TH AT THE ASSESSEE HAS DELIVERED VACANT POSSESSION OF THE PROPERTY TO THE PURCHASER AND THE PURCHASER MAY THEREFORE PEACEABLY AND QUIETLY POSSESS AND ENJOY T HE SAID PROPERTY WITHOUT ANY SORT OF LET, HINDRANCE CLAIM OR DEMAND, INTERRUPTIO N OR DISTURBANCE EITHER FROM THE ASSESSEE OR ANY PERSON CLAIMING THROUGH OR UNDER TH E ASSESSEE OR IN TRUST FOR IT. THE CONTENTION OF THE ASSESSEE IS THAT THE ABOVE SA LE OF THE ASSET CANNOT BE I.T.A. NOS.195&218/COCH/2014 13 CONSTITUTED AS SLUMP SALE AND THERE WAS NO SALE OF BUSINESS AS A WHOLE. ACCORDING TO SECTION 2(42C), SLUMP SALE MEANS THE TRANSFER OF ONE OR MORE UNDERTAKINGS FOR A LUMPSUM CONSIDERATION WITHOUT VALUES BEING ASSIGN ED TO THE INDIVIDUAL ASSETS AND LIABILITIES. AND WHAT SECTION 50B MAKES CHARGE ABLE TO CAPITAL GAINS, IS THE DIFFERENCE BETWEEN SLUMP PRICE AND THE NET WORTH OF THE UNDERTAKING WITHOUT GIVING THE BENEFIT OF INDEXATION AND THE NET WORTH FOR THIS PURPOSE IS DEFINED AS THE SUM TOTAL OF PAID UP CAPITAL AND FREE RESERVES BY IMPORTING THE DEFINITION OF SECTION 3(1)(G) OF THE SICK INDUSTRIAL COMPANIES (S PECIAL PROVISIONS) ACT, 1985. WE ARE OF THE OPINION THAT IN ORDER TO APPLY THE PR OVISIONS OF SECTION 2(42C) IN THE ASSESSEES CASE, THERE SHOULD BE SALE OF BUSINESS A S A RUNNING CONCERN, I.E., THE SALE OF BUSINESS AS A WHOLE COMPRISING OF ASSETS AS WELL AS LIABILITIES WHICH IS NOT THE CASE OF THE ASSESSEE HEREIN. A READING OF THE AGREEMENT DATED 15 TH MARCH, 2005 WHICH IS PLACED ON RECORD IN PG. NOS. 17 TO 27 OF THE PAPER BOOK REVEALS THAT THE ASSESSEE DID NOT ENTER INTO THIS TRANSACTION AN D WHAT IS SOLD IS THE PROPERTY AS PER SCHEDULE SITUATED AT SY. NO. 622, 9 HECTARES, 5 1 ARES AND 25 SQ. M. IN KOLLAM DISTRICT, KOLLAM TALUK, KUNDARA SUB-DISTRICT, PERIN AD VILLAGE. IT IS ALSO CLEAR THAT THE LIQUIDATOR WILL BE RESPONSIBLE FOR ACQUIRING O F LIABILITIES. THUS, IT WAS NOT A SLUMP SALE, RATHER ONLY THE LAND AND BUILDING WERE SOLD OUT AND THE LIABILITIES REMAINED WITH THE ASSESSEE. AS PER THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CIT VS. ARTEX MANUFACTURING CO. (227 ITR 26 0), THE SALE OF BUSINESS AS A RUNNING CONCERN INVOLVING BOTH THE ASSETS AND THE L IABILITIES, SHALL BE TREATED AS SLUMP SALE. BEING SO, THERE WAS NO SLUMP SALE IN T HIS CASE, HENCE, FROM THE I.T.A. NOS.195&218/COCH/2014 14 IMPUGNED SALE DEED DATED 15 TH MARCH, 2005 AND AFORESAID AGREEMENT, THE CONSIDERATION ATTRIBUTABLE TO LAND AND STRUCTURES T HEREIN CAN EASILY BE FOUND OUT AND SECTION 50(2) IS TO BE APPLIED. THUS, IT IS ON LY LAND WHICH IS NOT A DEPRECIABLE ASSET AND THE CONSIDERATION ATTRIBUTABLE TO LAND WI LL GIVE RISE TO LONG TERM CAPITAL GAINS U/S. 45 OF THE I.T. ACT. THE CONSIDERATION A TTRIBUTABLE TO THE DEPRECIABLE ASSET WILL GIVE RISE TO DEEMED CAPITAL GAINS IN TER MS OF SECTIONS 50 AND 50A OF THE I.T. ACT. THE ASSESSING OFFICER IS REQUIRED TO RECO MPUTE THE CAPITAL GAIN OF THIS TRANSACTION. 8. NOW COMING TO THE HYDERABAD UNIT SOLD BY THE ASS ESSEE, THERE WERE TWO SALE DEEDS ONE FOR RS.1,75,50,000/- IN THE NAME OF CREATIVE HOMES PVT. LTD AND ANOTHER FOR RS.2,47,50,000/- IN FAVOUR OF M/S. UDAY A HOMES AS PER SCHEDULE OF PROPERTIES REFERRED IN PGS. 36 AND 37 OF THE PAPER BOOK WHICH WAS CONSEQUENT TO THE HIGH COURT ORDER DATED 08/06/1999 IN C.P. NO. 3 4/1998. THE TOTAL CONSIDERATION RECEIVED BY THE ASSESSEE WAS RS.4,23, 00,000/- WHICH WAS ATTRIBUTABLE TO THE SALE OF ASSESSEES LAND AND BUI LDING ONLY AND THE LIABILITIES WERE NOT INCLUDED SO AS TO TREAT THE SALE AS SLUMP SALE U/S. 2(42C) OF THE I.T. ACT. AS DISCUSSED IN THE CASE OF KUNDARA UNIT, WE DIRECT TH E ASSESSING OFFICER TO COMPUTE THE CAPITAL GAIN ON THIS UNIT ALSO ACCORDINGLY. 9. REGARDING ASSESSMENT FOR ASSESSMENT YEAR 2004-05 , THE LD. AR SUBMITTED THAT THE SALE TRANSACTIONS TOOK PLACE AS BELOW: I.T.A. NOS.195&218/COCH/2014 15 1. HYDERABAD UNIT AS PER SALE DEED DATED 12 /04/2004 FOR RS.1,75,50,000/-. 2. HYDERABAD UNIT AS PER SALE DEED DATED 18 /04/2004 FOR RS.2,47,50.000/- RS.4,23,00,0 00/- 3. KUNDARA UNIT AS PER SALE DEED DATED 15/0 3/2005 FOR RS.2,50,00,000/-. ACCORDING TO THE LD. AR, ALL THESE TRANSACTIONS TOO K PLACE IN THE FINANCIAL YEAR 2004- 05, AND THE TAXABILITY ARISES ON THESE TRANSACTIONS IN THE ASSESSMENT YEAR 2005-06 AND THEREFORE, IT CANNOT BE TAXED IN THE ASSESSMENT YEAR 2004-05. 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS IN THIS CASE. THERE WAS ORDER FROM KERALA HIGH COURT DATED 22-07-2003 IN RESPECT OF SALE OF KUNDARA UNIT AND THE ASSESSEE RECEIVED THE CONSIDERATION AS BELOW: DATE OF PAYMENT MODE OF PAYMENT AMOUNT (RS.) 18/07/2003 BY DD 40,00,000 02/09/2003 BY DD 50,00,000 29/09/2003 BY DD 20,00,000 12/11/2003 BY DD 55,00,000 30/08/2004 BY DD 1,60,00,321 3,25,00.321 HOWEVER, THOUGH THE SALE DEED WAS DATED 15-03-2005, THE SALE DEED WAS CONFIRMED BY THE HIGH COURT ON 22-07-2003 AND THE PAYMENT WAS ALSO RECEIVED BETWEEN JULY, 2003 AND AUGUST, 2004. BEING SO, THE CAPITAL GAIN IS TO BE TAXED IN THE ASSESSMENT YEAR 2004-05 ONLY IN RESPECT OF KUNDARA UNIT. I.T.A. NOS.195&218/COCH/2014 16 10.1 REGARDING THE HYDERABAD UNIT, THE HIGH COURT PASSED ORDER DATED 23-05- 2005 FOR A SALE CONSIDERATION OF RS.4,23,00,000/- A ND TWO SALE DEEDS WERE EXECUTED ON 12/04/2004 AND 18/04/2004 AND THE PAYMENT HAS BE EN RECEIVED AS BELOW: DATE OF PAYMENT AMOUNT 27.02.2003 RS . 5,00,000 07.07.2003 RS .85,00,000 08.08.2003 RS .18,00,000 16.09.2003 RS .27,00,000 16.10.2003 RS .72,00,000 17.11.2003 RS .36,00,000 18.12.2003 RS .45,00,000 19.01.2004 RS.1, 35,00,000 RS.4,23,00,000 10.2 THE SUBSTANCE IS TO BE SEEN IN THIS CASE AS T HE TRANSFER OF PROPERTY TOOK PLACE IN ASSESSMENT YEAR 2004-05 AND ONLY THE FORMA LITY HAS BEEN COMPLETED VIDE THE ABOVE SALE DEEDS, THOUGH THE SALE WAS COMPLETED AND PAYMENT WAS ALSO RECEIVED AS PER THE COURT ORDER. ACCORDINGLY, THE CAPITAL GAIN ARISING FROM THE HYDERABAD UNIT IS ALSO TO BE TAXED IN THE ASSESSMEN T YEAR 2004-05. WITH THIS OBSERVATION, WE REMIT THE ISSUE RELATING TO ASSESSM ENT YEAR 2004-05 TO THE FILE OF THE ASSESSING OFFICER TO RE-COMPUTE THE CAPITAL GAI N ARISING ON THESE TRANSACTIONS AS DISCUSSED IN THE EARLIER PARA. 11. NOW COMING TO THE ASSESSMENT YEAR 2005-06, SINC E WE HAVE GIVEN DIRECTION TO THE ASSESSING OFFICER TO COMPUTE THE CAPITAL GAI N FOR THE ASSESSMENT YEAR 2004- 05, THE DEPARTMENT CANNOT HAVE ANY GRIEVANCE FOR TH E ASSESSMENT YEAR 2005-06 I.T.A. NOS.195&218/COCH/2014 17 OTHERWISE SUSTAINING THE ADDITION FOR ASSESSMENT YE AR 2005-06 WOULD AMOUNT TO DOUBLE TAXATION. ACCORDINGLY, THE DELETION OF ADDI TION BY THE CIT(A) FOR THE ASSESSMENT YEAR 2005-06 IS CONFIRMED. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IN I.T.A. NO. 195/COCH/2014 FOR THE ASSESSMENT YEAR 2004-05 IS PARTLY ALLOWED F OR STATISTICAL PURPOSES AND THE APPEAL FILED BY THE REVENUE IN I.T.A. NO. 218/COCH/ 2014 FOR THE ASSESSMENT YEAR 2005-06 IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 06-03-2015. SD/- SD/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 06/03/2015 GJ COPY TO: 1. M/S. LAXMI STARCH LTD., REP. BY OFFICIAL LIQUIDA TOR (HIGH COURT OF KERALA), COMPANY LAW BHAVAN, THRIKKAKARA, KOCHI-682 021. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1(2) KOCHI. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN