BALLARPUR INDUSTRIES LTD, GURGAON V. ADDL. CIT-RANGE-7, Nagpur

ITA 302/NAG/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1642 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 09-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Keywords: Capital asset; Cost of acquisition; Wholly owned subsidiary; Scheme of amalgamation
• Section: 143(3); 2(14)

Judgement Text

1 ITA NO. 302/NAG/2014 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 302 /NAG/2014 ASSESSMENT YEAR :2008 09. BALLARPUR INDUSTRIES LTD., ADDL. COMMISSIONER OF TOWER C FIRST INDIA PLACE, V/S. INCOME TAX, RANGE 7, MEHRAULI GURGAON ROAD, NAGPUR. GURGAON 12200 2. PAN AAACB5343E. APPELLANT. RESPONDENT. APPELLANT BY : SHRI K.P. DEWANI. . RESPONDENT BY : SHRI NARENDRA K ANE. DATE OF HEARING : 09 - 09 - 2015 DATE OF PRONOUNCEMENT : 24 TH SEPT., 2015 O R D E R PER MUKUL K. SHRAWAT, J.M. . THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATING FROM AN ORDER OF LEARNED CIT(APPEALS) II, NAGPUR DATED 31 ST MARCH, 2014. AS PER THE GROUNDS OF APPEAL, THE ONLY LEGAL ISSUE RAISED IS THAT WHETHER THE TRANSACTION IN QUESTION WAS A SLUMP SALE OR A TRANSACTION OF SLUMP EXCHANGE. THIS ISSUE HAS BEEN RAISED IN THE GROUNDS OF APPEAL IN THE FOLLOWING MANNER : 1. THAT THE ADDITION MADE BY THE A.O. AT ` 174.52 CRORES AS LONG TERM CAPITAL GAIN ON TRANSFER OF THREE INDUSTRIAL UNDERTAKING IS UNJUSTIFIED, UNWARRANTED AND BAD IN LAW. 2 ITA NO. 302/NAG/2014 2. THAT THE LD. A.O. ERRED IN HOLDING THAT THE TRANSFER OF THREE INDUSTRIAL UNDERTAKINGS BY ASSE SSEE COMPANY BEING A SLUMP EXCHANGE IS LIABLE TO BE ASSESSED IN TERMS OF PROVISIONS OF SECTION 50B OF INCOME TAX ACT, 1961. 3. THAT THE LD. A.O. ERRED IN HOLDING THAT THE TRANSACTIONS OF TRANSFER OF THREE INDUSTRIAL UNDERTAKINGS ARE IN THE NATURE OF SLUMP SAL E AS AGAINST SLUMP EXCHANGE THEREBY ASSESSING THE LONG TERM CAPITAL GAIN AT ` 174.52 CRORES. 4. THAT THE LD. CIT(APPEALS) ERRED IN UPHOLDING THE ADDITION MADE BY A.O. AT ` 174.52 CRORES AS LONG TERM CAPITAL GAIN BY HOLDING THAT THE TRANSACTION OF TRANSFER OF THREE INDUSTRIAL UNDERTAKINGS IS LIABLE TO BE ASSESSED IN TERMS OF PROVISIONS OF SECTION 50B OF I.T. ACT, 1961. 5. THAT THE LD. CIT(APPEALS) OUGHT TO HAVE DELETED THE ADDITION MADE BY A.O. AT ` 174.52 CRORES AS ASSESSED BY THE A.O. AS LONG TERM CAPITAL GAIN AT THE HANDS OF ASSESSEE. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED UNDER SECTION 143(3) DATED 31 12 2010 WERE THAT THE ASSESSEE COMPANY IS IN THE BUSINESS OF MANUFACTURING OF PAPER ,COATED PAPER, PULP, CAUSTIC SODA AS WELL AS MANUFACTURING OF CHLORINE HYDRAULIC ACID ETC. THE ASSESSEE COMPANY HAD FILED A RETURN OF INCOME FOR ASSESSMENT YEAR 2008 09 AT ` 201,54,80,475/ . FROM THE DOCUMENTS ANNEXED WITH THE RETURN IT WAS NOTICED BY THE ASSESSING OFFICE R THAT THE ASSESSEE COMPANY HAD TRANSFERRED THREE OF ITS UNITS STATED TO BE SITUATED AT 1) BIGHWAN (MAHARASHTRA), 2) BALLARPUR AND 3) KAMALAPURAM (A.P.). THOSE THREE UNITS HAVE BEEN ALLEGEDLY TRANSFERRED TO A SUBSIDIARY OF THIS COMPANY, NAMELY, BILT GRA PHIC PAPER PRODUCTS LTD. (IN SHORT BGPPL) . THE EFFECTIVE DATE OF TRANSFER AS PER THE SCHEME WAS STATED TO BE 1 ST JULY, 2007. THE SAID SCHEME WAS APPROVED BY AN ORDER OF HONBLE HIGH COURT OF BOMBAY, NAGPUR BENCH AS PER THE PROVISIONS 3 ITA NO. 302/NAG/2014 OF SECTION 391 394 OF THE COMPANIES ACT, 1956. THOSE UNITS WERE TRANSFERRED FOR A CONSIDERATION OF ` 1950 CRORES. AS PER THE EXPLANATORY STATEMENT PRESCRIBED UNDER SECTION 393 OF THE COMPANIES ACT, 1956 ANNEXED WITH THE PETITION, IT WAS MENTIONED THAT THE TRANSFER OF THE THREE UNDERTAKINGS HAS BEEN TERMED AS SLUMP EXCHANGE. THE ASSESSEE WAS ASKED TO DESCRIBE THE NATURE OF THE TRANSFER AND THE TAXABILITY OF THE CONSIDERATION RECEIVED IN THE LIGHT OF THE PROVISIONS OF I.T. ACT. 2.1 IN COMPLIANCE THE ASSESSEE HAS FURNISHED THE SCHEME OF ARRANGEMENT AND REORGANIZATION BETWEEN THE ASSESSEE COMPANY I.E. BALLARPUR INDUSTRIES LTD. AND THE TRANSFEREE SUBSIDIARY NAMELY, M/S BGPPL. THE ASSESSEE HAS ALSO FURNISHED TO THE ASSESSING OFFICER THE SANCTION ORDER OF HONBLE HIGH COURT. TH E HONBLE COURT HAD ORDERED THAT ALL THE PROPERTIES AND THE RIGHTS ATTACHED IN RESPECT OF THE SAID THREE UNDERTAKINGS SHALL BE TRANSFERRED FROM THE TRANSFEROR COMPANY TO THE TRANSFEREE COMPANY WITH EFFECT FROM THE APPOINTED DATE I.E. 1 ST JULY, 2007. THE ASSESSEE HAS FURTHER EXPLAINED THAT THE SAID SCHEME ENVISAGES TRANSFER BY WAY OF EXCHANGE AND THEREUPON VESTING OF THE SAID THREE UNITS WITH BGPPL. 2.2 A LEGAL QUESTION HAS BEEN RAISED BEFORE THE ASSESSING OFFICER THAT BECAUSE OF THE REASON THAT THE TRAN SACTION IN QUESTION WAS BY WAY OF SLUMP EXCHANGE, THEREFORE, NOT TAXABLE AS SLUMP SALE AS PER SECTION 50B OF I.T. ACT. IT HAS ALSO BEEN PLEADED BEFORE THE ASSESSING OFFICER THAT THE TRANSACTION IN QUESTION DID NOT FALL UNDER THE CATEGORY OF SECTION 2(4 2C) OF I.T. ACT WHICH DEFINES THE TERM SLUMP SALE THE ASSESSEE HAS EXPLAINED THAT THIS SECTION IS IN RESPECT OF SALE FOR A LUMPSUM CONSIDERATION. SINCE THE TRANSACTION IN QUESTION WAS NOT A SALE BUT AN EXCHANGE, THEREFORE, THE PROVISIONS OF SECTION 2 (42C) WOULD NOT BE ATTRACTED. A 4 ITA NO. 302/NAG/2014 DECISION OF CIT V/S. R.R. RAMAKRISHNAN PILLAI 66 ITR 275 (SC) HAS BEEN CITED FOR THE LEGAL PROPOSITION THAT AN EXCHANGE DOES NOT AMOUNT TO A SALE. AN ANOTHER DECISION OF AVAYA GLOBLE CONNECT V/S. ACIT 26 SOT 397 (MUM.) HAS ALSO BEEN CITED WHEREIN IT WAS HELD THAT THE TRANSFER IN QUESTION WAS UNDER THE SCHEME APPROVED BY THE COURT WAS NOT AS A RESULT OF SLUMP SALE AS DEFINED UNDER SECTION 2(42C) OF I.T. ACT. AS PER THE QUOTED PORTION, DULY REPRODUCED IN THE ASSESSMENT ORDER, THE TRANSFER WAS AS A RESULT OF SCHEME OF AMALGAMATION WHICH WAS APPROVED BY THE HIGH COURT WAS NOT SAID TO BE A SALE OF AN UNDERTAKING. IT WAS HELD THAT SUCH TRANSFER COULD NOT BE SAID TO BE A SALE, HENCE THE PROVISIONS OF SECTION 2(42C) WOULD N OT APPLY AND AS A RESULT, OUT OF THE AMBITS OF THE PROVISIONS OF SECTION 50B OF I.T. ACT. 2.3 THE NEXT ARGUMENT WAS THAT AN UNDERTAKING IS A CAPITAL ASSET AS DEFINED UNDER SECTION 2(14) OF I.T. ACT. THE ARGUMENT WAS THAT AN UNDERTAKING IS A CAPITAL ASSET AND AN UNDERTAKING AS A WHOLE CAN BE SUBJECTED TO CAPITAL GAIN AND NOT THE INDIVIDUAL ASSET OF THE UNDERTAKING. FOR THIS LEGAL PROPOSITION RELIANCE WAS PLACED ON WEST COAST ELECT. V/S. CIT 107 ITR 483 (MAD.), SYNDICATE BANK V/S. CIT 155 ITR 681 (KAR.). 3 . THE ASSESSEE HAS ALSO ARGUED THAT IN THE ABSENCE OF ANY SPECIFIC PROVISION FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN IN CASE OF SLUMP EXCHANGE THE COMPUTATION MECHANISM WOULD FALL. IN THE ABSENCE OF ANY SPECIFIC PROVISION IT WAS PLEADED THAT IT WA S NOT POSSIBLE TO COMPUTE THE CAPITAL GAIN OF SUCH AN UNDERTAKING. RELIANCE WAS PLACED ON SHRINIVAS SHETTY 128 ITR 294 (SC), SYNDICATE BANK OF INDIA 155 ITR 681 (KAR.), CADELL WEAVING MILL CO. P. LTD. 84 TTJ 370 (ITAT, HYDERABAD). 5 ITA NO. 302/NAG/2014 4. IT WAS ALSO CLARIFI ED THAT SUCH TRANSFER WAS NOT EVEN A CASE OF DEMERGER FOR TRANSFER OF ASSETS. IN SUPPORT OF THIS ARGUMENT THE ASSESSEE HAS ALSO REFERRED THE PROVISIONS OF SECTION 45 OF I.T. ACT WHICH SAYS THAT ANY PROFIT ARISING FROM THE TRANSFER OF A CAPITAL ASSET SHA LL BE THE INCOME OF THE ASSESSEE UNDER THE HEAD CAPITAL GAINS. THE ARGUMENT WAS THAT SECTION 45(1) TALKS ABOUT TRANSFER OF CAPITAL ASSET. THE TERM TRANSFER IS DEFINED IN SECTION 2(47) OF I.T. ACT WHICH INCLUDES EXCHANGE. ACCORDING TO THE ARGUMENTS OF THE ASSESSEE SECTION 50B REFERS ONLY SLUMP SALE AND NOT TRANSFER OF CAPITAL ASSETS. THEREFORE, NO PROFIT WAS DERIVED FOR EXCHANGE OF ASSETS BECAUSE SECTION 45 IS APPLICABLE WHEN THE GAIN IS FROM THE TRANSFER OF A CAPITAL ASSET. SINCE IT WAS NOT A SALE, THEREFORE, IN THE ABSENCE OF ANY SALE THERE COULD NOT BE ANY PROFIT UNDER SECTION 45 OF I.T. ACT, PLEADED BEFORE ASSESSING OFFICER. 5. THE ASSESSEE HAS ALSO DISCUSSED THE SCHEME WHICH WAS APPROVED BY THE HONBLE HIGH COURT. IN THE SAID SCHEME AS PER CLAUSE (VII) OF THE EXPLANATORY STATEMENT IT WAS SUGGESTED THAT THE BILT HAS TRANSFERRED THE UNDERTAKING AND THEREUPON THE VESTING OF THE THREE UNDERTAKINGS SHOULD BE IN THE NAME OF THE TRANSFEREE COMPANY I.E. BGPPL BY WAY OF SLUMP EXCHANGE WITH THE SHARES AND DEBENTURES. THE MONITORY LUMPSUM VALUE ASSIGNED WAS AT ` 1950 CRORES IN RESPECT OF THE SAID THREE UNITS AGAINST THE EXCHANGE OF UNITS WITH THE SHARE AND DEBENTURES, WHICH WERE EXCHANGED. THE ASSESSEE COMPANY HAD PRINTED AN ACCOUNT AS ON 31 ST MARCH, 2008 IN THE FOLLOWING MANNER : 6 ITA NO. 302/NAG/2014 RS.LN LACS RS.LN LACS FIXED ASSETS 1,29,460 45 CRORE OF EQUITY 45,000 SHARES OF RS. 10/ - EACH CONSTRUCTION & INSTALLATION IN 15,820 15 CRORE COMPULSORILY 150,000 PROGRESS. CONVERTIBLE DEBENTURE OF RS. 100 EACH. ADVANCE AGAINST CAPITAL 16,455 ASSETS NET CURRENT ASSETS 33,265 1,95,000 1,95,000 5.1 THEREFORE, THE EXPLANATION OF THE ASSESSEE WAS THAT THE SAID UNDERTAKINGS WERE COMPRISING OF FIXED ASSETS, CONSTRUCTIONS, ADVANCES AND CURRENT ASSETS ON ONE HAND AND ON THE OTHER HAND, THE SLUMP EXCHANGE WAS ROUTED AGAINST THE 45 CRORES OF EQU ITY SHARES AND 15 CRORES OF CONVERTIBLE DEBENTURES. THE SAID SCHEME OF EXCHANGE WAS DULY APPROVED BY THE HONBLE HIGH COURT. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED AND DISCUSSED THE CLAUSES OF THE SCHEME, A PORTION WAS REPRODUCED AS UNDER : 1. PART - III: 3.1 - UPON THE SCHEME BECOMING EFFECTIVE AND W.E.F THE APPOINTED DATE, THE BILT NEW UNDERTAKING SHALL TRANSFERRED TO INVESTED IN THE TRANSFEREE COMPANY, AS A GOING CONCERN ON A SLUMP EXCHANGE BASIS, WITHOUT ANY FURTHER DEED OR ACT, TOGETHER WITH ALL ITS PROPERTIES, ASSETS, RIGHTS, BENEFITS AND INTEREST THEREIN SUBJECT TO ADJUSTING CHARGES OR LIS PENDENS, IF ANY, THEREON, IN FAVOUR OF BANKS AND FINANCIAL INSTITUTIONS. ) PART.IV : 4.1 - BETWEEN THE DATE OF SANCTION OF THE SCHEME AND THE DATE OF THE SCHEME BECOMING EFFECTIVE, THE TRANSFEREE COMPANY SHALL ENHANCE ITS AUTHORIZED SHARE CAPITAL TO THE SUM OF RS. 450,10,00,000/ - (RS. FOUR HUNDRED AND FIFTY CRORES AND TEN LACS ONLY) AS SPECIFIED IN CLAUSE 5.1 OF THIS SCHEME. ON THE EFFE CTIVE DATE OR THEREAFTER, THE TRANSFEREE COMPANY, IN CONSIDERATION OF THE SLUMP EXCHANGE, SHALL ISSUE AND ALLOT TO THE TRANSFEROR COMPANY, 45,00,00,000 (FORTY FIVE CRORES) EQUITY 7 ITA NO. 302/NAG/2014 SHARES OF THE FACE VALUE OF RS. 10/ - (RUPEES TEN ONLY) PER EQUITY SHARE AND 1 5,00,00, OOO(FIFTEEN CRORES) DEBENTURE OF THE FACE VALUE OF RS. 100/ - (RUPEES ONE HUNDRED ONLY) PER DEBENTURE. THE TRANSFEREE COMPANY AT IT OPTION, SHALL BE ENTITLED TO ISSUE LETTERS OF ALLOTMENT, DEBENTURES IN DEMAT FORM OR DEBENTURE CERTIFICATES, AS IT M AY DEEM FIT FOR THE DEBENTURES PENDING CREATION OF SECURITY, IF REQUIRED, IN A RELATION TO THE DEBENTURES ISSUED IN FAVOUR OF THE TRANSFEROR COMPANY. 4.2 - THE B/LT NEW UNDERTAKING HAS BEEN DULY VALUED BY AN INDEPENDENT VALUE NAMELY M/S. PRICE WATERHOUSE COOPERS PVT.UD., INDIA. SUCH A VALUATION IS A NON - ITEMIZED LUMP - SUM VALUATION BASED ON ENTERPRISE VALUE AND HAS BEEN DULY APPROVED BY THE BOARD OF DIRECTORS OF THE TRANSFEROR COMPANY. PART - V: 5.3 - PRIOR TO THE RECORD DATE, THE TRANSFEROR COMPANY SHALL SELL/TRANSFER ITS INVESTMENT/SHARE HOLDINGS IN THE TRANSFEREE COMPANY TO BE BPH, BEING A NOMINEE OF A TRANSFEROR COMPANY IN THIS REGARD, IN ACCORDANCE WITH LAW AND WITH NECESSARY APPROVALS, AS MAY BE REQUIRED FOR A CONSIDERATION OF RS. 1,950,00,00,000/ - (RUPEES ONE THOUSAND NINE HUNDRED AND FIFTY CRORES ONLY) 5.2 FURTHER ACCORDING TO THE ASSESSING OFFICER, THE SCHEME WAS APPROVED BY THE HONBLE HIGH COURT AS A ROUTINE MANNER IN COMPLIANCE OF THE PROVISIONS OF COMPANIES ACT, 1956 BUT THE ISSUE BEFORE THE HONBLE COURT WAS NOT IN RESPECT OF THE NATURE OF TRANSACTION TO BE JUDGED UNDER I.T. ACT. THE HONBLE COURT WAS SEIZED WITH THE MATTER PERTAINING TO REORGANIZATION OF THE ASSESSEE COMPANY. BUT THE HONBLE COURT HAD NOT THE OCCASION TO DEAL WITH THE ISSUE TO DEFINE THE TRANSACTION EITHER AS A SALE OR TRANSFER. ACCO RDING TO THE ASSESSING OFFICER, BY TERMING THE WHOLE SCHEME AS SLUMP EXCHANGE THE ASSESSEE HAD MERELY PLAYED WITH THE WORDS. IT WAS NOT A BARTER TRANSACTION, AS PER THE ASSESSING OFFICER. THE ASSESSEE HAS RECEIVED SALE CONSIDERATION IN THE FORM OF SHARES AND DEBENTURES WHICH WERE REQUIRED TO BE MONETIZED WITHIN THE PRESCRIBED PERIOD ON PREDETERMINED VALUE. IT WAS A DEVISE TO AVOID THE TAX ON THE SAID TRANSACTION. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAD SOLD ITS THREE 8 ITA NO. 302/NAG/2014 UNDERTAKINGS A ND REALIZED THE PRICE FROM THE PURCHASER AS PER THE PRIOR TERMS AND CONDITIONS SETTLED IN THE SCHEME. 5.3 THE ASSESSING OFFICER HAS REFERRED A DECISION OF JUARI INDUSTRIES 298 ITR 97 (AT) WHEREIN ON SALE OF CEMENT DIVISION TO JUARI IT WAS HELD THAT THE LUM PSUM CONSIDERATION PAID BY WAY OF ALLOTMENT OF EQUITY SHARES WAS A CASE OF SLUMP SALE. ONE MORE DECISION, NAMELY, ARTEX MANUFACTURING CO. 227 ITR 260 (SC) HAS ALSO BEEN CITED FOR THE LEGAL PROPOSITION THAT THE ARRANGEMENT BETWEEN THE ASSESSEE AND THE PURCHASER COMPANY WAS AN ARRANGEMENT OF SALE. LIKEWISE, AS PER THE ASSESSING OFFICER, IN THE CASE OF PREMIER AUTOMOBILES 264 ITR 193 (BOM.) THE ASSESSEE COMPANY HAD TRANSFERRED ITS GOING UNIT FOR A CONSIDERATION RECEIVED PARTLY IN CASH AND PARTLY IN THE FORM OF FULLY PAID UP EQUITY SHARES WHICH WAS HELD AS SLUMP SALE BY THE HONBLE COURT. THE ASSESSING OFFICER HAS, THEREFORE, OPINED THAT THE TRANSFER EFFECTED BY THE ASSESSEE WAS NOTHING BUT A SALE IRRESPECTIVE OF THE TERM EXCHANGE WAS USED. HENCE THE TRANSACTION WAS WITHIN THE AMBITS OF SECTION 50B OF I.T. ACT READ WITH SECTION 2(42C) OF I.T. ACT. AFTER MENTIONING THESE SECTIONS A CALCULATION UNDER SECTION 50 B WAS MADE BY THE ASSESSING OFFICER TO DETERMINE THE CAPITAL GAIN AS UNDER : TOTAL SALE CONSIDERATION RECEIVED BY THE ASSESSEE : ` 19,50,00,00,000/ LESS: NET WORTH OF THE THREE UNDERTAKINGS : WDV OF DEPRECIABLE ASSETS : ` 10,83,76, 02,197/ ADD BOOK VALUE OF OTHER ASSETS : ` 6,91,71,13,420/ AGGREGATING VALUE OF TOTAL ASSETS : ` 17,75,47,15,617/ LESS VALUE OF LIABILITIES TRANSFERRED TO THE PURCHASER COMPANY. : ` 16,91,235,000/ NET WORTH AS PER SEC. 50B : ` 16,06,34,80,617/ 9 ITA NO. 302/NAG/2014 LONG TERM CAPITAL GAIN : ` 3,43,65,19,383 =============== 6. BEING AGG RIEVED, THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITIES. BEFORE THE LEARNED CIT(APPEALS) IT WAS PLEADED THAT THE TRANSACTION IN QUESTION WAS NOT A SALE OF A PARTICULAR ASSET OR ITEM BECAUSE THE SAID THREE UNDERTAKINGS COMPRISED OF FIXED ASSET S, ADVANCES, BORROWINGS, LICENSES, PERMITS, QUOTAS, RIGHTS AND PRIVILEGES, GOODWILL ETC. UNDER THE SCHEME THE SAID THREE UNITS WERE TRANSFERRED THROUGH SLUMP EXCHANGE ROUTE AGAINST SHARES AND DEBENTURES. THEREFORE, THE PROVISIONS OF SECTION 45 WOULD NO T BE ATTRACTED. SINCE IT WAS A REORGANIZATION, THEREFORE, THERE WAS NO ELEMENT OF PROFIT AND GAIN. IT HAS ALSO BEEN PLEADED THAT THE PROVISIONS OF SECTION 2(42C) TALKS ABOUT SALE FOR A LUMP SUM CONSIDERATION. HOWEVER, SECTION 45 TALKS ABOUT PROFITS AND G AINS ARISING FROM THE TRANSFER. DUE TO THIS REASONING EVEN THE PROVISIONS OF SECTION 50B WOULD ALSO NOT BE ATTRACTED. 6.1 LEARNED CIT(APPEALS) WAS NOT CONVINCED AND AFTER DISCUSSING FEW CLAUSES OF THE SCHEME, MENTIONED A DECISION OF VIRTUAL SOFTWARE AND TRAINING P. LTD. 116 TTJ 920 (DEL.) WHEREIN IT WAS HELD THAT IN THE CASE OF A SLUMP EXCHANGE THE TRANSACTION IS COVERED WITHIN THE DEFINITION OF SLUMP SALE. VIDE PARA 9.13 LEARNED CIT(APPEALS) HAS OPINED AS UNDER : IT IS THE CONTENTION OF THE APPEL LANT THAT IN VIEW OF THE JUDGMENTS IN THE CASE OF BHARAT BIJLEE LIMITED, MUMBAI V/S. ADDL. CIT (SUPRA) AND INCOME TAX OFFICER, WARD 3(2), HYDERABAD V/S. ZINGER INVESTMENTS (P) LTD., SINCE THERE WAS NO MONETARY CONSIDERATION INVOLVED IN TRANSFERRING THE DIV ISION WITH ALL ITS ASSETS AND LIABILITIES TO BGPPL UNDER SCHEME APPROVED BY THE HONBLE HIGH COURT, IT CANNOT BE CONSIDERED TO BE A SLUMP SALE WITHIN 10 ITA NO. 302/NAG/2014 THE MEANING ASCRIBED UNDER SECTION 2(42C) OF THE ACT SO AS TO ATTRACT THE LIABILITY OF THE CAPITAL GAI N UNDER SECTION 50B OF THE ACT. HOWEVER, IT IS RESPECTFULLY SUBMITTED THAT THE ABOVE PRONOUNCEMENTS RELIED UPON BY THE APPELLANT ARE NO LONGER GOOD LAW IN VIEW OF THE CLEAR FINDINGS GIVEN IN THE WRIT PETITION (CIVIL) NO. 1592/2012 IN THE HIGH COURT OF DE LHI IN THE CASE OF M/S SREI INFRASTRUCTURE FINANCE V/S. THE INCOME TAX SETTLEMENT. IN THIS CASE, THOUGH THE FACTS OF THE CASE WHERE SLIGHTLY DIFFERENT, THE HONOURABLE HIGH COURT OF DELHI LAID DOWN THE BROADER PREPOSITION OF LAW THAT THE USE OF THE WORD S LUMP SALE DOES NOT NARROW DOWN THE CONCEPT OF TRANSFER AS DEFINED AND UNDERSTOOD IN SECTION 2(47) AND THAT ALL TRANSFERS IN THE NATURE OF SALES I.E. SLUMP SALES ARE COVERED BY SECTION 2(42C). LEARNED CIT(APPEALS) HAS ALSO D ISCUSSED A DECISION OF DELHI HIGH COURT PRONOUNCED IN THE CASE OF M/S SREI INFRASTRUCTURE FINANCE LTD. (SUPRA) AND THEREUPON ARRIVED AT THE CONCLUSION THAT THE TRANSACTION IN QUESTION WAS NOTHING ELSE BUT A SLUMP SALE OF CAPITAL ASSETS WHICH RESULTED INT O A GAIN IN THE HANDS OF THE ASSESSEE, TO BE TAXED UNDER THE PROVISIONS OF SECTION 50B OF I.T. ACT. THE ACTION OF THE ASSESSING OFFICER WAS CONFIRMED. BEING AGGRIEVED, NOW THE ASSESSEE IS FURTHER IN APPEAL. 7. FROM THE SIDE OF THE APPELLANT, LEARNED A.R. MR. K.P. DEWANI APPEARED AND PLEADED THAT ONCE THE SCHEME HAS BEEN APPROVED BY THE HONBLE HIGH COURT AS A SLUMP EXCHANGE THEN THERE WAS NO OCCASION ON THE PART OF LEARNED CIT(APPEALS) AND ASSESSING OFFICER TO TREAT THIS TRANSFER AS SLUMP SALE. LEARNE D A.R. HAS DRAWN OUR ATTENTION ON THE SAID SCHEME AS WELL AS THE ACCEPTANCE OF THE SAID SCHEME BY THE HONBLE HIGH COURT OF JUDICATURE AT BOMBAY, NAGPUR BENCH. SOME OF THE CLAUSES OF THE SCHEME WERE AS UNDER : 1.1.3 IN ORDER TO ACHIEVE SYNERGY AND EFFICIE NCY OF OPERATIONS AND MANAGEMENT AND TO ALIGN THE THREE UNDERTAKINGS AT BHIGWAN, BALLARPUR AND 11 ITA NO. 302/NAG/2014 KAMALAPURAM I.E. THE BILT NEW UNDERTAKING (AS HEREINAFTER DEFINED) AND SABAH, THE TRANSFEROR COMPANY PROPOSES THAT THE BILT NEW UNDERTAKING BE TRANSFERRED TO AND VESTED IN THE TRANSFEREE COMPANY BY A SLUMP EXCHANGE UNDERTAKEN THROUGH THIS SCHEME (AS HEREINAFTER DEFINED). 1.1.4 UPON THE SCHEME BECOMING EFFECTIVE, WITH EFFECT FROM THE APPOINTED DATE (AS HEREINAFTER DEFINED), THE TRANSFEROR COMPANY WILL EXCHANGE THE BILT NEW UNDERTAKING FOR SHARES AND DEBENTURES OF THE TRANSFEREE COMPANY, WHICH WILL BE VESTED WITH THE BILT NEW UNDERTAKING UPON THE SCHEME BECOMING EFFECTIVE. THIS SLUMP EXCHANGE IS IN THE INTEREST OF SHAREHOLDERS, CREDITORS AND EMPLOYEES AS THEIR INTER ESTS IN THE BILT NEW UNDERTAKING AND BILT RESIDUAL UNDERTAKING ARE MAINTAINED EVEN AFTER THE SCHEME. 3.1 UPON THIS SCHEME BECOMING EFFECTIVE AND WITH EFFECT FROM THE APPOINTED DATE, THE BILT NEW UND ERTAKING SHALL STAND TRANSFERRED TO AND VESTED IN THE TRANSFEREE COMPANY AS GOING CONCERN ON A SLUMP EXCHANGE BASIS WITHOUT ANY FURTHER DEED OR ACT, TOGETHER WITH ALL ITS PROPERTIES, ASSETS, RIGHTS, BENEFITS AND INTEREST THEREIN, SUBJECT TO EXISTING CHARG ES OR ITS PENDENS, IF ANY THEREON, IN FAVOUR OF BANKS AND FINANCIAL INSTITUTIONS. 6.2 HE HAS PLEADED THAT THERE ARE NUMBER OF CLAUSES THROUGH WHICH IT IS CLEAR THAT IT WAS AN EXCHANGE AND NOT SALE . ACCORDING TO HIM THE ISSUE IS COVERED BY THE FOLLOWING DECISIONS. 1. BHARAT BIJLEE LTD. V/S.A CIT (2012) 54 SOT 571 (MUM). 2. CIT V/S. BHARAT BIJLEE LTD. (2014) 365 ITR 259 (BOM). 3. ITO V/S. ZINGER INVESTMENTS PVT. LTD. (2013) 27 ITR 218 (HYD). 4. CIT V/S. MOTORS & GENERAL STORES (P) LT D. (1967) 66 ITR 692 (SC). LEARNED A.R. MR. DEWANI HAS ALSO INFORMED THAT THE DECISION OF DELHI HIGH COURT, NAMELY, SREI INFRASTRUCTURE FINANCE LTD. (SUPRA), AS REFERRED BY LEARNED CIT(APPEALS), HAD BEEN CONSIDERED BY THE HON BLE BOMBAY HIGH COURT IN 12 ITA NO. 302/NAG/2014 THE CASE OF BHARAT BIJLEE LTD. 54 SOT 571. THERE WAS A DISTINCTION WHICH WAS POINTED OUT THAT IN THE CASE OF SREI INFRASTRUCTURE FINANCE LTD. THERE WAS A CONSIDERATION OF ` 375 LAKHS IN ADDITION TO SHARES. DUE TO THE SAID REASON I T WAS CONSIDERED AS A SALE TRANSACTION. LEARNED A.R. HAS ALSO INFORMED THAT IN THE CASE OF BHARAT BIJLEE LTD. CERTAIN FACTS WERE RECORDED THAT THE PREFERENCE SHARES WERE RECEIVED IN PURSUANCE TO SLUMP EXCHANGE. THOSE PREFERENCE SHARES WERE REDEEMED IMMED IATELY AFTER THE TRANSACTION. ON THOSE FACTS THE ITAT, MUMBAI AS WELL AS BOMBAY HIGH COURT HAVE HELD THAT WHENEVER THERE IS A TRANSACTION OF SLUMP EXCHANGE THEN SUCH TRANSACTION WOULD NOT FALL UNDER SECTION 50B OF I.T. ACT. HE HAS PLEADED THAT THE COUR TS HAVE ALSO HELD THAT THE SUBSEQUENT DISPOSAL OF SHARES OR DEBENTURES WOULD NOT HAVE ANY EFFECT SO AS TO ATTRACT THE PROVISIONS OF SECTION 50B OF I.T. ACT. CASE LAW CITED WAS DAULAT RAM RAWATMULL 87 ITR 249. HE HAS ALSO PLEADED THAT IN THE CASE OF THIS A PPELLANT THE UNDERTAKINGS WERE TRANSFERRED AS A GOING CONCERN . THERE WAS NO FIGURE OF COST OF ACQUISITION OF SUCH UNDERTAKINGS. THEREFORE, THE PROVISIONS OF SECTION 45 COULD ALSO NOT BE ATTRACTED. FOR THIS LEGAL PROPOSITION CASE LAWS CITED WERE AS UND ER : 1) CIT V/S. B.C. SRINIVASA SETTEE 128 ITR 294. 2) CIT V/S. POLYCHEM LTD. (2012) 343 ITR 115. 3) PNB FINANCE LTD. V/S. CIT (2008) 307 ITR 75. 7. ON THE OTHER HAND, FROM THE SIDE OF THE REVENUE, LEARNED D.R. MR. NARENDRA MANE SUPPORTED THE ORDERS OF THE REVENU E AUTHORITIES. HE HAS VEHEMENTLY PLEADED THAT AFTER THE INTRODUCTION OF THE PROVISIONS OF SLUMP SALE AS PER SECTION 2(42C) AND ALSO AFTER THE INTRODUCTION OF SECTION 50B THE TRANSACTION IN QUESTION SHOULD BE TAXED UNDER THE ACT. LEARNED D.R. HAS ALSO 13 ITA NO. 302/NAG/2014 PLE ADED THAT THE ASSESSEE ITSELF WAS AWARE ABOUT THE VALUE OF EACH AND EVERY ITEM OF THE UNDERTAKINGS ONLY THEN THE ASSESSEE COMPANY WAS ABLE TO NEGOTIATE WITH THE CONSIDERATION AMOUNT WITH THE TRANSFEREE COMPANY. THE VALUE OF EACH ITEM OUGHT TO HAVE BEEN CON SIDERED WHILE NEGOTIATING THE SALE CONSIDERATION. THEREFORE, ACCORDING TO THE LEARNED D.R., IT WAS NOT AN EN - BLOCK TRANSFER OF ASSET BUT A TRANSFER IN QUESTION WAS A SYSTEMATIC SALE OF ASSETS OF THREE UNITS OF THE ASSESSEE. HE HAS FINALLY PLEADED THAT THE VIEW TAKEN BY THE REVENUE AUTHORITIES MUST BE CONFIRMED. 8. WE HAVE HEARD BOTH THE SIDES AT LENGTH AND THOROUGHLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE COMPILATIONS FILED. THE ASSESSEE COMPANY HAD TWO UNDERTAKINGS WHICH WERE MANUFACTURING PRINTING QUALITY PAPER SITUATED AT BHIGWAN AND BALLARPUR. THE THIRD UNDERTAKING WAS ENGAGED IN THE MANUFACTURE OF PULP SITUATED AT KAMLAPURAM. THOSE THREE UNDERTAKINGS (COLLECTIVELY NAMED IN THE SCHEME AS BILT NEW UNDERTAKING) WERE REQUIRED TO BE REORGANIZED , THEREFORE, A SCHEME WAS DRAFTED TO TRANSFER THOSE UNDERTAKINGS TO BILT GRAPHIC PAPER PRODUCTS LTD ( BGPPL). IT IS WORTH TO MENTION THAT AS PER THE EXPLANATORY STATEMENT UNDER SECTION 393 OF THE COMPANIES ACT, 1956 VIDE CL AUSE 5, IT WAS INFORMED THAT THE SAID TRANSFEREE COMPANY I.E. BGPPL WAS INCORPORATED AS A PUBLIC LIMITED COMPANY ON 16 TH JULY, 2007. THE ENTIRE ISSUED AND PAID UP SHARE CAPITAL OF THE TRANSFEREE COMPANY WAS HELD BY THE ASSESSEE COMPANY. THEREFORE, THE BGPP L, TRANSFEREE COMPANY, IS A WHOLLY OWNED SUBSIDIARY OF THE APPLICANT COMPANY. THE INTENTION OF THIS REARRANGEMENT HAS ALSO BEEN EXPLAINED. THE ASSESSEE COMPANY WAS HAVING TWO SUBSIDIARY IN NEITHERLAND, NAMELY, BALLARPUR INTERNATIONAL HOLDINGS B.V. IT WA S A DIRECT SUBSIDIARY. THERE WAS ONE MORE SUBSIDIARY IN NEITHERLAND, NAMELY, BALLARPUR PAPER HOLDINGS B.V. 14 ITA NO. 302/NAG/2014 WHICH WAS A WHOLLY OWNED STEPS DOWN SUBSIDIARY. THESE ENTITIES WERE INCORPORATED WITH THE OBJECT OF ACQUIRING SABAH FOREST INDUSTRIES, AN INTEGRA TED PULP AND PAPER MANUFACTURING COMPANY BASED IN MALAYSIA. THE SAID THREE UNDERTAKINGS( BILT NEW UNDERTAKING) WERE CARRYING ON THE BUSINESS WHICH WAS SIMILAR TO THAT OF SABAH I.E. MANUFACTURE OF PULP. IT WAS THOUGHT BY THE MANAGEMENT THAT THE ALIGNMENT OF THREE UNDERTAKINGS WITH SABAH WILL BE BENEFICIAL FOR THE BUSINESS. THEREFORE, THE ASSESSEE COMPANY HAD PROPOSED TO TRANSFER THE UNDERTAKINGS SO AS TO VEST WITH THE TRANSFEREE COMPANY. THERE WAS A SLUMP EXCHANGE OF SHARES AND DEBENTURES. 8.1 AS PER CLAUS E 10 OF THE EXPLANATORY STATEMENT, THE SALIENT FEATURES OF THE SCHEME WERE AS UNDER : . 10. T H E SALIENT FEATURES OF THE SCHEME A R E DE T A I L ED H E R E I NBELOW : - . (I) THE SCHEME IS A COMPOS I T E SCHEME O F ARRANGEMENT AND REORGAN I ZAT I ON, AND ENVISAGES THE S L UMP EXCHANGE OF THE SILT NEW UN D E RTA K I N G OF THE APP L I CAN T COMPANY FOR SHA R ES AND DEBENTURES OF THE TRANSFEREE COMPANY ; THE TRANSFER OF THE SHARES AND DEBENTURES OF T HE T R A N S F EREE COMPANY HELD ' BY THE APP LI CANT COMPANY TO BPH, FOR CASH CONSIDERATION ; AND SUBSEQUENT RE - O RG A NIZAT I ON OF C APITA L O F THE APPLICANT COMPANY TH R OUG H STOCK SPL I T AND BUYBACK . ( I I ) T HE SCHEME PROVIDES THAT THE ' APPO I NTED DATE ' SHALL BE J U LY 1 , 2007 . ( II I ) THE 'EFFECTIVE DATE ' FOR THE SCHEME IS THE DATE OF FIL I NG OF FORM 2 1 W ITH THE REGISTRAR OF COMPAN I ES , MUMBA I, NO T W I THSTAND I NG TH E PENDING ADJUDICATION OF STAMP DUTY PAYABLE TO T H E SUB REG I STRAR OF ASSURANCES,MAHARASHIRA . (IV) ' RE CORD DATE ' FOR THE PURPOSES OF THE SC HEM E I S TH E D A T E F O R DE T E RMI N I NG THE SHAREHOLDERS OF T H E RESULT I NG COMPANY AS ON A PART I CU L AR DATE AND I S RE F ERENCED T O 3 0 D A Y S F R O M TH E E FF EC TIV E DATE OF THE SCHEME . (V) P AR T III AND I V O F TH E S C H EME ENV I SAGES TH E S L UMP EXCH A NG E O F T H E S I LT NEW UNDERTAKING PURSUANT TO SECTIONS 391 TO 394 A N D OT H ER R E L EVANT P R O V I S I ONS O F TH E CO M PAN I ES ACT , 195 6 O N A GO I NG CONCERN BASIS I N THE MANNER PROV I DED F OR IN T H E S CHEM E . (V I ) THE ' BILT NEW UNDERTA K I NG ' MEANS THE UNDER TA K I NG S OF TH E APP L ICANT COMPANY COMPR I SING OF THE BH I GWAN, BALLARPU R AND KAMALAPURAM UNITS O F THE APPLICANT COMPANY, AS OF T HE APPO I N T ED DATE AND I NCLUDES : (A ) ALL ASSETS WHETHER MOVABLE OR IMMOVABLE, TANGIBLE OR I N T A N G I B L E , I NCLUDING ALL RIGHTS,TTITLE , I N T ERES T, COVENANT , UNDERTAKINGS , INCLUDING CONTINUING RIGHTS, TIUE AND INTEREST IN CONNEC T ION W I TH THE LAND AND THE BUILD I NGS THEREON WHETHER , CORPOREAL OR I N CORPOREAL, LEASEHOLD OR OTHERWISE, PLANT AND MACH I NERY , F I XED OR 15 ITA NO. 302/NAG/2014 MOVEABLE , AND WHETHER LEASED OR OTHERW I SE , I NCLUDING IN V E NT OR Y A N D WORK I N PROGRESS, CENVAT CREDITS TOGETHER WITH ALL PRESE NT AND FUTURE L I AB I L I TY I NCLUDING CONT I NGENT L I ABILIT I ES AND DEBT S A PPE RT A I NIN G T H ERETO , OF THE APPLICANT COMPANY ALL OF WH I CH RELATE T O THE BILT NEW UNDERTAK I NG. FO R T H E P U RPOSE O F I DENT I F I CAT I ON , T HE IMM OVABLE PROPERTIES ARE MORE FULLY SET OU T I N SCHEDULE I 01 THE SCHEME ; ( B ) AL L INV E STMEN T S , L OA N S AND A D VANC ES , I NCLU D IN G ACCRUED INTEREST THEREON, . OF THE APPL I CANT COMPANY APPERTAINING TO THE BILT NEW UNDERTAK I NG ; ( C ) ALL DEBTS, BORROWINGS AND L I ABILIT I ES , INCLUDIN G CO NT I NGENT L I A B ILITI ES , PRESEN T OR FUTUR E , W H E T HER SECURED OR UNSECURED , I F ANY, PERTAINING TO THE SILT NEW UNDER T A KIN G ; (D) ALL PERMITS, QUOTAS, RIGHTS, ENTITLEMENTS, APPROVALS, CONSENTS, TENANCIES, OFFICES AND DEPOTS, PRIVILEGES AND ', BENELITS OF ALL CONTR ACTS, AGREEMENT S AND AI/ OTHE R RIG H TS INCL UDING L EASE RI G H TS , LI CENSES , EASEMENTS , POWERS AND F AC ILIT I ES OF EVERY KIND AND DESCRIPTION WHATSOEVER APPERTA I N IN G T O T HE BI LT NEW U N DERTAK I NG ; (E ) A L L EMPLOYEES AND CONTRACT LABOUR ENGAGED I N THE BIL T NEW U NDERTAK I NG A T THE I R R ESPECT I VE OFFIICES , BRANCHE S , DEPO T S , S H OPS AT THEIR CURRENT TERMS AND CONDITIONS ; AND (T) A L L EARNES T MON I ES AND/OR SECURI T Y DEPOSITS , PAYMEN T AGA I NST WARRANTS OR OTHER EN TI T L E M ENTS I N CONNECTION WITH OR R E L ATI NG TO THE BILT NEW UNDERTAKING. 8. 2 ON EXAMINATION OF THIS CLAUSE IT IS CLEAR THAT THE TRANSACTION OF THE UNDERTAKING WAS NOT JUST A BUNDLE OF SOME LISTED FIXED ASSETS AND CURRENT ASSETS. WE HAVE BEEN INFORMED THAT THE TRANSACTION WAS IN THE NATURE OF LOCK, STOCK AND BARREL WHEREIN THE VALUE OF EACH ASSET COULD NOT BE ASCERTAINED. THOSE UNDERTAKINGS WERE RUNNING FROM LAST 50 YEARS USING SUPPLY OF WATER, SUPPLY OF RAW MATERIAL, STORES AND CHEMICALS, MANAGED BY PROFESSIONALS IN THE FIELD OF TECHNOLOGY, MARKETING, FINANCE ACCOU NTS, HUMAN RESOURCES, INSURANCE ETC. THE UNDERTAKINGS WERE HAVING LICENSES AND PERMITS AS WELL. THEREFORE, IT WAS NOT POSSIBLE TO ATTRIBUTE VALUE OF EACH ASSET. A LUMP SUM CONSIDERATION WAS FIXED AND THE SHARES OF THE TRANSFEREE COMPANY OF THE EQUAL AMOU NT WERE TRANSFERRED TO THE ASSESSEE COMPANY. BY THESE FACTS IT HAS BEEN ESTABLISHED AND THE REVENUE DEPARTMENT HAS ALSO NOT RAISED QUESTION THAT THE TRANSACTION IN QUESTION WAS NOT A SLUMP TRANSACTION. THIS ARGUMENT HAS FURTHER BEEN ELABORATED BEFORE US IN THE 16 ITA NO. 302/NAG/2014 LIGHT OF THE PROVISIONS OF SECTION 2(42C) DEFINING SLUMP SALE MEANS TRANSFER OF UNDERTAKING AS A RESULT OF THE SALE OR A LUMP SUM CONSIDERATION WITHOUT VALUES BEING ASSIGNED TO THE INDIVIDUAL ASSETS AND LIABILITIES IN SUCH SALES. HENCE THE ARGUMEN T BEFORE US IS THAT THE TRANSACTION IN QUESTION WAS ALSO A LUMP - SUM TRANSACTION IN WHICH NO INDEPENDENT VALUE HAS BEEN ASSIGNED TO THE INDIVIDUAL ASSETS TRANSFERRED IN A COMPOSITE MANNER AS LOCK, STOCK & BARREL. 9. AN ANOTHER ARGUMENT HAS ALSO BEEN VEHEM ENTLY RAISED BEFORE US THAT IN A SITUATION WHEN THE TRANSACTION WAS BETWEEN THE PARENT COMPANY, I.E. THE TRANSFEROR COMPANY WITH THE WHOLLY OWNED SUBSIDIARY COMPANY I.E. TRANSFEREE COMPANY, THEN THERE WAS NO ELEMENT OF PROFIT OR GAIN EARNED WITHIN THE GROU P. IT HAS BEEN PLEADED BEFORE US THAT THE ENTIRE EXERCISE WAS NOTHING BUT A BUSINESS ARRANGEMENT TO FACILITATE THE OBJECT OF ACQUIRING OF SABAH FOREST INDUSTRIES. DUE TO THIS ARRANGEMENT WITHIN THE GROUP A REORGANIZATION WAS REQUIRED. IT WAS A BUSINESS NEE D. THE UNDERTAKINGS WERE HAVING THE SIMILAR TYPE OF MANUFACTURING ACTIVITY AS IT WAS CARRIED ON BY SABAH. THEREFORE, A REORGANIZATION WAS SUGGESTED TO HAVE A GROUP OF UNITS HAVING SIMILAR TYPE OF MANUFACTURING ACTIVITIES. FOR THIS PURPOSE THE TRANSFEREE CO MPANY WAS INCORPORATED ON 16 TH JULY, 2007 WHICH WAS A WHOLLY OWNED SUBSIDIARY OF ASSESSEE COMPANY. SINCE IT WAS A TRANSFER/EXCHANGE WITHIN THE GROUP, THEREFORE, THERE WAS NO QUESTION OF EARNING OF PROFIT OR GAIN. RATHER AN EXAMPLE HAS BEEN QUOTED BEFORE US BY LEARNED A.R. THAT THE SHARES WHICH WERE TRANSACTED WERE TRANSFERRED FROM RIGHT HAND SIDE POCK ET TO LEFT HAND SIDE POCKET OF THE SAME GROUP ENTITY WHICH HAS NOT RESULTED INTO ANY MONITORY GAIN. 17 ITA NO. 302/NAG/2014 10. THE SCHEME WAS REQUIRED TO BE APPROVED BY THE HONBLE COURT. THEREFORE, VIDE AN ORDER DATED 30 TH NOV., 2007 (CO. PETITION NO. 12 OF 2007) THE HONBLE HI GH COURT OF JUDICATURE AT BOMBAY, NAGPUR BENCH HAS APPROVED THE SCHEME AS PRESCRIBED UNDER SECTIONS 391 TO 394 OF THE COMPANIES ACT, 1956 BY HOLDING THAT IT WAS THOUGHT FIT TO APPROVE THE SCHEME OF ARRANGEMENT AND REORGANIZATION PROPOSED TO BE MADE BETWEEN THE PETITIONER COMPANY I.E. ASSESSEE BALLARPUR INDUSTRIES LTD. AND BILT GRAPHIC PAPER PRODUCTS LTD. (IN SHORT BGPPL). THE HONBLE COURT HAS ORDERED THAT ALL THE PROPERTIES, RIGHTS AND POWERS OF THE TRANSFEROR COMPANY IN BILT NEW UNDERTAKING (THE THREE UN DERTAKINGS) BE TRANSFERRED TO THE TRANSFEREE COMPANY I.E. BGPPL IN THE MANNER PROVIDED IN THE SCHEME WITH EFFECT FROM APPOINTED DATE. IN SUPPORT OF THE ABOVE ARGUMENTS A DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF BHARAT BIJLEE LTD. REPORTED IN 54 SOT 571 (MUM.) HAS BEEN REFERRED WHEREIN THE PROVISIONS OF SECTION 2(42C) AS WELL AS THE PROVISIONS OF SECTION 50B HAVE BEEN DULY CONSIDERED AND HELD THAT IN THE INSTANT CASE THE TRANSFER OF THE UNDERTAKING HAD TAKEN PLACE IN EXCHANGE FOR ISSUE OF PREFERENCE S HARES AND BONDS PURSUANT TO SCHEME OF ARRANGEMENT. MERELY BECAUSE OF FACT THAT THERE WAS A QUANTIFICATION OF BONDS/PREFERENCE SHARES, WOULD NOT MEAN THAT THE MONITORY CONSIDERATION WAS DETERMINED. ACCORDING TO THE RESPECTED COORDINATE BENCH IT WAS A CASE O F EXCHANGE AND NOT SALE. FURTHER IT WAS OPINED THAT THE TRANSFER BEING ONE OF THE GOING CONCERNS, IT WAS NOT POSSIBLE TO ASCERTAIN THE PROFIT OR GAIN FROM TRANSFER OF SUCH TYPE OF UNDERTAKINGS BECAUSE THE COST OF ACQUISITION ALONG WITH THE COST OF IMPR OVEMENT OF SUCH UNDERTAKINGS COULD NOT BE ASCERTAINED AS PRESCRIBED UNDER SECTION 45 AND SECTION 48 OF THE ACT FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN. FINALLY IT WAS HELD THAT THERE WAS NO CAPITAL GAIN WHICH COULD BE BROUGHT TO TAX. THE SAID DECISI ON 18 ITA NO. 302/NAG/2014 WAS CONFIRMED BY HONBLE BOMBAY HIGH COURT WHEN APPEALED BY THE REVENUE DEPARTMENT CITED AS CIT V/S. BHARAT BIJLEE LTD. 365 ITR 258 (BOM.). THIS DECISION IS BINDING UPON US BEING A DECISION OF JURISDICTIONAL HIGH COURT WHEREIN IT WAS HELD THAT ONCE THE SCHEME IS SANCTIONED BY THIS COURT AND THE LIFT DIVISION IS TRANSFERRED NOT BY WAY OF EXCHANGE, THEN THE TRIBUNALS VIEW COULD NOT BE SAID TO BE ERRONEOUS IN LAW NOR CAN IT BE TERMED AS PERVERSE. INTERESTINGLY THE HONBLE BOMBAY HIGH COURT HAS ALSO MENTIO NED THE DECISION OF HONBLE DELHI HIGH COURT WHICH WAS RELIED UPON BY THE REVENUE AUTHORITIES CITED AS SRIE INFRASTRUCTURE P. LTD. (WRIT PETITION CIVIL NO. 1592 OF 2012 DECIDED ON 30 TH MARCH, 2012) VIDE PARA 24, 25 AND 26; IT WAS OBSERVED AS UNDER : . 24 WE SEE NO FORCE IN THE CONTENTION OF MR.SURESH KUMAR. FIRSTLY, I T IS NOT NECESSARY FOR US TO DECIDE ANY WIDER QUESTION OR LARGER CONTROVERSY. THE JUDGMENT OF THE DELHI HIGH COURT WOULD AP P L Y PROV I DED T HE T R ANSFER IS BY WAY OF A SALE. BEFORE THE DELHI HIGH COURT, FACTS WERE THAT THE PETITION E R C O MPANY WAS ENGAGED IN PROJECT FINANCING THROUGH TERM LOANS AND LEASING IN SPECIFIED SECTORS. FOR THE ASSESSMENT YEAR 200920010 , THE PET I TIONER HAD D I SCLOSED LOSS OF MORE THAN RS.76 C RORES IN THEIR RETURN. NO RETURN WAS FILED FOR THE ASSESSMENT YEAR 20102011 . THE BOOK LOSS W AS MORE THAN RS.72 CRORES. AN APPLICATION WAS FILED BEFORE THE SETTLEMENT COMMISSION FOR THE TWO ASSESSMENT YEARS AND DISCLOSING ADD I T I ONAL INCOME. THE SETTLEMENT COMM I SSION PASSED AN ORDER AND WHICH IS TERMED AS FINAL ORDER IN PARAGRAPH 4 OF THE JUDGMENT OF THE DELH I HIGH COURT, DETERMINING AND DECIDING VARIOUS QUESTIONS WHICH ARE RAISED IN THE WR I T PET I T I ON. IN THE WRIT PET I T I O N, TH E O N L Y ASPE CT WAS TH AT OF T A X A BIL I T Y OF RS.375 LACS UNDER SECTION SOB OF THE INCOME TAX ACT AS CAPIT AL GAINS ON ' SLUMP SALE ' PAID UNDER THE SCHEME OF ARRANGEMENT TO THE PETITIONER BY ITS SUBSIDIARY. THE SETTLEMENT COMMISSION HELD THAT THE AMOUNT OF RS.375 LACS RECEIVED BY THE PETITIONER FROM ITS SUBSIDIARY ON TRANSFER OF ITS PROJECT FINANCE BUS I NESS AND ASSETS BASED ON FINANCING BUSINESS INCLUDING ITS SHAREHOLDING I N SRIE INSURANCE BRAKING PVT. LTD. WAS TAXABLE UNDER SECTION SOB OF THE ACT AS A SLUMP SALE . 25 THE ARGUMENT OF THE PETITIONER WAS THAT THIS IS A TRANSFER UNDER THE SCHEME OF ARRANGEMENT BUT IS NOT A SALE. THE SCHEME OF ARRANGEMENT WAS SANCTIONED BY THE HIGH COURT OF CALCUTTA. THE ARGUMENT WAS THAT THIS IS A TRANSFER OF A STATUTORY INTEREST AND CHARACTER . SECTION SOB THEREFORE HAD NO APPLICATION AS THE SCHEME OF ARRANGEMENT IS NOT A SLUMP SALE. 26 IT IS IN DEALING WITH THAT ARGUMENT AND IN THE PECULIAR FACTS THAT THE DELHI HIGH COURT HELD THAT THE PETITIONER'S CONTENTIONS CANNOT BE ACCEPTED. T HE PETITIONER BEFORE THE DELHI HIGH COURT H AD ADM I TTED THA T THERE WAS A MONETARY CONSIDERATION IN THE SCHEME OF ARRANGEMENT. THE MONEY WAS PAID AND ADDITIONALLY SHARES OF A THIRD COMPANY WERE ISSUED IN FAVOUR OF THE ASSESSE E. THUS, THE CONSIDERATION WAS IN MONEY AS ALSO SHARES AND NOT SHARES OR BONDS EXCLUSIVELY. THE TRANSFER COULD NOT BE TERMED AS AN EXCHANGE BUT A SALE. IN THAT LIGHT THE DELHI 19 ITA NO. 302/NAG/2014 H I GH COURT HELD THAT THE CONSIDERATION OF RS.375 LACS WAS RECEIVED ON TRANSFER OF THE PROJECT F I NANCE BUSIN ESS OF THE ASSESSEE'S SUBSIDIARY INCLUDING ITS SHAREHOLDING IN ANOTHER COMPANY. THEREFORE, THE TRANSACTION ITSELF WAS BY WAY OF A SALE AND NOT AN EXCHANGE. 27 THERE IS NO NECESSITY FOR US TO ANALYZE THE CIRCUMSTANCES IN WHICH THE SECTION 5OB WAS INSERTE D IN THE STATUTE BOOK. BEFORE US, THE ISSUE AS TO WHETHER THE CONCLUSIONS REACHED BY THE HON'BLE SUPREME COURT IN THE CASE OF MOTORS & GENERAL STORES (PVT) LTD. (SUPRA) WOULD STILL HOLD GOOD OR TH A T THEY WOULD NOT BE THE ENABLING PRINCIPLES AFTER THE AME NDMENT TO THE INCOME TAX ACT, DOE S N O T A RISE AT ALL. WE PROCEED ON THE FOOTING THAT THE STATUTE WAS AMENDED WITH SOME SP E CIFIC OBJECT AND PURPOSE. HOWEVER, WE ARE IN AGREEMENT WITH THE LEARNED SENIOR C O UN SE L A PP E ARING FOR THE ASSESSEE BEFORE US THAT THE APPLICABILITY OF SECTION SOB WOULD HAVE TO BE CONSIDERED IN THE FACTS AND CIRCUMSTANCES OF EACH CASE. IF THE TRANSFER IS BY WAY OF SALE, ONLYTH E N IT COULD BE TERMED AS A SLUMP SALE AND THEN SECTION 5OB WOULD BE ATTRACTED. IT IS IN THESE CIRCUMSTANCES AND GOING BY THE FACTS OF THE PRESENT CASE THAT WE HAVE DECIDED THE PRESENT APPEAL . NO LARGER QUESTION OR WIDER CONTROVERSY NEED BE DECIDED AS WE ARE OF THE OPINION THAT EVEN THE JUDGMENT RENDERED BY THE DELHI HIGH COURT IS DISTINGUISHABLE ON FACTS. DUE TO THE REASON THAT THE CASE LAW ON THE BASIS OF WHICH LEARNED CIT(APPEALS) HAS DECIDED THIS ISSUE IN FAVOUR OF THE REVENUE NOW STOOD CONSIDERED BY THE HONBLE JURISDICTIONAL HIGH COURT AND THEREUPON THE BOMBAY HIGH COURT HAS HELD THAT ON THE BASIS OF THE FACTS THE TRANSACTION IN QUESTION BEFORE THE DELHI HIGH COURT WAS ITSELF BY WAY OF SALE AND NOT BY WAY OF AN EXCHANGE, HENCE THE SAID JUDGMENT RENDERED BY THE DELHI HIGH COURT WAS HELD AS DISTINGUISHABLE ON FACTS. SI NCE THE HONBLE BOMBAY HIGH COURT HAS EXPRESSED IN AN UN - EQUIVOCAL TERM THE DISTINCTION BETWEEN EXCHANGE AND SALE, THEREFORE, RESPECTFULLY FOLLOWING THE SAID VERDICT, WE CAN HEREBY SAFELY CONCLUDE THAT THE REVENUE AUTHORITIES WERE NOT LEGALLY CORRECT T O HOLD THE TRANSACTION IN QUESTION AS COVERED UNDER SECTION 50B OF I.T. ACT. 11) HOWEVER, BEFORE PARTING WITH THE MATTER IT IS ALSO WORTH TO MENTION THAT A LEGAL ARGUMENT HAS ALSO BEEN RAISED BEFORE US THAT THE TERM TRANSFER AS DEFINED UNDER SE CTION 2(47) INCLUDES SALE AS WELL AS EXCHANGE . MEANING THEREBY A TRANSFER CAN HAPPEN EITHER BY WAY OF SALE OR BY WAY OF EXCHANGE. SO THE ARGUMENT IS THAT THE TRANSACTION IN QUESTION OF TRANSFERRING ALL THE UNITS TO BGPPL 20 ITA NO. 302/NAG/2014 WAS NOT BY WAY OF SALE BUT B Y WAY OF EXCHANGE. IT HAS FURTHER BEEN ELABORATED THAT SECTION 2(42C) ACKNOWLEDGES ONLY SALE WHILE DEFINING SLUMP SALE. THE SLUMP SALE MEANS SALE FOR A LUMPSUM CONSIDERATION. LIKEWISE IN SECTION 50B THE TERMINOLOGY USED BY THE STATUTE IS SALE AND THERE IS NO MENTION OF CHARGING OF CAPITAL GAIN IN CASE OF EXCHANGE. SECTION 50B PRESCRIBES PROFITS OR GAINS ARISING FROM THE SLUMP SALE. IF THERE IS AN INCIDENCE OF SLUMP EXCHANGE THEN THESE PROVISIONS OF I.T. ACT ARE CLUELESS. ACCORDING TO US THE RESPECTED STATUTORY AUTHORITIES IN THEIR WISDOM HAVE CHOSEN NOT TO USE OR INSERT THE TERM EXCHANGE IN SECTION 50B AS WELL AS IN SECTION 2(42C), ALTHOUGH IT WAS USED IN SECTION 2(47) OF THE I.T. ACT. THEREFORE, THIS TRIBUNAL HAS NO AUTHORITY OR OCCA SION TO PROVIDE CASUS OMISSUS . WE HAVE TO READ THE LANGUAGE OF THE STATUTE AS IT IS DRAFTED AND SHOULD NOT SUPPLY OR ADD ANY WORD TOWARDS THE CONSTRUCTION OF A SECTION PROVIDED IN THE STATUTE SO AS TO CREATE A CASUS OMISSUS. IT IS FORBIDDEN. ON THE B ASIS OF THESE REASONING, RESULTANTLY WE HEREBY REVERSE THE FINDING OF LEARNED CIT(APPEALS) AND THE ADDITION OF ` 174.52 CRORES IS HEREBY DELETED AND ALLOW THE GROUND RAISED BY THE ASSESSEE. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF SEPT., 2015. SD/ SD/ (SHAMIM YAHYA) (MUKUL K. SHRAWAT) (ACCOUNTANT MEMBER. JUDICIAL MEMBER NAGPUR, DATED: 24 TH SEPT. 2015. 21 ITA NO. 302/NAG/2014 COPY OF ORDER FORWARDED TO : 1. THE ASSESSEE. 2. REVENUE. 3. THE CIT(A) 4. THE CIT, NAGPUR. 5. THE D.R., ITAT, NAGPUR. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGIST RAR, ITAT, NAGPUR WAKODE