UNIVERSAL MEDICARE P.LTD, MUMBAI V. DCIT CEN CIR 3(2), MUMBAI

ITA 4418/MUM/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2808 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 24-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS S PADMAJA
• Keywords: Capital asset; Business income; Additional evidence; Cost of acquisition; Condonation of delay; Set aside; Capital Gains
• Section: 143(3); 153A; 234B; 195; 48; 13; 22

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL F BENCH MUMB AI BEFORE SHRI PAWAN SINGH JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 4418/MUM/2016 (ASSESSMENT YEAR 2012-13 ) UNIVERSAL MEDICARE PVT. LTD., CAPSULATION PREMISES, SION TROMBAY ROAD, DEONAR, MUMBAI-400088 . PAN: AAACU0717B VS. DCIT, CENTRAL CRICLE-3(2), MUMBAI (ERSTWHILE ASST. COMMISSIONER OF INCOME TAX, CC-20, MUMBAI), ROOM NO. 1923, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400021. APPELLANT RESPONDE NT C.O. NO. 268/MUM/2017 (ASSESSMENT YEAR 2012-13 ) DCIT, CENTRAL CRICLE-3(2), MUMBAI (ERSTWHILE ASST. COMMISSIONER OF INCOME TAX, CC-20, MUMBAI), ROOM NO. 1923, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400021. VS. UNIVERSAL MEDICARE PVT. LTD., CAPSULATION PREMISES, SION TROMBAY ROAD, DEONA R, MUMBAI-400088 . PAN: AAACU0717B APPELLANT RESPONDE NT APPELLANT BY : SHRI J.D. MISTRY SENIOR ADVOCATE WITH SHRI MANISH SHAH ADVO CATE RESPONDENT BY : MRS. S. PADMAJA (CIT-DR) DATE OF HEARING : 11.12.2019 DATE OF PRONOUNCEMEN T : 06.03.2020 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER ; 1. THIS APPEAL BY ASSESSEE AND CROSS OBJECTION BY REVE NUE ARE DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [LD. CIT(A)]-51, MUMBAI DATED 14.03.2016 WHICH ARISES FR OM THE ASSESSMENT ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 2 ORDER DATED 29.03.2014 PASSED UNDER SECTION 143(3) FOR ASSESSMENT YEAR 2012-13. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN MANUFACTURING AND TRADING OF PHARMACEUTICAL PRODUCT S. THE ASSESSEE FILED ITS RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 28.11.2012 DECLARING TOTAL INCOME OF RS. 495,49,42,070/-. DURI NG THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT UNIVERSAL MEDICARE PVT . LTD. (UMPL) ASSESSEE HAS SOLD ITS MARKETING DIVISION TO M/S A VENTIS PHARMA LTD. (APL), (NOW KNOWN AS SANOFI) THE ASSESSEE HAS SHOWN TOTAL SALE CONSIDERATION AGAINST THE SALE OF MARKETING DIVISIO N OF RS. 567.07 CRORE. HOWEVER, IN THE COMPUTATION OF INCOME, THE ASSESSEE HAS SHOWN CAPITAL GAIN OF RS. 477.30 CRORE ONLY, ON SALE OF MARKETING DIVISION, AFTER DEDUCTING RS. 89.73 CRORE. THE ASSESSEE CLAIMED THA T TOTAL SALE CONSIDERATION PAYABLE TO THE ASSESSEE AMOUNTS IS RS . 567.07 CRORE, OUT OF WHICH RS. 89.49 CRORE IS PLACED BY THE PURCHASER IN A ESCROW ACCOUNT OPENED WITH HONGKONG AND SHANGHAI BANKING CORPORATI ON LTD. (HSBC), WHICH WILL ACCRUED TO THE ASSESSEE COMPANY IN FIVE ANNUAL EQUAL INSTALMENT ANNUALLY, SUBJECT TO FULFILMENT OF CERTA IN OBLIGATION BEING ON THE ACHIEVEMENTS OF THE PERFORMANCE TARGETS EVERY Y EAR. FURTHER, OUT OF RS. 89.45 CRORE, THE ASSESSEE HAS OFFERED RS. 17.89 CRORE BEING FIRST INSTALMENT AND REMAINING RS. 71.56 CRORE WAS KEPT/S HOWN/DEPOSIT IN ESCROW ACCOUNT WITH HSBC BANK. THE ASSESSING OFFICE R ISSUED SHOW- ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 3 CAUSE NOTICE AS TO WHY THE ENTIRE AMOUNT IN THE ESC ROW ACCOUNT SHOULD NOT BE TAXED AS THE INCOME BEING PART OF CAPITAL GA IN ACCRUED TO THE ASSESSEE ON SALE OF MARKETING DIVISION. THE ASSESSE E FILED ITS REPLY STATING THAT THE AMOUNT WILL BE REALIZED IN FIVE EQUAL ANNU AL INSTALMENTS ON FULFILLING CERTAIN SPECIFIC CONDITIONS AND CAN BE T AXED ONLY YEAR OF REALIZATION. THE EXTRACT OF REPLY OF ASSESSEE IS RE CORDED BY ASSESSING OFFICER IN PARA-3.1.2 OF THE ASSESSMENT ORDER. 3. THE REPLY/ EXPLANATION FURNISHED BY ASSESSEE WAS NO T ACCEPTED BY ASSESSING OFFICER BY TAKING VIEW THAT SECTION 50B C LEARLY STATES THAT ANY PROFIT OR GAIN ARISING FROM SLUM SALE EFFECTED IN T HE PREVIOUS YEAR SHALL BE CHARGEABLE TO TAX AS CAPITAL GAIN ARISING OUT FROM THE TRANSFER OF LONG TERM CAPITAL ASSET AND SHALL BE DEEMED TO BE INCOME OF THE PREVIOUS YEAR IN WHICH TRANSFER TOOK PLACE. THE BUSINESS IN WHICH CAPITAL GAIN ON SLUM SALE EARNED WAS TRANSFERRED ON 03.11.2011 ACCO RDINGLY; THE CAPITAL GAIN FROM TRANSFER CANNOT ACCRUE IN INSTALMENTS. 4. SECONDLY, THE ASSESSEE IS FOLLOWING THE ACCRUAL SYS TEM OF ACCOUNTING AND THE INCOME EARNED IS ACCRUED TO THE ASSESSEE ON SAL E OF TRANSFER. THE CONTENTION OF ASSESSEE IS THAT THE AMOUNT IS KEPT I N ESCROW ACCOUNT IS NOT RELEASED TO THE ASSESSEE IS NOT ACCEPTED. 5. THIRDLY, AS PER SECTION 2(42C), IN CASE OF SLUM SAL E, THE UNDERTAKING WHICH IS TRANSFERRED AS A WHOLE, SINGLE UNIT WITHOU T VALUES BEING ATTACHED TO THE NEW ASSET AND LIABILITIES. THE CONSIDERATION OF RS. 567 CRORE EARNED ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 4 ON SELLING THE MARKETING DIVISION IS DIRECTLY RELAT ED TO SLUM SALE AND INCOME IS EARNED BECAUSE OF TRANSFER OF MARKETING D IVISION AND DOES NOT HAVE ANY BEARING ON ANY OTHER THINGS (CONDITIONS). 6. FOURTHLY, ONCE THE AGREEMENT IS EXECUTED, THE TRANS FER TOOK PLACE AND ANY PAYMENT OR OBLIGATION CAN SPREAD OVER SOME TIME, TH IS DOES NOT MEAN THAT TRANSFER IS ALSO HAPPENING OVER A PERIOD OF TIME. T HE TRANSFER IS ONE TIME EVENT WHEREAS PAYMENT CAN HAPPEN OVER A PERIOD WHIC H IS AGREED BETWEEN THE PARTIES. AS THE TRANSFER TOOK PLACE ON 03.11.2011, MAJOR PART OF CONSIDERATION WAS RECEIVED ON THE DAY ITSELF I.E . RS. 477.62 CRORE, OUT OF RS. 567.07 CRORE I.E. 84% OF TOTAL CONSIDERATION . 7. FIFTHLY, THE AMOUNT KEPT IN ESCROW ACCOUNT HAS NO R ELATION, WHATSOEVER WITH THE TRANSFER OF MARKETING DIVISION. IT HAS ONL Y BEARING OF SUPPLY AGREEMENT BETWEEN THE PARTIES. 8. AND SIXTHLY ON GOING THROUGH THE ESCROW AGREEMENT A ND SUPPLY AGREEMENT, THE ASSESSING OFFICER TOOK THE VIEW THAT INTEREST ON THE AMOUNT KEPT IN ESCROW ACCOUNT BELONG TO THE SELLER AND THAT ASSESSEE HAS OFFERED INTEREST OF RS. 3.03 CRORE ACCRUED ON FULL ESCROW ACCOUNT FROM 03.11.2011 TO 31.03.2012. THE ASSESSING OFFICER TOO K HIS VIEW THAT THESE FACTS CLEARLY ESTABLISH THAT THE AMOUNT IS CLEARLY EARNED BY ASSESSEE. THE ASSESSING OFFICER BROUGHT THE REMAINING AMOUNT OF R S. 71.57 CRORE, KEPT IN ESCROW ACCOUNT TO TAX AS INCOME OF ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 5 9. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF ASSE SSING OFFICER WAS AFFIRMED. THE LD. CIT (A) WHILE AFFIRMING THE ACTIO N OF ASSESSING OFFICER HELD THAT AS PER THE AGREEMENT, THE BUSINESS OF DIS TRIBUTING AND SELLING PHARMACEUTICAL PRODUCTS A GOING CONCERN WAS SOLD ON SLUM SALE BASIS. THE ASSESSEE ALSO ENTERED WITH BUSINESS PURPOSE AGR EEMENT TO SUPPLY CERTAIN PHARMACEUTICAL PRODUCTS TO THE PURCHASER. A S PER THE SUPPLY AGREEMENT, THE ASSESSEE SHALL SUPPLY CERTAIN PRODUC T TO PURCHASER/APL AS PER TERMS AND CONDITIONS AGAINST WHICH IT WOULD REC EIVED SEPARATE AMOUNT FOR A PERIOD FIVE YEARS TO ENSURE THESE SUPP LIES WITHOUT ANY DISRUPTION TO ESCROW AGREEMENT WAS EXECUTED. AS PER THE ESCROW AGREEMENT, AN AMOUNT OF RS. 89.45 CRORE WAS KEPT IN ESCROW ACCOUNT IN HSBC BANK. THE CLAIM OF ASSESSEE THAT AMOUNT OF RS. 17.89 CRORE BEING RELEASED IN FIVE ANNUAL EQUAL INSTALMENTS WOULD ACC RUE TO THE ASSESSEE WHENEVER SAID INSTALMENT IS REALIZED; WHICH IS SUBJ ECT TO FULFILLING OF CERTAIN CONDITIONS AND SHOULD BE TAXED IN RELEVANT ASSESSMENT YEAR, BUT AS PER BUSINESS PURPOSE AGREEMENT CLOSING MEANS, TH E COMPLETION OF SALE AND PURCHASE OF BUSINESS PURSUANT TO CLAUSE-(7) OF SALE AGREEMENT. CLAUSE-(7), THE DATE AND PLACE OF CLOSING, CLOSING EVENT, PAYMENT OF CLOSING AND BREACH OF CLOSING OBLIGATION, THE CLOSI NG EVENTS ALSO DEFINE IN SCHEDULE -(6) OF THE AGREEMENT AND ON FURTHER SCRUT INY OF AGREEMENT, THE LD. CIT(A) TOOK THE VIEW THAT PURCHASER HAS PAID TH E ENTIRE AMOUNT OF CLOSING DATE AND IT IS THE ASSESSEE WHO HAD INSTRUC TED THE PURCHASER TO ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 6 KEEP THE AMOUNT IN THE ESCROW ACCOUNT. THE LD. CIT( A) FURTHER TOOK HIS VIEW THAT ON CONJOINT READING OF VARIOUS CLAUSES OF THE AGREEMENT THAT SALE TRANSFER IS NOT LINKED TO ESCROW ACCOUNT AND T HE ASSESSEE, AS THE GUARANTEE OF SUPPLY AGREEMENT PLACED CERTAIN AMOUNT IN THE ESCROW ACCOUNT AND THE SAME IS NOT LINKED TO THE SALE OF B USINESS. THE LD CIT(A) CONCLUDED THAT IT IS LIKE A BANK GUARANTEE AGAINST THE PERFORMANCE. THE ASSESSEE INSTEAD OF PAYING THIS AMOUNT SEPARATELY A LLOWED APL/PURCHASER TO KEEP THE PART OF CONSIDERATION IN THE ESCROW ACC OUNT, THE SALE OF BUSINESS/MARKETING DIVISION IS IRREVOCABLE AND COMP LETED ON THE CLOSING DATE MENTIONED ON THE AGREEMENT AND FINALLY CONCLUD ED THAT HE CONCUR WITH THE FINDING OF ASSESSING OFFICER THAT AMOUNT K EPT IN ESCROW ACCOUNT HAS NO RELATION WHATSOEVER TO THE TRANSFER OF MARKETING DIVISION AND ACCORDINGLY, THE ASSESSING OFFICER RIGHTLY BROU GHT THE CAPITAL GAIN TO TAX THE ENTIRE GAIN FOR THE YEAR UNDER CONSIDERATIO N. 10. FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE THIS TRIBUNAL BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEA RNED COMMR. OF INCOME TAX (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 71,56,00,000/- WHILE COMPUTING THE LONG TERM CAPITAL GAIN IN CASE OF SLU MP SALE OF BUSINESS DURING A.Y. 2012-13. THE LEARNED COMMR. OF INCOME TAX (A) HAS ERRED IN CONCLUDING THAT THE CAPITAL GAINS ACCRUED TO THE EX TENT OF RS.71,56,00,000/- DURING THE A.Y. 2012-13 AND IS CHARGEABLE TO TAX. T HE CONCLUSION REACHED BY THE LEARNED COMMR. OF INCOME TAX (A) IS ERRONEOUS A ND THE APPELLANT PRAYS THAT THE ADDITION OFRS.71,56,00,000/- MAY BE DELETE D. ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 7 2. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEA RNED COMMR. OF INCOME TAX (A) HAS ERRED IN CONCLUDING THAT SALE CONSIDERA TION OF RS.567.07 CRORES FOR TRANSFER OF MARKETING DIVISION ACCRUED TO THE A PPELLANT DURING A.Y. 2012- 13 AND CONSEQUENTLY THE RESULTANT CHARGEABLE LONG T ERM CAPITAL GAIN IS TO BE INCREASED BY RS.71,56,00,000/-. THE APPELLANT PRAYS THAT DURING A.Y. 2012- 13 THE SALE CONSIDERATION OF RS.477.30 CRORES ONLY ACCRUED TO THE APPELLANT AND THE LONG TERM CAPITAL GAIN IS TO BE WORKED OUT BASED ON THE SALE CONSIDERATION ACCRUED TO THE APPELLANT AMOUNTING TO RS.477.30. THE APPELLANT PRAYS THAT THE ADDITION MADE BY THE LEARN ED ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMR. OF INCOME TAX (A) A MOUNTING TO RS.71,56,00,000/- MAY BE DELETED. 3. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEA RNED COMMR. OF INCOME TAX (A) HAS ERRED IN REJECTING THE CLAIM OF THE APP ELLANT THAT THE SUM OF RS.89.45 CRORES BEING THE PART SALE CONSIDERATION O UT OFRS.567.07 CRORES DID ACCRUE TO THE APPELLANT AND THE APPELLANT WAS ENTIT LED TO THE SAID SUM ONLY ON HAPPENING OF CERTAIN EVENTS IN FUTURE. THE SALE CON SIDERATION OF RS.89.45 CRORES WAS TO ACCRUE IN FUTURE DEPENDING UPON FULFI LLMENT OF CERTAIN OBLIGATIONS UNDERTAKEN BY THE APPELLANT. AT THE POI NT OF TIME WHEN THE TRANSFER OF BUSINESS TOOK PLACE THE SALE CONSIDERAT ION OF RS.477.30 CRORES WAS ONLY ACCRUED AND THE APPELLANT PRAYS THAT THE L ONG TERM CAPITAL GAINS IN CASE OF SLUMP SALE OF BUSINESS BE COMPUTED CONSIDER ING THE SALE CONSIDERATION OF RS.477.30 CRORES AND CONSEQUENTLY THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER AND CONFIRMED BY LEARNED COMMR. OF INCOME TAX (A) AMOUNTING TO RS.71,56,00,000/- MAY BE DELET ED. 4. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE APP ELLANT PRAYS THAT THE SALE CONSIDERATION WHICH DID NOT ACCRUE AND WHICH WAS NO T RECEIVED BY THE APPELLANT AND KEPT UNDER ESCROW ACCOUNT AMOUNTING T O RS.89.45 CRORES MAY NOT BE TREATED AS THE SALE CONSIDERATION ACCRUED TO THE APPELLANT FOR THE PURPOSE OF COMPUTING LONG TERM CAPITAL GAIN IN CASE OF SLUMP SALE OF BUSINESS FOR A. Y. 2012-13. 5. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEA RNED COMMR. OF INCOME TAX (A) HAS ERRED IN REJECTING THE CLAIM OF THE APP ELLANT OF THE DEFALCATION LOSS OF RS.5,00,00,000/-. THE LEARNED COMMI. OF INC OME (A) ERRED IN CONCLUDING THAT THE APPELLANT CANNOT RAISE THE GROU ND REGARDING THE DEFLATION ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 8 LOSS OF RS.5,00,00,000/- IN A.Y. 2012-13. THE CONCL USION REACHED BY LEARNED COMMR. OF INCOME TAX(A) IS ERRONEOUS AND TH E APPELLANT PRAYS THAT THE LOSS SUFFERED ON ACCOUNT OF DEFALCATION LOSS AM OUNTING TO RS.5,00,00,000/- MAY BE ALLOWED WHILE COMPUTING THE TOTAL INCOME. 6. THE LEARNED COMMR. OF INCOME TAX (A) HAS ERRED I N REJECTING THE CLAIM OF APPELLANT THAT NO INTEREST U/S 234B BE LEVIED FO R A.Y. 2012-13. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE APPELLANT PRA YS THAT INTEREST LEVIED U/S 234B BY LEARNED ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMR. OF INCOME TAX (A) BE DELETED. 11. THE ASSESSEE VIDE APPLICATION DATED 09.09.2017 RAIS ED THE FOLLOWING ADDITIONAL GROUNDS OF APPEAL: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD.AO AND THE LD.CIT(A) ERRED IN COMPUTING CAPITAL GAINS ARISING FROM TRANSFER OF THE 'MARKETING DIVISION' EVEN WHEN THE 'FULL VALUE OF C ONSIDERATION' ARISING AS A RESULT OF TRANSFER OF THE SAID DIVISION WAS NO T DETERMINABLE AND, THUS, THE MECHANISM TO COMPUTE CAPITAL GAINS FAILED. 12. ON SERVICE/FILING THE ADDITIONAL GROUND OF APPEAL, THE REVENUE FILED ITS CROSS OBJECTION (CO) BY RAISING FOLLOWING GROUNDS O F CROSS OBJECTION: 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSEE IS JUSTIFIED IN FILING ADDITIONAL GROUNDS OF APPEAL DISPUTING CALCULATION OF CAPITAL GAIN BY AO, WHICH WAS UPHELD BY CIT(A), ON THE GROUND THAT THE FULL VALUE OF CONSIDERATION ARISING AS A RESULT OF TRANS FER OF SAID DIVISION WAS NOT DETERMINABLE, EVEN THOUGH THE COMPANY ITSELF DECLAR ED THE SAID TRANSFER AS A SLUMP SALE BY FILING AUDIT REPORT IN FORM 3CEA AND THE PURCHASER M/ S SANOFI INDIA LTD HAS REFLECTED THE ENTIRE AMOUNT I. E. RS. 567.07CR IN A.Y 2012-13'. 13. WE HAVE HEARD THE SUBMISSION OF SHRI J.D. MISTRY, LD. SENIOR COUNSEL/AUTHORISED REPRESENTATIVE (AR) OF THE ASSES SEE AND MISS. S. PADMAJA, LD. CIT-DR FOR REVENUE AND PERUSED THE REC ORD CAREFULLY. WE ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 9 HAVE ALSO GONE THROUGH THE ORDERS OF LOWER AUTHORIT IES WITH THE ACTIVE ASSISTANCE WITH LD. SR. COUNSEL AND LD. CIT-DR FOR THE REVENUE. IN SUPPORT OF SUBMISSION OF ADDITIONAL GROUND OF APPEA L, THE LD. AR OF THE ASSESSEE SUBMITS THAT VIDE APPLICATION DATED 09.09. 2017, THE ASSESSEE HAS RAISED THE ADDITIONAL GROUND OF APPEAL, WHICH IS PU RELY LEGAL IN NATURE. THE LD. SR. COUNSEL SUBMITS THAT NO ADDITIONAL FACT S ARE REQUIRED TO BE BROUGHT ON RECORD. THE FACTS RELATING TO THE RAISIN G OF ADDITIONAL GROUND OF APPEAL ARE EMANATING FROM THE ORDER OF LOWER AUT HORITIES. THE LD. SR. COUNSEL SUBMITS THAT THE REVENUE HAS FILED CROSS OB JECTION. THE CROSS OBJECTION IS BARRED BY LIMITATION. NO PROPER APPLIC ATION FOR CONDONATION OF DELAY OF CROSS OBJECTION IS FILED BY REVENUE, TH E LD. SR. COUNSEL SUBMITS THAT THE CROSS OBJECTION RAISED/FILED BY RE VENUE ARE LIABLE TO BE REJECTED OUT-RIGHTLY. 14. ON THE OTHER HAND, THE LD. CIT-DR SUBMITS THAT THE ASSESSEE HAS RAISED ADDITIONAL GROUNDS OF APPEAL VIDE APPLICATION DATED 09.09.2017, WHICH WAS HANDED OVER DURING THE HEARING OF THE APPEAL AN D THE ADDITIONAL GROUND OF APPEAL, WAS REFERRED TO THE ASSESSING OFF ICER. THEREAFTER, THE ASSESSING OFFICER AFTER OBTAINING NECESSARY APPROVA L FROM THE LD. PRINCIPAL COMMISSIONER OF INCOME TAX (LD. PCIT) FIL ED CROSS OBJECTION AND SIMULTANEOUSLY APPLICATION FOR CONDONING THE DE LAY. THE LD. CIT-DR FURTHER SUBMITS THAT THE CAUSE OF ACTION FOR FILING CROSS OBJECTION AGAINST THE ADDITIONAL GROUND OF APPEAL AROSE ONLY ON SERVI CE/SUPPLY OF ADDITIONAL ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 10 GROUND OF APPEAL. THE LD. CIT-DR PRAYED THAT CONSID ERING THE CONTENTS OF APPLICATION FOR CONDONATION OF DELAY, IF ANY DELAY THE ASSESSING OFFICER HAS REQUESTED THAT DUE TO ADMINISTRATIVE REASON AND PAUCITY OF STAFF AND TRANSFERS, THE OBJECTION COULD NOT BE FILED IN TIME . THE LD. CIT-DR SUBMITS THAT THERE IS SUFFICIENT GROUND FOR CONDONI NG SUCH DELAY WHICH IS BONAFIDE AND THERE WAS NO INTENTIONAL AND DELIBERAT E DELAY. 15. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND NOTED THAT IN THE ADDITIONAL GROUND OF APPEAL, THE ASSESSEE HAS C LAIMED THAT IN COMPUTING CAPITAL GAIN ON THE TRANSFER OF MARKETING DIVISION AS A RESULT OF TRANSFER OF SAID DIVISION WAS NOT DETERMINABLE AND THUS, THE MECHANISM OF COMPUTING CAPITAL GAIN FAILS. IN OUR VIEW FOR DECID ING ADDITIONAL GROUND OF APPEAL, NO NEW FACTS ARE REQUIRED. THE FACTS ARE EMANATING FROM THE ORDER OF LOWER AUTHORITIES. THEREFORE, CONSIDERING THE FACT THAT WHEN NO NEW FACTS ARE NECESSARY TO BE BROUGHT ON RECORD AND THAT THE FACTS ARE EMANATING FROM THE ORDERS OF LOWER AUTHORITIES. WE ARE INCLINED TO ADMIT THE ADDITIONAL GROUND OF APPEAL RAISED BY ASSESSEE. 16. NOW TURNING TO THE CROSS OBJECTION FILED BY REVENUE /ASSESSING OFFICER. IN OUR CONSIDERED VIEW, THE CAUSE OF ACTION FOR FIL ING CROSS OBJECTION AGAINST THE ADDITIONAL GROUND OF APPEAL ARISES ONLY ON SERVICE OF THE ADDITIONAL GROUND OF APPEAL. THE CROSS OBJECTIONS A RE FILED ON 07.11.2017. CONSIDERING THE CONTENTION OF ASSESSING OFFICER/REVENUE THAT THE DELAY WAS DUE TO ADMINISTRATIVE REASON AND PAUC ITY OF STAFF. ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 11 MOREOVER, WE HAVE NOTED THAT THERE IS A DELAY OF AB OUT 21 DAYS IN FILING THE SAID CROSS OBJECTION. WE HAVE NOTED THAT LD. AR OF THE ASSESSEE HAS NOT EXPLAINED AS TO WHEN THE COPY /NOTICE OF ADDITI ONAL GROUND OF APPEAL WAS SERVED UPON THE REVENUE. HOWEVER, ON PERUSAL OF ORDER-SHEET, IT IS REVEALED THAT THE HEARING OF THIS APPEAL WAS FIXED ON 15.09.2017, THUS WE ASSUME THAT THE ADDITIONAL GROUND OF APPEAL WAS SER VED UPON THE REVENUE ON 15.09.2017 AND THAT THE ASSESSING OFFICER/REVENU E COULD FILE ITS CROSS OBJECTION TILL 15 TH OCTOBER 2017, HOWEVER, THE CROSS OBJECTION FILED O N 07.11.2017. THUS, THERE IS DELAY OF ABOUT 20/21 DAY S. CONSIDERING THE CONTENTS OF APPLICATION FOR CONDONATION OF DELAY TH AT THE DELAY IN FILING THE CROSS OBJECTION IS NEITHER INTENTIONAL NOR DELI BERATE BUT DUE TO BONAFIDE REASON, THE DELAY IN FILING THE CROSS OBJE CTION WAS CONDONED. 17. THE ADMISSION OF ADDITIONAL GROUNDS OF APPEAL AND T HE CROSS OBJECTIONS INCLUDING THE CONDONATION OF DELAY WAS COMMUNICATED TO THE PARTIES WHILE HEARING THE SUBMISSIONS OF THE PARTIES. 18. NOW ADVERTING TO THE MERITS OF THE APPEAL. GROUND N O. 1 TO 4 RELATES TO THE ADDITION ON ACCOUNT OF AMOUNT KEPT IN ESCROW AC COUNT. THE LD. AR OF THE ASSESSEE SUBMITS THAT ASSESSEE-COMPANY IS EN GAGED IN THE BUSINESS OF MANUFACTURING AND MARKETING PHARMACEUTICALS AND NUTRACEUTICAL PRODUCTS. DURING THE PREVIOUS YEAR, THE ASSESSEE SO LD ITS MARKETING DIVISION TO AVENTIS PHARMA LIMITED (WHICH IS KNOWN AS SANOFI INDIA LTD.) THROUGH BUSINESS PURCHASE AGREEMENT (BPA) DAT ED 24.08.2011 BY ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 12 WAY OF SLUMP SALE. COPY OF BUSINESS PURCHASE AGREEM ENT IS FILED ON RECORD. UNDER THE BUSINESS PURCHASE AGREEMENT THE G ROSS CONSIDERATION WAS AGREED AT RS. 567.07 CRORES, OUT OF WHICH RS. 4 77.62 CRORES ACCRUED AND BECAME PAYABLE UPON TRANSFER AND BALANCE OF RS. 89.44 CRORES WAS PLACED IN ESCROW ACCOUNT AND WOULD ACCRUED AND PAYA BLE TO THE ASSESSEE ANNUALLY IN FIVE EQUAL INSTALMENTS OF RS. 17.89 CRO RE EACH. PURSUANT TO THE BUSINESS PURCHASE AGREEMENT, THE ASSESSEE ENTER ED INTO ESCROW AGREEMENT DATED 28.10.2011 WITH THE PURCHASER, WHER EIN PURCHASER AS PER THE CLAUSE 3.1 OF THE ESCROW AGREEMENT WAS REQU IRED TO DEPOSIT THE SAID CONTINGENT PORTION OF CONSIDERATION IN ESCROW ACCOUNT. THE COPY OF ESCROW AGREEMENT IS ALSO PLACED ON RECORD. 19. DURING THE SUBMISSION, THE LD. AR OF THE ASSESSEE A LSO READ OVER VARIOUS CLAUSES OF BUSINESS PURCHASE AGREEMENT AND ESCROW A GREEMENT AND WOULD SUBMIT THAT DEPOSIT OF RS. 89.45 CRORE IN A E SCROW ACCOUNT WAS AGREED TERM WITH FULFILMENT OF CERTAIN CONDITION AN D IN THE EVENT, THE ASSESSEE DID NOT FULFIL THOSE CONDITIONS, THE AMOUN T KEPT IN ESCROW ACCOUNT WAS NOT RECEIVABLE BY ASSESSEE. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT WHILE FILING RETURN OF INCOME, THE ASSESSEE OFFERED A LUMP-SUM PAYMENT OF RS. 477.30 CRORE AS WELL AS RS. 17.89 CRORE (OUT OF RS. 89.45 CRORE), ACCRUED TO THE ASSESSEE DURING TH E PREVIOUS YEAR. THE LD. AR OF THE ASSESSEE ALSO REFERRED ANNUAL ACCOUNTS, W HEREIN THE ASSESSEE HAS DISCLOSED SALE OF MARKETING DIVISION AS A SLUMP SALE. THE LD. AR O THE ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 13 ASSESSEE SUBMITS THAT BALANCE OF RS. 71.56 CRORE WA S OFFERED IN FOUR SUBSEQUENT AYS. THE BALANCE OFFERED BY ASSESSEE IN FOUR SUBSEQUENT YEAR I.E. IN A.Y. 2013-14 TO A.Y. 2016-17 WAS ACCEPTED B Y REVENUE IN ASSESSMENT ORDER PASSED UNDER SECTION 143(3), COPIE S OF ASSESSMENT ORDER WITH THE COMPUTATION OF INCOME IS ALSO PLACED ON RE CORD. THE ASSESSING OFFICER AND THE LD. CIT(A) TREATED THE BUSINESS PUR CHASE AGREEMENT AND ESCROW AGREEMENT INDEPENDENT TO EACH OTHER AND HELD THAT ESCROW ACCOUNT COULD NOT BE LINKED TO SUPPLY AGREEMENT AND THEREFORE, ENTIRE CONSIDERATION OF RS. 567.07 CRORE ACCRUED TO THE AS SESSEE IN THE ASSESSMENT YEAR ITSELF. THE LD. AR OF THE ASSESSEE SUBMITS THAT GROUND NO.1 TO 4 RELATES TO CONTINGENT CONSIDERATION KEPT IN ESCROW ACCOUNT. THE LD. AR OF THE ASSESSEE SUBMITS THAT PERUSAL OF VARI OUS CLAUSE OF BUSINESS PURCHASE AGREEMENT AND ESCROW AGREEMENT CLEARLY DEM ONSTRATE THAT MAINTAINING OF ESCROW ACCOUNT WAS AN INTEGRAL PART OF BUSINESS PURCHASE AGREEMENT, THE SALE WOULD BE INCOMPLETE WI THOUT THE SAME. THE AMOUNT KEPT IN ESCROW ACCOUNT WOULD ACCRUE TO T HE ASSESSEE ONLY UPON FULFILMENT OF CERTAIN CONDITION, CAN BE OFFERE D TO TAX ONLY UPON ACCRUAL AND NOT OTHERWISE. THE LD. AR OF THE ASSESS EE SUBMITS THAT AS PER THE VARIOUS CLAUSES MENTIONED IN THE BUSINESS PURCH ASE AGREEMENT, THE CLOSING OF THE TRANSACTION HAS BEEN DEFINED TO ME AN AS COMPLETION OF SALE AND PURCHASE OF BUSINESS PURSUANT TO CLAUSE-7 OF THE BUSINESS PURCHASE AGREEMENT. FURTHER, CLOSING AMOUNT HAS B EEN DEFINED AS AN ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 14 AMOUNT EQUAL TO PURCHASE PRICE LESS ESCROW ACCOUNT. FURTHER CLAUSE-7 DEFINES THE CLOSING EVENTS OF TRANSFER. CLAUSE-7.3 STATES THAT ON CLOSING, THE PURCHASER WHICH PAYS THE CLOSING AMOUNT DIRECTL Y TO THE SELLER AND DEPOSITS THE ESCROW AMOUNT IN ESCROW ACCOUNT. FURTH ER, CLAUSE-7.4 PROVIDES THAT IF PURCHASER FAILED TO COMPLETE WITH ITS OBLIGATION UNDER CLAUSE-7.3, THE SELLER SHALL BE ENTITLED TO TERMINA TE THIS AGREEMENT. THUS, A COMBINED READING OF CLAUSE-7.3 & 7.4 CLEARLY PROVES THAT IF THE CONDITION LAID DOWN IN CLAUSE-7.3 ARE NOT FULFILLED THE BUSIN ESS PURCHASE AGREEMENT, WILL BE TERMINATED, THEREFORE, THE DEPOS IT OF ESCROW AMOUNT IN THE ESCROW ACCOUNT IS INTRINSIC AND INTEGRAL PAR T OF TRANSFER OF THE MARKETING DIVISION UNDER THE BUSINESS PURCHASE AGRE EMENT. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT CLAUSE-3 & 3.9 PRESCRIBES THAT ASSESSEE AND THE PURCHASER SHALL ENTER INTO AN AGRE EMENT FOR THE SUPPLY BY THE SELLER OF PHARMACEUTICAL PRODUCTS THAT ARE MANU FACTURED BY ASSESSEE. A DRAFT OF SUPPLY AGREEMENT IS AN INTEGRAL PART OF BUSINESS PURCHASE AGREEMENT. 20. ON THE OBSERVATION OF ASSESSING OFFICER AND LD. CIT (A) THAT ESCROW AGREEMENT HAS NO CONNECTION TO THE TRANSFER OF UNDE RTAKING, BUT IS A RESULT OF SUPPLY AGREEMENT. THE LD. AR OF THE ASSESSEE POI NT OUT THAT RECITAL-II OF ESCROW AGREEMENT CLEARLY STATES THAT IT HAS BEEN ENTERED PURSUANT TO THE TERM OF BUSINESS PURCHASE AGREEMENT. THE ESCROW ACCOUNT REFERS TO THE BUSINESS PURCHASE AGREEMENT DATED 24.08.2011. T HE ESCROW AMOUNT ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 15 IS DEFINED AS AMOUNT DEPOSITED BY PURCHASER AS PER AGREED TERM IN THE ESCROW ACCOUNT. THE LD. AR WOULD SUBMIT THAT THE FA CTS AND CLAUSES THEREIN CLEARLY REFLECTS THAT ESCROW ARRANGEMENT WA S AN INTEGRAL PART OF THE BUSINESS PURCHASE AGREEMENT, WITHOUT WHICH THE BUSINESS PURCHASE AGREEMENT WOULD NOT HAVE CLOSED AND THAT SUPPLY AGR EEMENT IS AN INTEGRAL PART OF BUSINESS PURCHASE AGREEMENT BUT HA S NO MENTION OF ESCROW ACCOUNT. FROM THE ABOVE FACTS, IT IS CLEAR T HAT CONTINGENT CONSIDERATION DEPOSIT IN ESCROW ACCOUNT BY PURCHASE R WAS ON ACCOUNT OF TRANSFER OF MARKETING DIVISION ON SLUM SALE BASIS A ND SUCH CONTINGENT CONSIDERATION WAS TO ACCRUE ONLY UPON FULFILMENT OF CONDITIONS OVER A PERIOD OF FIVE YEARS. ACCORDINGLY, THE ASSESSEE OFF ERED THE SAID AMOUNT IN RESPECT OF ORDERS WITHOUT IT WAS ACCRUED AND WAS TA XED IN THE YEAR IN WHICH THE SAID AMOUNTS WERE OFFERED. 21. ON THE OBSERVATION OF ASSESSING OFFICER THAT INTERE ST ACCRUED TO THE SELLER ON THIS ISSUE, IT WAS POINTED OUT THAT INTEREST AMO UNT WAS RECEIVED IN AS MUCH AS THE FIRST INSTALMENT HAS ACCRUED TO THE ASS ESSEE. THEREFORE, THE INTEREST ACCRUED UNTIL SUCH DATE HAS ALSO ACCRUED T O THE ASSESSEE. THE SAID INTEREST WAS DULY OFFERED TO TAX. IN THE EVENT, CON TINGENT CONSIDERATION WAS NOT RECEIVABLE BY ASSESSEE, THE INTEREST THEREO N WOULD HAVE TO BE REFUNDED BACK TO THE PURCHASER SUCH TO SAME ADJUSTM ENT. THUS, INTEREST WAS TO BE TREATED IN ACCORDANCE WITH THE TERM OF CO NTRACTUAL AGREEMENT BETWEEN THE PARTIES AND CANNOT BE CONSIDERED AS BAS IS FOR CALCULATING THE ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 16 ENTIRE CONTINGENT ACCOUNT ACCRUED TO THE ASSESSEE. THE ASSESSING OFFICER HIMSELF ASSESSED THE AMOUNT DEPOSITED IN ESCROW ACC OUNT AS CAPITAL GAIN OF ASSESSEE. IF THE DEPOSIT IN THE ESCROW ACCOUNT W AS LINKED ONLY TO SUPPLY AGREEMENT THEN THE SAME WOULD BE IN THE NATU RE OF BUSINESS INCOME AND NOT CAPITAL GAIN. ONCE ACCEPTED THAT DEP OSIT IN THE ESCROW ACCOUNT IS IN THE NATURE OF CAPITAL GAIN, THE ONLY QUESTION ARISE IS THE POINT OF ACCRUAL OF SUCH CAPITAL GAIN. ON THE OBSER VATION OF LD. CIT(A) REGARDING THAT ESCROW AGREEMENT DOES NOT HAVE ANY I MPACT AND PROCESS OF SALE OF BUSINESS, IT WAS EXPLAINED THAT LD. CIT( A) COMPLETELY MISREAD THE AGREEMENT. PARAGRAPH NO. 4.1 TO 4.3, 7.3 AND 7. 4 OF BUSINESS PURCHASE AGREEMENT CLEARLY PROVES THAT IF THE CONDITIONS LAY DOWN IN CLAUSE-7.3 (PAYMENT OF CLOSING AMOUNT AND DEPOSIT IN ESCROW AC COUNT) ARE NOT FULFILLED THEN THE BUSINESS AGREEMENT WILL BE TERMI NATED. THE LD. AR OF THE ASSESSEE FINALLY SUBMITS THAT THERE IS NO DISPU TE ABOUT THE TRANSFER TOOK PLACE IN THE YEAR UNDER CONSIDERATION. HOWEVER , THE LIMITED ISSUE IS WHETHER THE CAPITAL GAIN IN RESPECT OF THE PORTION OF CONSIDERATION WHICH WAS CONTINGENT UPON FULFILMENT OF CONDITION ACCRUE D TO THE ASSESSEE DURING THE CURRENT YEAR. SECTION 45 R.W.S. 48 PROV IDES THAT CAPITAL GAIN IS CHARGED ONLY WHEN INCOME IS RECEIVED OR HAS ACCRUE D AS A RESULT OF TRANSFER OF CAPITAL ASSET. THE ASSESSEE DID NOT ACQ UIRE ANY RIGHT TO RECEIVE THE INCOME; INASMUCH AS SUCH ALLEGED RIGHT WAS DEPE NDENT UPON NECESSARY CONDITION BEING FULFILLED. THE ASSESSING OFFICER HIMSELF ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 17 ASSESSED THE AMOUNT DEPOSITED IN ESCROW ACCOUNT AS CAPTIAL GAIN OF THE ASSESSEE. IF THE DEPOSIT IN ESCROW ACCOUNT WAS NOT LINKED ONLY TO SUPPLY AGREEMENT THAN THE SAME WOULD BE IN THE NATURE OF B USINESS INCOME AND NOT CAPITAL GAIN. ONCE ACCEPTED THAT THE DEPOSIT IN ESCROW ACCOUNT IS IN THE NATURE OF CAPITAL GAIN, THE ONLY QUESTION WHICH ARISE IS THE POINT OF ACCRUAL OF SUCH CAPITAL GAIN. THE REVENUE IN SUBSEQ UENT YEARS TOO, HAS TAXED THE AMOUNT WITHDRAWN FROM ESCROW ACCOUNT AS A CAPITAL GAIN OF THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT IF THE VIEW OF THE AO THAT THE ENTIRE AMOUNT OF RS. 567 CRORE IS THE AMOUNT TO BE CONSIDERED FOR CAPITAL GAIN, THAN AS STATED EARLIER THE AMOUNT OF RS. 89.4 5 CRORE WAS CONTINGENT CONSIDERATION, WHICH MAY OR MAY NOT HAVE ACCRUED/AR ISEN TO THE ASSESSEE (DEPENDING ON FUTURE CONDITION BEING FULFILLED) AND THEREFORE, IN THIS ASSESSMENT YEAR IT WAS NOT POSSIBLE TO COMPUTE FUL L VALUE OF CONSIDERATION. 22. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASS ESSEE RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN SUNIL SIDDHART HBHAI [156 ITR 509 (SC)] AND IN CIT VS. GORGE HENDERSON & CO. LTD. [66 ITR 622 (SC)] WHEREIN IT WAS HELD THAT ABSENCE OF QUANTIFIABLE CO NSIDERATION RESULT IN FAILURE OF THE ASSESSEE FOR CHARGING CAPITAL GAIN T AX. ACCORDINGLY, IF CONTENTION OF AO ACCEPTED THEN FOLLOWING THE AFORES AID RATIO OF HONBLE APEX COURT, FULL VALUE OF CONSIDERATION NOT BEING D ETERMINABLE, THE CAPITAL GAIN ACCRUING ON ACCOUNT OF SLUM SALE WAS N OT DETERMINABLE AT ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 18 ALL. IT WAS SUBMITTED THAT FUNDAMENTAL RULE OF LAW ON TAXATION IS THAT UNLESS OTHERWISE EXPRESSLY PROVIDED, THE INCOME CAN NOT BE TAXED TWICE. THUS, THE LOWER AUTHORITY ERRED IN ASSESSING THE EN TIRE AMOUNT AS CHARGEABLE TO TAX IN THE CURRENT YEAR. IN SUPPORT O F HIS OTHER SUBMISSION, THE LD. AR OF THE ASSESSEE ALSO RELIED ON THE FOLLO WING DECISIONS: CIT VS. MRS. HEMAL RAJU SHETE (239 TAXMANN 176 (BOM . HC). CIT VS. BALBIR SINGH MAINI (398 ITR 531(SC). E.D. SASSOON & CO. LTD. VS. CIT (AIR 1954 SC 470). CIT VS. EXCEL INDUSTRIES (358 ITR 295 SC). MORVI INDUSTRIES LTD. VS. CIT (82 ITR 835 SC). LATE SHRI GORDHANDAS S. GARODIA (THROUGH LRS VS. D CIT (ITA NO. 5097/MUM/2015. CIT VS. M/S NAGARJUNA FERTILISER (ITTA NO. 100 OF 2 003 (AP HIGH COURT. DCIT VS. ROHAN PROJECTS (113 TAXMANN.COM 339 BOM .) 23. THE ASSESSEE HAS PLACED FOLLOWING DOCUMENTS ON REC ORD; (I) LTCG WORKING STATEMENT FROM AY 2013-14 TO 2015- 16, (II) HSBC BANK STATEMENT SHOWING THE AMOUNT RECEIVE D FOR SALE CONSIDERATION OF ASSESSEES MARKETING DIVISION ON 0 3.11.2011, (III) COPY OF ESCROW AGREEMENT BETWEEN ASSESSEE, PU RCHASER AND HSBC BANK, (IV) COPY OF ESCROW RELEASE LETTER AND RECEIPT OF A CCOUNTS IN HSBC A/C FOR AY 2012-13 TO 2015-16 AND (V) COPY OF COMPUTATION OF INCOME FOR AY 2012-13 WI TH ANNUAL ACCOUNTS. ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 19 24. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. THE LD. DR SUBMITS THAT ASSESSEE SOLD ITS MARKETING DIVISION TO AVENTIS PHARMA LTD., NOW KNOWN AS SANOF I INDIA LTD.(SIL) THE ASSESSEE CLAIMED THE SALE AS A SLUMP SALE. ACCO RDING TO THE ASSESSEE, THE CONSIDERATION OF SALE OF WAS RS. 567.07 CRORE. THE ASSESSEE CLAIMED THAT ONLY RS. 477.30 CRORE WAS RELEVANT FOR THE COM PUTATION OF CAPITAL GAIN IN A.Y. 20012-13. AND RS. 89.45 CRORE WAS PLAC ED IN ESCROW ACCOUNT AGAINST A SUPPLY AGREEMENT WITH THE SIL. TH E ASSESSEE FILED ITS AUDIT REPORT IN FORM NO. 3CEA RELATING TO COMPUTATI ON OF CAPITAL GAIN IN SLUMP SALE. IT WAS SUBMITTED THAT AS PER SECTION 45, CAPITAL GAIN ARISING FROM TRANSFER OF CAPITAL ASSET AFFECTED IN THE PREVIOUS YEAR IS CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAIN AND SHALL BE DEEMED TO BE INCOME OF PREVIOUS YEAR IN WHICH TRANSFER TOOK P LACE. THE LD. DR FURTHER SUBMITS THAT SECTION 48 IS THE COMPUTATION SECTION FOR CAPITAL GAINS AND REFERRED TO ONLY TWO DEDUCTIONS, NAMELY ( I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER AND (II) THE COST OF ACQUISITION OF ASSET AND ANY IMPROVEMEN T THERETO. THE LD. DR SUBMITS THAT DEDUCTION CLAIMED BY ASSESSEE ON ACCOU NT OF AMOUNT OF RS. 89.45 CRORE PLACED IN ESCROW ACCOUNT IS NOT ALLOWAB LE AS PER SECTION 48. 25. ON THE SUBMISSION OF LD. AR OF THE ASSESSEE THAT TH E REMAINING AMOUNT OF RS. 89.45 CRORE HAS BEEN OFFERED IN THE SUBSEQUENT YEARS, THE LD. DR SUBMITS THAT THE CHARGEABILITY ARISES ONLY IN THE Y EAR IN WHICH TRANSFER ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 20 TOOK PLACED AND THE RELEVANT A.Y. IS 2012-13 ONLY. IN ANY EVENT THE ASSESSEE HAS SET IT OFF AGAINST LOSSES WHICH WOULD NEVER HAVE BEEN THE CASE HAD IT BEEN OFFERED TO TAX IN THE YEAR OF TRAN SFER WHICH IS IN A.Y. 2012-13 IN THIS CASE. THE LD. DR FURTHER SUBMITS TH AT THE ASSESSEE HAS SHOWN RS. 17.89 CRORE FOR EACH OF SUBSEQUENT AYS AS NET CAPITAL GAIN ON TRANSFER OF BUSINESS PURCHASE AGREEMENT. HOWEVER, F OR A.Y. 2014-15 AND 2015-16 THIS AMOUNT OF RS. 17.89 CRORE IN EACH YEAR , HAS BEEN SET OFF AGAINST THE LONG TERM CAPITAL LOSS ON SALE OF MUTUA L FUNDS OF RS. 7.55 CRORE AND RS. 4.36 CRORE RESPECTIVELY. HOWEVER, IT IS NOT KNOWN AS TO WHAT AMOUNT WERE DECLARED FOR A.Y. 2016-17. 26. THE LD. DR FURTHER SUBMITS THAT IN THE BUSINESS PUR CHASE AGREEMENT DATED 24.08.2011 BETWEEN ASSESSEE AND AVENTIS PHARMA LTD. THERE IS RECITAL (A) THE SELLER IS, INTERALIA ENGAGED IN THE BUSINE SS (AS DEFINED BELOW). GELTEC IS, INTERALIA ENGAGED IN THE BUSINESS OF MAN UFACTURING NUTRACEUTICAL AND PHARMACEUTICAL PRODUCT. (B) THE SELLER HAS AGREED TO SALE THE BUSINESS AND TO ASSUME THE OBLIGATION IMPO SED ON THE SELLER UNDER THIS AGREEMENT. (C) THE PROMOTER COLLECTIVELY HOLDS 100% OF THE ISSUED AND PAID-UP SHARE CAPITAL OF THE SELLER AND GELTEC. (D) THE PURCHASER HAD AGREED TO PURCHASE THE BUSINESS OF A GOING CONCERN AND ON A SLUMP SALE BASIS, AND TO ASSUME THE OBLIGATION IMPOSED ON THE PURCHASER UNDER THIS AGREEMENT. THE LD. DR SUBMITS THAT FROM THE ABOVE RECITAL IT IS EVIDENT THAT THE TRANSACTION BE TWEEN ASSESSEE AND ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 21 AVENTIS PHARMA IS THAT OF SLUMP SALE AND OBLIGATION IMPOSED ON THE PURCHASER ARE SEPARATE FROM THE SLUMP SALE TRANSACT ION. THE LD. DR FURTHER SUBMITS THAT CLAUSE 2 OF BUSINESS PURCHASE AGREEMENT (BPA) IS THE AGREEMENT TO SALE THE BUSINESS, THUS WHAT IS SO LD ARE THE ASSET MENTIONED AND THE SO-CALLED DEDUCTION OF RS. 89.45 CRORE ON ACCOUNT OF SUPPLEMENTARY AGREEMENT IS NOT A PART OF SLUMP SALE . FURTHER, THE OTHER CLAUSE OF THE BUSINESS PURCHASE AGREEMENT, IT IS CL EARLY ESTABLISHES THAT SLUMP SALE CONSIDERATION IS RS. 567.07 CRORE. THIS PRICE IS SUBJECT TO ADJUSTMENT IS AN EVENT ONLY SUBSEQUENT TO THE SLUMP SALE. A SALE OF GOING CONCERN IS EITHER SLUMP SALE OR NOT A SLUMP SALE. T HE ASSESSEE CANNOT CLAIM TO SLUMP SALE UNDER SECTION 50B AND AT THE SA ME TIME CAN STAY CLAIM THAT IT IS NOT A GOING CONCERN TRANSACTION BU T SUBJECT TO ADJUSTMENT. THE LD. DR VEHEMENTLY SUBMITS THAT THE TRANSFER OF BUSINESS ON WHICH THE CAPITAL GAINS ARISE IS NOT DEPENDENT ON THE SUPPLY AGREEMENT. IN SUPPORT OF HER SUBMISSION, THE LD. DR FOR THE REVENUE RELIE D UPON THE FOLLOWING DECISIONS: T.A. TAYLOR (P.) LTD. (ITA NO. 622/CHNY/2017 DT. 19 .07.2018. CIT VS. ROHTAK TEXTILES LTD. 138 ITR 195 (DEL.) AJAY GULIYA VS. ACIT [2012] 24 TAXMAN.COM 276(DEL.) DT. 16.07.2012. E.D. SASSON & CO. LTD. VS. CIT (267 ITR 27 (SC). MORVI INDUSTRIES LTD. VS. CIT [1971] 82 ITR 835. CIT VS. ASHOKBHAI CHIMANBHAI [1965] 56 ITR 42 (SC). CIT VS. EQUINOX SOLUTION (P.) LTD. [2017] 393 ITR 5 66 (SC). ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 22 27. THE LD. DR FOR THE REVENUE ALSO FURNISHED HER WRITT EN SUBMISSION RUNNING INTO 22 PAGES. THE RELEVANT PART OF HER SUBMISSION ARE EXTRACTED BELOW : 1 . CLEARLY THE DEDUCTION CLAIMED BY THE APPELLANT ON ACCOUNT OF AMOUNT OF RS 89.45 CR PLACED IN ESCROW ARE NOT ALLOWABLE PER SEC 48. FURTHER, THE COMPUTATION OF CAPITAL GAINS IN A SLUMP SALE IS PER SEC 50 B AND THE APPELLANT HAS NOT DEMONSTRATED HOW THE DEDUCTION OF RS 89.45 CR IS PER SEC 50B. THIS IS IN THE FACE OF THE ARGUMENT OF THE LD COUNSEL STATI NG THAT, 'SLUMP SALE IS NOT A DIFFERENT ANIMAL.' 2. WITH RESPECT TO THE LD COUNSEL'S ARGUMENT THAT T HIS LONG TERM CAPITAL GAINS OF RS 89.45 CR HAS BEEN OFFERED IN THE SUBSEQUENT Y EARS, IT IS SUBMITTED THAT THE CHARGEABILITY ARISES IN THE YEAR IN WHICH THE TRANS FER HAPPENED AND THIS IS RELEVANT AY 12-13 ONLY. IN ANY EVENT, THE APPELLANT HAS SET IT OFF AGAINST LOSSES WHICH 'AULD NEVER HAVE BEEN THE CASE HAD IT BEEN OFFERED TO TAX IN THE YEAR OF TRANSFER, THAT IS 12-13. THE APPELLANT FILED A PAPER BOOK ON 17 TH AUGUST 2017 WHICH CONTAINS 322 PAGES. PLEASE SEE PP 1-31 AT S1. NO.1 OF INDEX WHICH IS LT CG WORKING STATEMENT FROM AY. 2013-14 TO AY. 2015-16 ALONG WITH COMPUTAT ION OF INCOME FOR CLAIMING OF ESCROW AMOUNT FROM AY. 13-14 TO A.Y. 15 -16. THE APPELLANT HAS SHOWN RS.17,89,00,000/- FOR EACH OF THE FOLLOWING A SSESSMENT YEARS I.E. AY. 2013-14, 2014-15 AND 2015-16 AS NET CAPITAL GAIN ON TRANSFER OF BUSINESS PURCHASE AGREEMENT, HOWEVER, FOR AY. 2014-15 AND 15 -16, THIS AMOUNT OF RS.17,89,00,000/- IN EACH YEAR, HAS BEEN SET OFF AG AINST LONG TERM CAPITAL LOSS ON SALE OF MUTUAL FUNDS OF RS. ,55,32,730/- AN D RS. 4,36,86,371/ RESPECTIVELY. IT IS NOT KNOWN WHAT AMOUNTS WERE DEC LARED FOR AY. 2016-17. 3. PLEASE SEE BUSINESS PURCHASE AGREEMENT AT S1. O. 5 OF THE INDEX WHICH IS AT PP 82-196. THIS BUSINESS PURCHASE AGREEMENT IS DATE D 24.08.2011 AND IS BETWEEN AVENTIS PH ARM A LTD. AND UNIVERSAL MEDICAR E PVT. LTD. PLEASE SEE PP 91 WHERE THE RECITAL IS AS FOLLOWS' (A) THE SELLER IS, INTER-ALIA ENGAGED IN THE BUSINE SS (AS DEFINED BELOW). GELTEC IS, INTER-ALIA ENGAGED IN THE BUSINESS OF MANUFACTU RING NUTRACEUTICAL AND PHARMACEUTICAL PRODUCTS. (B) THE SELLER HAS AGREED TO SELL THE BUSINESS AND TO ASSUME THE OBLIGATIONS IMPOSED ON THE SELLER UNDER THIS AGREEMENT. (C) THE PROMOTERS, COLLECTIVELY, HOLD 100% OF THE ISSUED AND PAID-UP SHARE CAPITAL O F THE SELLER AND GELTEC. (D) THE PURCHASER HAS AGREED TO PURCHASE THE BUSINE SS AS A GOING CONCERN AND ON A SLUMP SALE BASIS, AND TO ASSUME THE OBLIGATION S IMPOSED ON THE PURCHASER UNDER THIS AGREEMENT.' IT IS EVIDENT FROM THIS RECITAL THAT THE TRANSACTIO N BETWEEN UNIVERSAL MEDICARE PVT. LTD. AND AVENTIS PH ARM A LTD. IS THAT OF A SL UMP SALE AND THE OBLIGATIONS IMPOSED ON THE PURCHASER I.E. AVENTIS PHARMA LTD. A RE SEPARATE FROM THE SLUMP SALE TRANSACTION. 4. PLEASE SEE CLAUSE 2 AT INTERNAL PP 14 OF THE BPA AND PP 101 OF THE PB WHICH IS 'AGREEMENT TO SELL THE BUSINESS' AND THE R ECITAL IS AS FOLLOWS: '2.1 SALE OF THE BUSINESS.2.1.1 ON AND SUBJECT TO THE TE RMS OF THIS AGREEMENT, THE SELLER AGREES TO SELL AND THE PURCHASER AGREES TO P URCHASE THE BUSINESS, AS ON THE CLOSING DATE, AS A GOING CONCERN, ON A SLUMP SA LE BASIS. 'AT CLAUSE 2.1.2 ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 23 THE BUSINESS TO BE SOLD IS DETAILED AT SUB CLAUSE ( I) TO (XI) AND THIS COMPRISES INTER-ALIA, PRODUCTS, BUSINESS IPR, CONTRACTS, PERM ISSIONS, INVENTORY ETC. THUS, WHAT IS SOLD ARE THE ASSETS MENTIONED, AND TH E DEDUCTION ON OF RS 89.45 CR ON ACCOUNT OF SUPPLEMENTARY AGREEMENT IS THEREFO RE NOT PART OF THE SLUMP SALE. 5. PLEASE SEE CLAUSE 4 IN INTERNAL PP 21 OF BPA WHI CH IS PP 108 OF PB. CLAUSE 4 IS 'CONSIDERATION AND ESCROW ARRANGEMENT'. CLAUSE 4.1 READS AS FOLLOWS 'ON THE CLOSING DATE, THE PURCHASER SHALL PAY RS. 5 ,670,700,000 (RUPEES FIVE BILLION SIX HUNDRED SEVENTY MILLION SEVEN HUNDRED T HOUSAND) AS THE LUMP SUM CONSIDERATION FOR THE SALE AND TRANSFER OF THE BUSI NESS UNDER THIS AGREEMENT AS AND BY WAY OF SLUMP SALE AS A WHOLE AS A GOING CONC ERN (THE PURCHASE PRICE'). THE PURCHASE PRICE PAID AT CLOSING IS SUBJECT TO TH E ADJUSTMENTS SET OUT IN CLAUSE 8.3 AND CLAUSE 8.4 OF THIS AGREEMENT:' THIS CLAUSE ESTABLISHES THAT THE LUMP SUM CONSIDERA TION FOR SLUMP SALE I.E. THE PURCHASE PRICE IS RS.567,07,00,000/-. THAT THIS PUR CHASE PRICE IS SUBJECT TO ADJUSTMENTS IS AN EVENT ONLY SUBSEQUENT TO THE SLUM P SALE. A SALE AS A GOING CONCERN IS EITHER A SLUMP SALE OR NOT A SLUMP SALE. ASSESSEE CANNOT STAKE A CLAIM TO SLUMP SALE U/S. 50B AND IN THE SAME BREATH STAKE A CLAIM THAT IT IS NOT A GOING CONCERN TRANSACTION BUT SUBJECT TO ADJUSTME NTS. HAVING CLAIMED THE SAID TRANSACTION WITH AVENTIS PHARMA AS TRANSFER OF A GOING CONCERN AS SLUMP SALE, THE COMPUTATION OF CAPITAL GAINS IS AGAINST T HE LUMP SUM CONSIDERATION OF RS. 567,07,00,000/-. IF THE ASSESSEE IS STAKING A C LAIM THAT LUMP SUM CONSIDERATION OF RS. 567,07,00,000/- IS SUBJECT TO ADJUSTMENT THEN IT CANNOT BE TAXED AS A SLUMP SALE U/S. 50B AND THE ASSESSEE WOU LD HAVE TO CALCULATE CAPITAL GAINS OF INDIVIDUAL ASSETS. 6. PLEASE SEE CLAUSE 4.2 WHICH READS AS FOLLOWS 'TH E SELLER WILL INSTRUCT THE PURCHASER TO PLACE AN AMOUNT OF RS. 894,500,000 (RU PEES EIGHT HUNDRED NINETY FOUR MILLION FIVE HUNDRED THOUSAND) (THE 'ES CROW AMOUNT'] OUT OF THE PURCHASE PRICE PAYABLE UNDER THIS AGREEMENT IN ESCR OW IN AN INTEREST BEARING BANK ACCOUNT (THE ESCROW ACCOUNT) OPENED WITH THE E SCROW BANK. THE ESCROW ACCOUNT WILL BE OPERATED BY THE ESCROW AGENT IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE ESCROW AGREEMENT.' THIS CLAUSE MAKES IT AMPLY CLEAR THAT THE AMOUNT OF RS.894,500,000/- PLACED IN THE ESCROW ACCOUNT IS OUT OF THE PURCHASE PRICE PAYABLE UNDER THIS AGREEMENT. THUS, THIS RS.894,500,000/- IS AN APPLIC ATION OF THE LUMP SUM CONSIDERATION OF RS.567,07,00,000/-. 7. PLEASE SEE CLAUSE 6.4 WHICH IS 'TERMINATION- MAT ERIAL ADVERSE CHANGE'. IT READS AS FOLLOWS 'IF PRIOR TO CLOSING ANY MATERIAL CHANGE SHALL OCCUR, THE PURCHASER SHALL BE ENTITLED BY NOTICE IN WRITING TO THE SELLER TO TERMINATE THIS AGREEMENT (OTHER THAN PROVISIONS OF CLAUSE 1 (DEFIN ITIONS AND INTERPRETATION). 16, 17.2 TO 17.14,18,19 AND 20). THE TERMINATION OF THIS AGREEMENT UNDER THIS CLAUSE 6.4 SHALL NOT RELEASE ANY PARTY FROM ANY LIA BILITY WHICH AT THE TIME OF TERMINATION HAS ALREADY ACCRUED TO ANOTHER PARTY, O R WHICH THEREAFTER MAY ACCRUE IN RESPECT OF ANY ACT OR OMISSION PRIOR TO S UCH TERMINATION. 'ALSO SEE CLAUSE 7.4 WHICH IS 'BREACH OF CLOSING OBLIGATIONS' . NONE OF THESE CLAUSES STIPULATE THAT IN THE EVENT O F NOT MEETING ANY REQUIREMENT, THE GOING CONCERN WILL REVERT TO THE S ELLER; WHEN SUCH IS THE CASE THERE IS NO QUESTION OF A PART OF THE LUMP SUM CONS IDERATION BEING PAYABLE TO THE SELLER CONTINGENT ON THE FULFILLMENT OF CERTAIN OBLIGATION BY THE SELLER. ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 24 8. PLEASE SEE SCHEDULE 21 AT PP 168 OF THE PB WHICH IS A SUPPLY AGREEMENT (DATE UNKNOWN) BETWEEN AVENTIS PHARMA LTD. AND UNIV ERSAL MEDICARE PVT. LTD. FROM THE RECITAL IT IS CLEAR THAT THIS AGREEME NT IS PURSUANT TO THE BPA AND THAT PURSUANT TO THE BPA, APL IS DESIROUS OF PURCHA SING PRODUCTS FROM UNIVERSAL MEDICARE AND UNIVERSAL MEDICARE HAS AGREE D TO MANUFACTURE AND SUPPLY PRODUCTS TO APL ON THE TERMS AND CONDITIONS SET OUT IN THIS AGREEMENT. THUS, THIS SUPPLY AGREEMENT CANNOT BE READ INTO THE BPA TO DRAW AN INFERENCE OF DEDUCTION AGAINST THE LUMP SUM CONSIDE RATION. 9. PLEASE SEE CLAUSE 12 AT PP 190 OF PB WHICH ARE T HE CONSEQUENCES OF TERMINATION AND IT IS EVIDENT FROM THIS CLAUSE THAT TERMINATION DOES NOT ENTAIL THE GOING CONCERN TO REVERTED TO THE SELLER I.E. UN IVERSAL MEDICARE PVT. LTD. 10. PLEASE REFER TO INTERNAL PP 5 AND 92 OF THE PB, WHEREIN' CLOSING AMOUNT' MEANS AN AMOUNT EQUAL TO THE PURCHASE PRICE LESS TH E ESCROW AMOUNT. 11. PLEASE REFER TO INTERNAL PP 10 AND 97 OF THE PB , WHEREIN' PURCHASE PRICE' HAS THE MEANING SET OUT IN CLAUSE 4.1; 12. PLEASE REFER TO INTERNAL PP 14 AND 101 OF THE P B, WHEREIN CLAUSE 2 READS AS, AGREEMENT TO SELL THE BUSINESS SALE OF THE BUSINESS 12.1.1 ON AN SUBJECT TO THE TERMS OF THIS AGREEMENT , THE SELLER AGREES TO SELL, AND THE PURCHASER AGREES TO PURCHASE, THE BUSINESS, AS ON THE CLOSING DATE, AS GOING CONCERN ON A SLUMP SALE BASIS. 12.1.2 SUBJECT TO THE TERMS OF THIS AGREEMENT, THE BUSINESS TO BE SOLD PURSUANT TO THIS AGREEMENT SHALL COMPRISE OF: (I) THE PRODUCTS; [II] THE BUSINESS IPR; [III] THE CONTRACTS (WHICH ARE IN FORCE ON THE CLOS ING DATE), SUBJECT TO THE PROVISIONS PART 4 OF SCHEDULE 2; (IV) THE PERMISSIONS, TO THE EXTENT THEY CAN BE TRA NSFERRED UNDER LAW; (V) THE INVENTORY SUBJECT TO THE PROVISIONS OF CLAU SE 6.2; (VI) THE COMPLETE CUSTOMER FILES AND RECEIVABLES TH EREON; [VII] THE RELEVANT EMPLOYEES OF THE SELLER, TOGETHE R WITH ANY ADVANCES GIVEN TO SUCH RELEVANT EMPLOYEES, SUBJECT TO CLAUSES 5.1. 3 AND 5.3.2; (VIII] THE BOOKS AND RECORDS, SUBJECT TO CLAUSE 9.4 .5; [IX] THE GOODWILL RELATING TO THE BUSINESS, TOGETHE R WITH THE EXCLUSIVE RIGHT FOR THE PURCHASER TO REPRESENT ITSELF AS CARRYING ON T HE BUSINESS IN SUCCESSION TO THE SELLER. (X) THE ASSUMED LIABILITIES, AND (XI) ALL TANGIBLE ASSETS RELATED TO OR HELD FOR USE EXCLUSIVELY IN CONNECTION WITH THE BUSINESS AS SET OUT IN SCHEDULE 19. 2.1.3. THE SELLER AGREES AND ACKNOWLEDGES THAT THE ASSETS-AND LIABILITIES BEING TRANSFERRED AS A PART OF THE BUSINESS PURSUANT TO C LAUSE 2.1.2 (ABOVE) ARE SUFFICIENT TO ENSURE THE CONTINUITY OF THE BUSINESS BY THE PURCHASER, AS FROM THE CLOSING DATE, AS A GOING CONCERN. 2.1.4 THE BUSINESS SHALL BE SOLD FREE FROM ALL ENCU MBRANCES. ' 3.4 ESCROW AGREEMENT THE SELLER, THE PURCHASER AND THE ESCROW AGENT WILL ENTER INTO AN ESCROW AGREEMENT WHICH WILL INTER ALIA SET OUT THE TERMS A ND CONDITIONS UPON WHICH THE ESCROW AMOUNT WILL BE DEPOSITED INTO THE ESCROW ACCOUNT AND RELEASED BY THE ESCROW AGENT TO THE SELLER AND/OR THE PURCHA SER, AS THE CASE MAY BE, IN ACCORDANCE WITH THE PROVISIONS OF SCHEDULE ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 25 16. THE ESCROW AGREEMENT SHALL BE ENTERED INTO AT C LOSING. THE ESCROW AGREEMENT WILL PROVIDE FOR THE RELEASE OF MONIES DE POSITED INTO THE ESCROW ACCOUNT PURSUANT TO THE RECEIPT BY THE ESCROW AGENT OF AN INSTRUCTION FROM THE SELLER OR THE PURCHASER AS PER SCHEDULE 29, UPO N THE OCCURRENCE OF THE EVENTS SET OUT IN SCHEDULE 16 TO THE AGREEMENT EACH OF THE PARTIES TO THIS AGREEMENT AGREES TO WORK TOGETHER IN GOOD FAITH AND USE THEIR RESPECTIVE REASONABLE EFFORTS TO AGREE THE TERMS OF THE ESCROW AGREEMENT WITH THE ESCROW AGENT PRIOR TO THE CLOSING. 4. CONSIDERATION AND ESCROW ARRANGEMENT 4.1 ON THE CLOSING DATE, THE PURCHASER SHALL PAY RS .5,670,700,000 (RUPEES FIVE BILLION SIX HUNDRED SEVENTY MILLION SEVEN HUND RED THOUSAND) AS THE LUMP SUM CONSIDERATION FOR THE SALE AND TRANSFER OF THE BUSINESS UNDER THIS AGREEMENT AS AND BY WAY OF SLUMP SALE AS A WHOLE AS A GOING CONCERN (THE 'PURCHASE PRICE'). THE PURCHASE PRICE PAID AT CLOSI NG IS SUBJECT TO THE ADJUSTMENTS SET OUT IN CLAUSE 8.3 AND CLAUSE 8.4 OF THIS AGREEMENT 4.2 THE SELLER WILL INSTRUCT THE PURCHASER TO PLACE AN AMOUNT OF RS. 894,500,000 (RUPEES EIGHT HUNDRED NINETY FOUR MILLI ON FIVE HUNDRED THOUSAND) (THE 'ESCROW AMOUNT'] OUT OF THE PURCHASE PRICE PAYABLE UNDER THIS AGREEMENT IN ESCROW IN AN INTEREST BEARING BANK ACC OUNT (THE 'ESCROW ACCOUNT'] OPENED WITH THE ESCROW BANK. THE ESCROW A CCOUNT WILL BE OPERATED BY THE ESCROW AGENT IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE ESCROW AGREEMENT. 4.3 THE ESCROW AMOUNT (TOGETHER WITH THE RELEVANT P ROPORTION OF INTEREST ACCRUED THEREON) WILL BE RELEASED TO THE SELLER AND /OR THE PURCHASER, AS THE CASE MAY BE, IN ACCORDANCE WITH TERMS AND CONDITION S SET OUT IN SCHEDULE 16 OF THIS AGREEMENT AND THE ESCROW AGREEMENT. 8.3 ADJUSTMENT OF THE PURCHASE PRICE FOR LIABILITIE S (I) IF THERE ARE ANY LIABILITIES (OTHER THAN LIABIL ITIES RELATING TO EXPIRED PRODUCTS) THAT HAVE BEEN TRANSFERRED TO THE PURCHAS ER AS PER THE CLOSING BALANCE SHEET IN ADDITION TO THE ASSUMED LIABILITIE S, THE SELLER SHALL REPAY (AND THE PROMOTERS SHALL PROCURE THAT THE SELLER SH ALL REPAY) TO THE PURCHASER AN AMOUNT EQUAL TO SUCH ADDITIONAL LIABILITIES AS A SSUMED BY PURCHASER AS AT CLOSING. (II) IF THE ASSUMED LIABILITIES SET OUT IN THE CLOS ING BALANCE SHEET ARE MORE THAN RS.3,800,000 (RUPEES THREE MILLION EIGHT HUNDR ED THOUSAND), THE SELLER SHALL REPAY (AND THE PROMOTERS SHALL PROCURE THAT T HE SELLER SHALL REPAY) TO THE PURCHASER AN AMOUNT EQUAL TO ASSUMED LIABILITIES SE T OUT IN THE CLOSING BALANCE SHEET LESS RS.3,800,000 (RUPEES THREE MILLI ON EIGHT HUNDRED THOUSAND). (III) IF THE ASSUMED LIABILITIES SET OUT IN THE CLO SING BALANCE SHEET ARE LESS THAN RS. 3,800,000 (RUPEES THREE MILLION EIGHT HUND RED THOUSAND], THE PURCHASER SHALL PAY TO THE SELLER AN ADDITIONAL AMO UNT EQUAL TO RS. 3,800,000 (RUPEES THREE MILLION EIGHT HUNDRED THOUSAND) LESS THE ASSUMED LIABILITIES SET OUT IN THE CLOSING BALANCE SHEET. (IV) ANY PAYMENT PURSUANT TO THIS CLAUSE 8.3 SHALL BE MADE ON OR BEFORE 10 (TEN) BUSINESS DAYS AFTER THE DATE ON WHICH THE PRO CESS DESCRIBED IN PARAGRAPH 3 OF PART 1 OF SCHEDULE 9 IS COMPLETE. 8.4 ADJUSTMENT OF THE PURCHASE PRICE FOR NET WORKIN G CAPITAL (I) IF THE NET WORKING CAPITAL SET OUT IN THE CLOSI NG BALANCE SHEET IS LESS THAN RS.73,250,000(SEVENTY THREE MILLION TWO HUNDRED FIF TY THOUSAND), THE SELLER SHALL REPAY (AND THE PROMOTERS SHALL PROCURE THAT T HE SELLER SHALL REPAY) TO THE ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 26 PURCHASER AN AMOUNT EQUAL TO RS.73,250,000 (SEVENTY THREE MILLION TWO HUNDRED FIFTY THOUSAND), LESS THE NET WORKING CAPIT AL SET OUT IN THE CLOSING BALANCE SHEET. (II) IF THE NET WORKING CAPITAL SET OUT IN THE CLOS ING BALANCE SHEET IS MORE THAN RS.73,250,000 (SEVENTY THREE MILLION TWO HUNDR ED FIFTY THOUSAND), THE PURCHASER WILL PAY TO THE SELLER AN ADDITIONAL AMOU NT EQUAL TO THE NET WORKING CAPITAL SET OUT IN THE CLOSING BALANCE SHEE T LESS RS.73,250,000 (SEVENTY THREE MILLION TWO HUNDRED FIFTY THOUSAND) AND ANY PAYMENT PURSUANT TO THIS CLAUSE 8.3 SHALL BE MA DE ON OR BEFORE 10 (TEN) BUSINESS DAYS AFTER THE DATE ON WHICH THE PROCESS D ESCRIBED IN PARAGRAPH 3 OF PART 1 OF SCHEDULE 9 IS COMPLETED. II IT IS AMPLY CLEAR FROM THE ABOVE THAT ON THE CLOSIN G DATE, THE PURCHASER SHALL PAY RS.5,670,700,000 AS THE LUMP SUM CONSIDERATION FOR THE SALE AND TRANSFER OF THE BUSINESS BY WAY OF SLUMP SALE AS A WHOLE AS A GOING CONCERN AND THIS RS.5,670,700,000 IS THE 'PURCHASE PRICE' WHICH IS T O BE PAID AT CLOSING AND THIS IS SUBJECT ONLY TO THE ADJUSTMENTS SET OUT IN CLAUSE 8.3 AND CLAUSE 8.4 WHICH ARE 'ADJUSTMENT OF THE PURCHASE PRICE FOR LIA BILITIES' AND 'ADJUSTMENT OF THE PURCHASE PRICE FOR NET WORKING CAPITAL' AND THESE CLAUSES DO NOT REFER TO THE ESCROW AMOUNT AND /OR THE SUPPLY AGREEMENT. THUS, DEDUCTION OF AMOUNT PLACED IN ESCROW ACCOUNT CANNOT BE CLAIMED A GAINST THE LUMP SALE CONSIDERATION. IT IS ALSO EVIDENT THAT THE AMOUNT IS PLACED IN ESC ROW AT THE INSTRUCTIONS OF THE SELLER; THE AMOUNT PLACED IN ESCROW ACCOUNT IS THUS AN APPLICATION OF THE LUMP SUM SALE CONSIDERATION ARISING FROM SLUMP SALE AND NOT ALLOWABLE AS A DEDUCTION THEREFORE. 13. PLEASE SEE FORM NO 3CEA FILED BY ASSESSEE APPEL LANT IN THE AY 12-13. FORM 3 CEA IS THE 'REPORT OF AN ACCOUNTANT TO BE FU RNISHED BY AN ASSESSEE UNDER SUB-SECTION (3) OF SECTION 50 B OF THE INCOME TAX ACT, 1961 RELATING TO COMPUTATION OF CAPITAL GAINS IN CASE OF SLUMP SALE' . 14. ALSO SEE COPY OF LETTER DT. 3.2.2012 , PLACED A T ANNEXURE 1, WHICH IS A LETTER ADDRESSED TO AVENTIS PHARMA LIMITED FROM UNI VERSAL MEDICARE PVT. LTD, THE SUBJECT LINE OF WHICH READS, RE: ADJUSTMENT OF THE PURCHASE PRICE PURSUANT TO C LAUSE 8 OF THE BUSINESS PURCHASE AGREEMENT DATED 24TH AUGUST 2011. THIS LE TTER READS AS FOLLOWS, ' ... ACCORDINGLY, THE NET CONSIDERATION RECEIVED BY US FOR SALE OF THE BUSINESS IS AS FOLLOWS: AMOUNT RECEIVED FROM YOU ON THE CLOSING DATE RS. 5 ,670,700,0000 LESS: AMOUNT REFUNDED TO YOU AS MENTIONED ABOVE RS. 58,504,174 ------------------- NET CONSIDERATION RECEIVED RS.5,612,195,826/-' 15. PLEASE SEE PB 4 FILED BY APPELLANT. PP 21 AND 2 9 IS SUBMISSION OF ASSESSEE APPELLANT VIDE LETTER DATED 18.08.2016 AND 21.03.20 17 ADDRESSED TO DCIT CENTRAL CIRCLE 3(2), MUMBAI AND CIT A RESPECTIVELY. HEREIN IT IS UNEQUIVOCALLY STATED THAT, ' OUR CLIENT HAS ENTERED INTO AN AGREEMENT DATED 24.08.2011 FOR SALE OF MARKETING DIVISION FOR A TOT AL CONSIDERATION OF RS 567.07 CRORES, OUT OF THE ABOVE CONSIDERATION RS 89 .45 CRORES WAS DEPOSITED IN AN ESCROW ACCOUNT WITH HSBC AND THESE AMOUNTS WERE PAYABLE TO OUR CLIENT ONLY ON SATISFACTION OF CERTAIN CONDITIONS ... '. ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 27 IT IS AMPLY CLEAR THAT THE CONSIDERATION WAS RS 567 .07 CR AND OUT OF THIS RS 89.45 CR WAS PLACED IN ESCROW ACCOUNT. 16. PLEASE REFER TO PP 35 OF THIS PB 4 WHICH IS ' N OTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2014' . HERE TOO , IT UNEQUIVOCALLY STATED THAT THE GROSS CONSIDERATION IS RS 5,670,700,000/- OUT O F WHICH RS 894,500,000/- IS PLACED BY THE PURCHASER IN ESCROW ACCOUNT OPENED WI TH THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, WHICH WILL BE PAID TO THE COMPANY ANNUALLY IN FIVE EQUAL INSTALLMENTS SUBJECT TO ACHI EVEMENT OF CERTAIN PERFORMANCE TARGETS EVERY YEAR.' THUS, THE AMOUNT P LACED IN ESCROW IS ONLY AN APPLICATION OF THE GROSS CONSIDERATION OF RS 5,6 70,700,000; AND THEREFORE NO DEDUCTION AGAINST THIS LUMP SUM CONSIDERATION IS ALLOWABLE PER SEC 50 B. 17. PLEASE SEE PRAYER FOR ADMISSION ADDITIONAL EVID ENCE U/R 29 OF ITAT RULES, 1962 FILED BY REVENUE VIDE LETTER DATED 2.7.2018. T HIS IS THE AUDITOR'S REPORT OF SANOFI INDIA LTD. (FORMERLY AVENTIS PHARMA LTD.) FOR THE ACCOUNTS FOR Y.E. 31.03.2012 AND THIS REPORT IS DATED 12.11.2012. PLE ASE PP 28 WHICH IS THE SCHEDULES ANNEXED TO AND FORMING PART OF THE FINANC IAL STATEMENT FOR THE Y.E. 31.03.2012 OF SANOFI INDIA LTD. (FORMERLY AVENTIS P HARMA LTD.). PLEASE SEE CLAUSE 16 WHICH DISCUSSES THE BPA WITH UNIVERSAL ME DICARE PVT. LTD. THE NARRATION IS AS FOLLOWS 'DURING THE YEAR, THE COMPA NY ENTERED INTO BUSINESS PURCHASE AGREEMENT (THE 'AGREEMENT WITH UNIVERSAL MEDICARE PRIVATE LIMITED (UML) FOR PURCHASE OF MARKETING AND DISTRIB UTION BUSINESS OF BRANDED NUTRACEUTICAL FORMULATIONS IN INDIA ON A GO ING CONCERN BASIS VIA SLUMP SALE EFFECTIVE FROM NOVEMBER 3, 2011 FOR A CO NSIDERATION OF RS.5,670,700/- THOUSANDS. SUBSEQUENTLY DUE TO CHANG E IN NET WORKING CAPITAL, THE CONSIDERATION WAS REVISED TO RS.5,612,195 THOUS ANDS.' THUS, IT IS EVIDENT THAT THE PURCHASER, SIL, IN THI S SLUMP SALE TRANSACTION HAS ACCOUNTED FOR IT ENTIRELY TO THE EXTENT OF A CONSID ERATION OF RS.5,670,700 THOUSANDS AND REVISED THE SAME TO RS.5,612,195 THOU SANDS OWING TO CHANGE IN NET WORKING CAPITAL, WHICH IS AS PER THE BPA WHEREI N THE PURCHASE CONSIDERATION WAS SUBJECT TO 'ADJUSTMENT OF THE PUR CHASE PRICE FOR LIABILITIES' AND 'ADJUSTMENT OF THE PURCHASE PRICE FOR NET WORKING CAPITAL'. THE ARGUMENT THAT THE LUMP SUM CONSIDERATION WAS CO NTINGENT ON THE SUPPLY AGREEMENT CANNOT HOLD FOR ONLY ONE PARTY TO THE TRA NSACTION; THE SLUMP SALE CONSIDERATION IF AT ALL IT WERE TO BE CONTINGENT ON THE SUPPLY AGREEMENT WOULD APPLY TO BOTH PARTIES TO THE TRANSACTION, THAT IS T HE SELLER AND THE PURCHASER. IT CANNOT BE THAT THE CONTINGENCY APPLIES ONLY TO THE SELLER AND NOT TO THE PURCHASER. THUS, IN THIS CONSPECTUS OF THE FACTS, T HE ENTIRE LUMP SUM CONSIDERATION IS TO BE SUBJECT TO CAPITAL GAINS TAX . 18. THERE IS NOTHING IN THE BPA WHICH DEFINES THE M ECHANISM BY WHICH THE TRANSFER OF MARKETING DIVISION SHALL FAIL, SHOULD T HERE BE A BREACH OF THE SUPPLY AGREEMENT. ONE CANNOT ENVISAGE A TRANSACTION WHICH IS CONTINGENT ON THE FULFILLMENT OF OBLIGATION IN A SUPPLY AGREEMENT, WH ICH INVOLVES A CONSIDERATION FOR TRANSFER OF INTANGIBLE OR TANGIBL E ASSETS, IN WHICH THE CONTINGENCY AND BREACH OF OBLIGATION IS NOT SPELT O UT CONTRACTUALLY AND WHICH DEFINES THE MECHANISM OF THE TRANSFER FALLING THROU GH - THIS HAS NOT BEEN BROUGHT OUT BY THE LD COUNSEL IN HIS ARGUMENTS NOR IS IT TO BE FOUND ANYWHERE IN THE DOCUMENTS FILED. ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 28 28. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. SR CO UNSEL (LD. AR) FOR THE ASSESSEE AND THE LD. COMMISSIONER OF INCOME- TA X DEPARTMENTAL REPRESENTATIVE (LD. CIT-DR) FOR THE REVENUE. WE HAV E ALSO DELIBERATED ON THE VARIOUS CASE LAWS RELIED BY THE LD. REPRESEN TATIVES OF THE PARTIES. DURING THE ASSESSMENT THE ASSESSING OFFICER NOTED T HAT DURING THE PREVIOUS YEAR THE ASSESSEE HAS SOLD ITS MARKETING D IVISION TO AVENTIS PHARMA LTD (APL) FOR CONSIDERATION OF RS. 567.07 CR ORE, HOWEVER IN THE COMPUTATION OF INCOME THE ASSESSEE HAS SHOWN CAPITA L GAIN OF RS. 477 CRORE AND REMAINING OF RS. 89.73 CRORE WAS KEPT IN ESCROW ACCOUNT WITH HSBC LTD. ON SHOW CAUSE THE ASSESSEE EXPLAINED THAT RS. 89.73 CRORE WILL ACCRUE TO THE ASSESSEE IN FIVE EQUAL YEARLY IN STALMENT OF RS. 17.89 CRORE EACH, ON FULFILMENT OF CERTAIN OBLIGATION BEI NG ON ACHIEVING OF PERFORMANCE OF TARGETS, STARTING FROM MARCH 2012 AN D UP TO MACH 2016. IT WAS ALSO EXPLAINED THAT OUT OF RS. 89.73 CRORE, FIRST INSTALMENT OF RS. 17.89 CRORE WAS RECEIVED BY THE ASSESSEE IN THE FIN ANCIAL YEAR UNDER CONSIDERATION AND HAVE BEEN OFFERED TO TAX. THE EXP LANATION/ REPLY OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER. ASSESSING OFFICER BY TOOK HIS VIEW THAT SECTION 50B CLEARLY DEFINE STAT ES THAT ANY PROFIT OR GAIN ARISING FROM SLUMP SALE EFFECTED IN THE PREVIOUS YE AR SHALL BE CHARGEABLE TO TAX AS CAPITAL GAIN ARISING OUT FROM THE TRANSFE R OF LONG TERM CAPITAL ASSET AND SHALL BE DEEMED TO BE INCOME OF THE PREVI OUS YEAR IN WHICH TRANSFER TOOK PLACE. THE CAPITAL GAIN ON SLUMP SALE EARNED WAS ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 29 TRANSFERRED ON 03.11.2011 ACCORDINGLY; THE CAPITAL GAIN FROM TRANSFER CANNOT ACCRUE IN INSTALMENTS. THE ASSESSEE IS FOLLO WING THE ACCRUAL SYSTEM OF ACCOUNTING AND THE INCOME EARNED IS ACCRU ED TO THE ASSESSEE ON SALE OF TRANSFER. IN CASE OF SLUM SALE OF THE MARKE TING DIVISION WHICH IS TRANSFERRED AS A WHOLE, SINGLE UNIT WITHOUT VALUES BEING ATTACHED TO THE NEW ASSET AND LIABILITIES. THE CONSIDERATION OF RS. 567 CRORE EARNED ON TRANSFER OF MARKETING DIVISION, DOES NOT HAVE ANY B EARING ON ANY OTHER CONDITIONS. ONCE THE AGREEMENT TO SALE IS EXECUTED, THE TRANSFER TOOK PLACE AND ANY PAYMENT OR OBLIGATION CAN SPREAD OVER SOME TIME, THIS DOES NOT MEAN THAT TRANSFER IS ALSO HAPPENING OVER A PER IOD OF TIME. THE TRANSFER IS ONE TIME EVENT WHEREAS PAYMENT CAN HAPP EN OVER A PERIOD WHICH IS AGREED BETWEEN THE PARTIES AND MAJOR PART OF CONSIDERATION RS. 477.62 CRORE WAS RECEIVED ON 03.11.2011 I.E. 84% OF TOTAL CONSIDERATION. THE AMOUNT KEPT IN ESCROW ACCOUNT HAS NO RELATION, WHATSOEVER WITH THE TRANSFER OF MARKETING DIVISION. IT HAS ONLY BEARING OF SUPPLY AGREEMENT BETWEEN THE PARTIES. AND THE AMOUNT KEPT IN ESCROW ACCOUNT BELONG TO THE SELLER AND THAT ASSESSEE HAS OFFERED INTEREST O F RS. 3.03 CRORE ACCRUED ON FULL ESCROW ACCOUNT FROM 03.11.2011 TO 31.03.201 2. ON THE AFORESAID OBSERVATION THE ASSESSING OFFICER BROUGHT THE REMAI NING AMOUNT OF RS. 71.57 CRORE, KEPT IN ESCROW ACCOUNT TO TAX IS INCOM E OF ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 30 29. BEFORE LD. CIT(A) THE ASSESSEE MADE ITS DETAIL SUB MISSIONS AND SUBMITTED THAT THE AMOUNT ACCRUED TO THE ASSESSEE O N FULFILMENT OF CERTAIN OBLIGATION AND THE SAME WAS OFFERED TO TAX AS AND W HEN IT ACCRUED. THE INCOME TAXED BY THE ASSESSING OFFICER IS INFACT NOT ACCRUED TO THE ASSESSEE. THE INCOME ON HYPOTHETICAL BASIS CANNOT B E TAXED. THE ASSESSEE ALSO RELIED ON THE VARIOUS CLAUSES OF ESCROW RELEAS E AGREEMENT. 30. THE LD CIT(A) ON PERUSAL OF SUPPLY AGREEMENT TOOK HIS VIEW THAT THE ASSESSEE ARE REQUIRE TO SUPPLY CERTAIN PRODUCT TO PURCHASER(APL). AND AS PER THE ESCROW AGREEMENT THE AMOUNT OF RS. 89.73 CR ORE WAS KEPT IN ESCROW ACCOUNT IN HSBC BANK. THE CLAIM OF THE ASSES SEE THAT AMOUNT OF RS. 17.89 CRORE IS LIABLE TO RELEASE IN FIVE ANNUAL EQUAL INSTALMENTS WOULD ACCRUE TO THE ASSESSEE WHENEVER SAID INSTALMENT IS REALIZED; WHICH IS SUBJECT TO FULFILLING OF CERTAIN CONDITIONS AND SHO ULD BE TAXED IN RELEVANT ASSESSMENT YEAR. HOWEVER, AS PER BUSINESS PURCHASE AGREEMENT THE DATE, PLACE OF CLOSING, CLOSING EVENT, PAYMENT OF C LOSING AND BREACH OF CLOSING OBLIGATION, THE CLOSING EVENTS ALSO DEFINE IN SCHEDULE-6 OF THE AGREEMENT. AND ON FURTHER SCRUTINY OF AGREEMENT, TH E LD. CIT(A) TOOK THE VIEW THAT PURCHASER HAS PAID THE ENTIRE AMOUNT OF CLOSING DATE AND IT IS THE ASSESSEE WHO HAD INSTRUCTED THE PURCHASER TO KEEP THE AMOUNT IN THE ESCROW ACCOUNT. THE SALE OF BUSINESS IS IRREVOC ABLE AND COMPLETE ON THE CLOSING DATE MENTIONED IN THE AGREEMENT. THE CA PITAL GAIN IS ACCRUED ON THE DATE OF SALE. ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 31 31. THE LD. CIT (A) ALSO TOOK HIS VIEW THAT ON CONJOINT READING OF VARIOUS CLAUSES OF THE AGREEMENT IT CAN BE HELD SALE TRANSF ER IS NOT LINKED TO ESCROW ACCOUNT AND THE ASSESSEE, AS THE GUARANTEE O F SUPPLY AGREEMENT PLACED CERTAIN AMOUNT IN THE ESCROW ACCOUNT AND THE SAME IS NOT LINKED TO THE SALE OF BUSINESS. THE LD CIT(A) CONCLUDED TH AT SALE OF MARKETING DIVISION IS COMPLETED ON THE CLOSING DATE MENTIONED ON THE AGREEMENT AND FINALLY CONCLUDED THAT HE CONCUR WITH THE FINDI NG OF ASSESSING OFFICER THAT AMOUNT KEPT IN ESCROW ACCOUNT HAS NO R ELATION WHATSOEVER TO THE TRANSFER OF MARKETING DIVISION AND AFFIRMED THE ACTION OF ASSESSING OFFICER. 32. WE HAVE PERUSED THE VARIOUS CLAUSES WHICH ARE REFER RED AND RELIED BY RESPECTIVE PARTIES OF BUSINESS PURCHASE AGREEMENT D ATED 24.08.2011, SUPPLY AGREEMENT WHICH IS SCHEDULE TO THE BUSINESS PURCHASE AGREEMENT AND ESCROW ACCOUNT AGREEMENT DATED 28.10.2011. PERU SAL OF AFORESAID CLAUSES OF BUSINESS PURCHASE AGREEMENT, THE CLAUSES OF SUPPLY AGREEMENT (ANNEXURE TO BPA) AND ESCROW AGREEMENT DEMONSTRATE THAT MAINTAINING OF ESCROW ACCOUNT WAS INCONSEQUENCE OF BUSINESS PUR CHASE AGREEMENT. THE CONDITIONS OF SUPPLY AGREEMENT CANNOT BE DELINK ED FROM BUSINESS PURCHASE AGREEMENT DATED 24.08.2011. THE ESCROW AGR EEMENT WAS EXECUTED ON 28.10.2011. THE ESCROW ACCOUNT AGREEMEN T WAS EXECUTED IN FURTHERANCE OF BPA. FURTHER, THE AMOUNT IN ESCROW A CCOUNT WOULD ACCRUE TO THE ASSESSEE ONLY ON FULFILMENT OF CERTAI N CONDITION. FURTHER, A ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 32 JOINT READING OF CLAUSE 7.3 AND CLAUSE 7.4 SHOWS TH AT IF THE CONDITION MENTIONED IN CLAUSE 7.3 IS NOT FULFILLED, THEN BUSI NESS PURCHASE AGREEMENT WILL BE TERMINATED. THUS, THE DEPOSIT IN ESCROW ACC OUNT IS INTRINSIC AND INTEGRAL TO THE TRANSFER OF MARKETING DIVISION UNDE R BUSINESS PURCHASE AGREEMENT WITHOUT IT, THE SALE SHALL BE INCOMPLETE. FURTHER, CLAUSE 3.1 AND CLAUSE 3.9 IS PRESCRIBED THAT ASSESSEE AND THE PURC HASER SHALL ENTER INTO AGREEMENT FOR THE SUPPLY BY THE SELLER OF PHARMACEU TICAL PRODUCT THAT IS MANUFACTURED BY ASSESSEE. A DRAFT OF SUPPLY AGREEME NT WAS ALSO PREPARED AS A PART OF BUSINESS PURCHASE AGREEMENT AS A SCHED ULE TO THE AGREEMENT. 33. IN OUR VIEW, ONCE THE CONDITION OF CONTRACT IS REDU CED IN WRITING, ONE MUST LOOK AT THE SUBSTANCE OF TERM OF THE CONTRACT. THE CONTRACT MUST BE READ AS A WHOLE AND NOT IN A PICK AND CHOOSE MANNER . FURTHER, THE INTENTION OF PARTIES MUST BE FOUND IN THE WORDS USE D BY THEM AND IF MORE THAN ONE INTERPRETATION IS POSSIBLE, ONE WHICH GIVE S EFFECT AND PROPER MEANING OF ALL PARTS OF THE CONTRACT SHOULD BE ADOP TED. 34. THE HONBLE SUPREME COURT IN BHARAT ALUMINIUM COMPA NY VS. KAISER ALUMINIUM TECHNICAL SERVICES INC. (CIVIL APPEAL NO. 7019 OF 2005) (SC) AND IN DELHI DEVELOPMENT AUTHORITY VS. DURGA CHAND (AIR 1973 SC 2609) ALSO HELD THAT IF TWO INTERPRETATIONS OF T HE DOCUMENT ARE REASONABLY POSSIBLE, AS IT SEEMS POSSIBLE, THE P RINCIPLE TO APPLY WOULD BE THAT THE INTERPRETATION FAVOURING THE GRANTEE A S AGAINST THE GRANTOR SHOULD BE ACCEPTED. ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 33 35. AS WE HAVE NOTED ABOVE THE LD. AR OF THE ASSESSEE VEHEMENTLY SUBMITTED THAT CAPITAL GAIN IS CHARGEABLE TO TAX ON LY WHEN INCOME ACCRUES TO ASSESSEE. THE CONTINGENT CONSIDERATION ACCRUED ONLY UPON COMPLIANCE OF CONDITION IN SUBSEQUENT ASSESSMENT YE ARS, THE SAME WAS CHARGEABLE ONLY IN THE YEARS IN WHICH THE SAID INCO ME ACCRUED. THE LD. AR ALSO FURNISHED THE COPY OF INCOME TAX RETURN AND THE INCOME OFFERED TO TAX A CAPITAL GAIN OF RS. 17.89 CRORE EACH IN A. YS. 2013-14, 2014-15, 2015-16 & 2016-17. 36. THE HONBLE BOMBAY HIGH COURT IN CIT VS. MRS. HEMAL RAJU SHETE (SUPRA) HELD THAT ONLY INCOME THAT WAS ACTUALLY REC EIVED OR ACCRUED TO ASSESSEE UPON SALE OF SHARES HAD TO BE TAXED AND NO T ANY CONTINGENT DEFERRED INCOME. HONBLE SUPREME COURT IN CIT VS. B ALBIR SINGH MAINI (SUPRA) HELD THAT WHEN FOR WANT OF PERMISSIONS, ENT IRE TRANSACTION OF DEVELOPMENT OF LAND ENVISAGED IN JOINT DEVELOPMENT AGREEMENT (JDA) FELL THROUGH; THERE WOULD BE NO PROFIT OR GAIN WHIC H AROSE FROM TRANSFER OF CAPITAL ASSET, WHICH COULD BE BROUGHT TO TAX UND ER SECTION 45, READ WITH SECTION 48. 37. THE HONBLE SUPREME COURT IN E.D. SASSOON & CO. LTD . V. CIT AIR 1954 SC HELD THAT INCOME MAY ACCRUE TO AN ASSESSEE WITHOUT THE ACTUAL RECEIPT OF THE SAME. IF THE ASSESSEE ACQUIRES A RIG HT TO RECEIVE THE INCOME, THE INCOME CAN BE SAID TO HAVE ACCRUED TO HIM THOUG H IT MAY BE RECEIVED LATER ON ITS BEING ASCERTAINED. THE BASIC CONCEPTIO N IS THAT HE MUST HAVE ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 34 ACQUIRED A RIGHT TO RECEIVE THE INCOME. IT WAS FURT HER HELD THAT UNLESS AND UNTIL THERE IS CREATED IN FAVOUR OF THE ASSESSEE A DEBT DUE BY SOMEBODY IT CANNOT BE SAID THAT HE HAS ACQUIRED A RIGHT TO RECE IVE THE INCOME OR THAT INCOME HAS ACCRUED TO HIM . 38. FURTHER, IN CIT V. EXCEL INDUSTRIES [2013] 358 ITR 295/219 TAXMAN 379/38 TAXMANN.COM 100 (SC) THE HONBLE COURT BY RE FERRING TO VARIOUS JUDGMENTS ON THE EXPRESSION 'ACCRUES', AND THEN HEL D IT IS NOW WELL SETTLED THAT INCOME TAX CANNOT BE LEVIED ON HYPOTHE TICAL INCOME. IN CIT V. SHOORJI VALLABHDAS AND CO. [CIT V. SHOORJI VALLA BHDAS AND CO., (1962) 46 ITR 144 (SC)] IT WAS HELD THAT INCOME TAX IS A LEVY ON INCOME. NO DOUBT, THE INCOME TAX ACT TAKES INTO ACCOUNT TWO POINTS OF TIME AT WHICH THE LIABILITY TO TAX IS ATTRACTED, VIZ., THE ACCRUAL OF THE INCOME OR ITS RECEIPT; BUT THE SUBSTANCE OF THE MATTER IS THE INC OME. IF INCOME DOES NOT RESULT AT ALL, THERE CANNOT BE A TAX, EVEN THOUGH I N BOOK KEEPING, AN ENTRY IS MADE ABOUT A 'HYPOTHETICAL INCOME', WHICH DOES N OT MATERIALIZE. WHERE INCOME HAS, IN FACT, BEEN RECEIVED AND IS SUBSEQUEN TLY GIVEN UP IN SUCH CIRCUMSTANCES THAT IT REMAINS THE INCOME OF THE REC IPIENT, EVEN THOUGH GIVEN UP, THE TAX MAY BE PAYABLE. WHERE, HOWEVER, T HE INCOME CAN BE SAID NOT TO HAVE RESULTED AT ALL, THERE IS OBVIOUSL Y NEITHER ACCRUAL NOR RECEIPT OF INCOME, EVEN THOUGH AN ENTRY TO THAT EFF ECT MIGHT, IN CERTAIN CIRCUMSTANCES, HAVE BEEN MADE IN THE BOOKS OF ACCOU NT. IN MORVI INDUSTRIES LTD. V. CIT [MORVI INDUSTRIES LTD. V. CI T, (1972) 4 SCC 451 : ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 35 1974 SCC (TAX) 140 : (1971) 82 ITR 835] THE HONBLE APEX COURT ALSO CONSIDERED THE DICTIONARY MEANING OF THE WORD 'ACCR UE' AND HELD THAT INCOME CAN BE SAID TO ACCRUE WHEN IT BECOMES DUE. 39. THE HONBLE BOMBAY HIGH COURT IN PCIT VS. ROHAN PRO JECTS (SUPRA) HELD THAT WHERE ASSESSEE SOLD A LAND DURING RELEVAN T ASSESSMENT YEAR AND AS PER MEMO OF UNDERSTANDING (MOU), PART OF SALE CO NSIDERATION WAS PAYABLE BY PURCHASERS ON COMPLETION OF ASSESSEES O BLIGATION UNDER MOU, ASSESSEE HAVING NOT MET CONDITIONS OF MOU DURI NG RELEVANT YEAR SUCH AMOUNT WAS NOT TAXABLE IN RELEVANT ASSESSMENT YEAR. THE HONBLE HIGH COURT ALSO REFERRED ITS EARLIER DECISION IN CI T VS. NAGRI MILLS CO. LTD. [1958] 33 ITR 681 (BOM)] WHEREIN IT WAS HELD T HAT AS UNDER: 3. WE HAVE OFTEN WONDERED WHY THE INCOME-TAX AUTHO RITIES, IN A MATTER SUCH AS THIS WHERE THE DEDUCTION IS OBVIOUSLY A PER MISSIBLE DEDUCTION UNDER THE INCOME-TAX ACT, RAISE DISPUTES AS TO THE YEAR I N WHICH THE DEDUCTION SHOULD BE ALLOWED. THE QUESTION AS TO THE YEAR IN W HICH A DEDUCTION IS ALLOWABLE MAY BE MATERIAL WHEN THE RATE OF TAX CHAR GEABLE ON THE ASSESSEE IN TWO DIFFERENT YEARS IS DIFFERENT; BUT IN THE CASE O F INCOME OF A COMPANY, TAX IS ATTRACTED AT A UNIFORM RATE, AND WHETHER THE DED UCTION IN RESPECT OF BONUS WAS GRANTED IN THE ASSESSMENT YEAR 1952-53 OR IN TH E ASSESSMENT YEAR CORRESPONDING TO THE ACCOUNTING YEAR 1952, THAT IS IN THE ASSESSMENT YEAR 1953-54, SHOULD BE A MATTER OF NO CONSEQUENCE TO TH E DEPARTMENT; AND ONE SHOULD HAVE THOUGHT THAT THE DEPARTMENT WOULD NOT F RITTER AWAY ITS ENERGIES IN FIGHTING MATTERS OF THIS KIND. BUT, OBVIOUSLY, J UDGING FROM THE REFERENCES THAT COME UP TO US EVERY NOW AND THEN, THE DEPARTME NT APPEARS TO DELIGHT IN RAISING POINTS OF THIS CHARACTER WHICH DO NOT AFFEC T THE TAXABILITY OF THE ASSESSEE OR THE TAX THAT THE DEPARTMENT IS LIKELY T O COLLECT FROM HIM WHETHER IN ONE YEAR OR THE OTHER. ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 36 40. IN VIEW OF THE AFORESAID DISCUSSION, WE ARE OF THE VIEW THAT THE INCOME FOR THE YEAR UNDER CONSIDERATION OF RS. 447.30 CROR E AND FURTHER RS. 17.89 CRORE WAS ACCRUED TO THE ASSESSEE. THE ASSESSEE OFF ERED THE SAME UNDER THE HEAD CAPITAL GAIN AND NO OTHER INCOME WHICH IS NOT ACCRUED TO THE ASSESSEE IS NOT LIABLE TO TAX IN THE YEAR UNDER CON SIDERATION. THE REMAINING INCOME WAS ACCRUED ONLY IN SUBSEQUENT ASS ESSMENT YEAR I.E. A.Y. 2013-14 TO 2016-17 THAT IS AN AMOUNT OF RS. 17 .89 CRORE EACH IN FOUR SUBSEQUENT YEARS, AND THE SAME HAS BEEN OFFERE D FOR TAXATION UNDER THE HEAD CAPITAL GAIN. EVEN THIS FACT IS NOT DISPUT ED BY THE REVENUE. 41. THE OBJECTION OF LD. DR FOR THE REVENUE IS THAT TH E ASSESSEE IN SUBSEQUENT YEAR CLAIM SET OFF OF LONG TERM CAPITAL LOSS ON SAL E OF MUTUAL FUNDS OF RS. 7.55 CRORE AND RS. 4.36 CRORE. IN OUR VIEW, THE ASSESSEE IS LEGALLY ENTITLED TO CLAIM THE SET OFF OF LEGITIMATE LOSSES UNDER THE SAME HEAD IF IT ACCRUES TO THE ASSESSEE. 42. AS NOTED ABOVE THE HONBLE JURISDICTIONAL HIGH COU RT IN CIT VS. NAGRI MILLS CO. LTD. (SUPRA) HELD THAT AS TO WHY THE INCO ME-TAX AUTHORITIES, IN A MATTER SUCH AS WHERE THE DEDUCTION IS OBVIOUSLY A P ERMISSIBLE DEDUCTION UNDER THE INCOME-TAX ACT, RAISE DISPUTES AS TO THE YEAR IN WHICH THE DEDUCTION SHOULD BE ALLOWED. THE QUESTION AS TO THE YEAR IN WHICH A DEDUCTION IS ALLOWABLE MAY BE MATERIAL WHEN THE RAT E OF TAX CHARGEABLE ON THE ASSESSEE IN TWO DIFFERENT YEARS IS DIFFERENT ; BUT IN THE CASE OF ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 37 INCOME OF A COMPANY, TAX IS ATTRACTED AT A UNIFORM RATE. APPLYING THE SAME ANALOGY THAT THE ASSESSEE BEING A CORPORATE EN TITY IS TAXED AT THE MARGINAL RATE , THE REVENUE SHOULD NOT FRITTER AWAY ITS ENERGIES IN FIGHTING MATTERS . 43. THE CASE LAW RELIED BY THE LD. DR FOR THE REVENUE A RE NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE AS THE SAME ARE BASED ON DIFFERENT SET OF FACTS. IN CIT VS. ROHTAK TEXTILES LTD. (SUPRA) IT WAS HELD THAT SECTION 55 CLEARLY LAID DOWN THAT CAPITAL GAINS ARE TO BE DEEM ED TO BE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER OF THE ASSET TO OK PLACE. THERE WAS NO DISPUTE ABOUT THE POINT OF TIME AT WHICH TRANSFER T OOK PLACE. IT WAS HELD THAT CAPITAL ARISE FROM THE TRANSFER WERE RIGHTLY C HARGED IN THE YEAR WHEN UNDERTAKEN VESTED IN THE GOVERNMENT, IRRESPECTIVE OF WHETHER THE SALE BECAME COMPLETE ON THOSE DATES OR ON LATER WHEN PRI CE WAS DETERMINED AND BECAME PAYABLE. HOWEVER, IN THE PRESENT CASE, T HOUGH THE PRICE WAS DETERMINED BUT WAS PAYABLE ON FULFILLMENT OF CERTAI N CONDITION AS AGREED IN ESCROW AGREEMENT AND THE SAME WERE PAID SUBSEQUE NTLY. IN E.D SASSON & CO. LTD. (SUPRA) (ALSO RELIED BY LD. AR) W HEREIN IT WAS HELD THAT INCOME MAY ACCRUE TO AN ASSESSEE WITHOUT THE ACTUAL RECEIPT OF THE SAME. IF THE ASSESSEE ACQUIRES A RIGHT TO RECEIVE THE INC OME, THE INCOME CAN BE SAID TO HAVE ACCRUED TO HIM THOUGH IT MAY BE RECEIV ED LATER ON ITS BEING ASCERTAINED. THE BASIC CONCEPTION IS THAT HE MUST H AVE ACQUIRED A RIGHT TO RECEIVE THE INCOME. THUS, THE RATIO OF THIS DECISIO N IS MORE FAVOURABLE TO ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 38 THE ASSESSEE. IN MORVI INDUSTRIES LTD. VS. CIT (SUP RA) THE FACTS OF THE CASE ARE ENTIRELY DIFFERENT, WHEREIN IT WAS HELD THAT IF THE INCOME FOR THE YEAR IN QUESTION WERE GIVEN UP UNILATERALLY BY ASSESSEE AFTER THEY HAD ACCRUED TO IT, THE ASSESSEE COMPANY COULD ESCAPE THE LIABIL ITY TO TAX. HOWEVER, IN THE PRESENT CASE, THE ASSESSEE HAS OFFERED THE CAPI TAL GAIN IN SUBSEQUENT ASSESSMENT YEARS. IN CIT VS. ASHOKBHAI CHIMANBHAI ( SUPRA) THE FACTS ARE ENTIRELY DIFFERENT. IN SAID CASE IT WAS HELD UN DER INCOME TAX, THE INCOME IS TAXABLE WHEN IT ACCRUES, ARISES OR RECEIV ED, OR WHEN IT IS BY FICTION DEEMED TO ACCRUE, ARISES OR DEEMED TO RECEI VE. THE RECEIPT IS NOT THE ONLY TEST OF CHARGEABLE TO TAX; IF INCOME ACCRU ES OR ARISE IT MAY BECOME LIABLE TO TAX. THE WORD ACCRUING AND ARISI NG ARE USED TO CONTRA- DISTINGUISH THE WORD RECEIVE. INCOME IS SAID TO B E RECEIVED WHEN IT REACHES TO THE ASSESSEE; WHEN RIGHT TO RECEIVE THE INCOME VESTED TO THE ASSESSEE, IT IS SAID TO BE ACCRUE OR ARISE. THE DOR MANT PROFIT CANNOT BE EQUATED WITH CHARGED TO TAX UNDER SECTION 3 & 4 OF THE INCOME TAX ACT. 44. IN AJAY GULLIYA VS. ACIT (SUPRA) THERE WAS NO EVIDE NCE ON RECORD IN AGREEMENT SUGGESTING THAT ENTIRE CONSIDERATION OR P ART WAS NOT PAID OR THE TITLE TO THE SHARES WILL REVERT TO THE SELLER. IN T .A. TAYLOR (P.) LTD. (SUPRA) THERE WAS NO DEFERRED CONSIDERATION MENTIONED IN TH E SLUMP SALE AGREEMENT. DEPOSITING A PART OF CONSIDERATION IN AN ESCROW ACCOUNT, EQUIVALENT TO DEFERRED CONSIDERATION (PARA-8 OF THE ORDER). IN CIT VS. EQUINOX SOLUTION (P.) LTD. (SUPRA) THE ASSESSEE SOL D ITS ENTIRE RUNNING ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 39 BUSINESS WITH ALL ASSETS AND LIABILITY AND ONE GO. IN CIT VS. MRS. HEMAL RAJU SHETE (SUPRA) WAS NOT A CASE OF SLUMP SALE AND ONLY INCOME THAT WAS ACTUALLY RECEIVED OR ACCRUED TO THE ASSESSEE UPON S ALE OF SHARES WAS TAXED AND NOT ANY CONTINGENT DEFERRED INCOME. 45. CONSIDERING THE AFORESAID FACTUAL AND LEGAL DISCUSSIONS, WE ARE OF THE VIEW THAT THE ACCRUED CAPITAL GAIN IN THE YEAR UNDE R CONSIDERATION WAS OFFERED BY THE ASSESSEE TO TAX AND THE REMAINING OF THE CAPITAL GAIN WHICH WAS ACCRUED ONLY IN THE SUBSEQUENT YEARS HAVE BEEN OFFERED TO TAX IN AY 2013-14 TO 2016-17. THE ASSESSEE HAS PLACED ON RECO RD THE COPY OF COMPUTATION AND RETURN OF INCOME FOR AY 2013-14 TO 2016-17 46. IN THE RESULT THE GROUND NO. 1 TO 4 AND ARE ALLOWE D. 47. GROUND NO. 5 RELATES TO DEFALCATION LOSS OF RS. 5. 00 CRORE. THE LD. AR FOR THE ASSESSEE SUBMITS THAT ASSESSEE SUFFERED LOS S ON ACCOUNT OF DEFALCATION OF RS.19.04 CRORE WHICH WAS DETECTED IN AY 2006-07. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDE R FOR AY 2006-07 ACCEPTED THE FACT THAT THE ASSESSEE SUFFERED LOSSES AND IN THE ASSESSMENT ORDER GAVE WORKING OF THE LOSS SUFFERED YEAR WISE. HOWEVER, THE ASSESSING OFFICER REDUCED THE CLAIM OF LOSS BY RS. 5.00 CRORE AND ACCEPTED THE CLAIM OF RS. 14.04 CRORE AS THE ECONOM IC OFFENCE WING ATTACHED THE PROPERTY OF THE CULPRIT. THE ASSESSEE, SUBSEQUENTLY IN THE RETURN FILED IN PURSUANCE OF NOTICE UNDER SECTION 1 53A CLAIMED THE SAME ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 40 LOSS OF RS. 5 CRORE AS THERE WAS NO RECOVERY FROM T HE EMPLOYEE (CULPRIT). HOWEVER, THE SAME WAS NOT ACCEPTED BY AO ON THE GRO UND THAT NO NEW CLAIM CAN BE MADE WHILE FILING RETURN OF INCOME IN RESPONSE TO NOTICE UNDER SECTION 153A. FOR THE YEAR UNDER CONSIDERATIO N, THE ASSESSEE RAISED A CLAIM OF RS. 5 CRORE IN THE FIRST APPELLATE PROCE EDING IN A.Y. 2006-07 AS WELL AS IN A.Y. 2012-13 ON THE GROUND THAT NO RE COVERY HAS BEEN MADE. THE TRIBUNAL IN THE APPEAL FOR A.Y. 2006-07 W HILE ADJUDICATING THE CORRESPONDING GROUND HELD THAT NO NEW CLAIM CAN BE MADE UNDER SECTION 153A AND THAT ISSUE WITH RESPECT TO THE CLA IM OF DEFALCATION WAS REMITTED BACK TO THE FILE OF AO. THE LD. AR PRAYED TO REMAND BACK THE ISSUE TO THE FILE OF AO FOR THE YEAR UNDER CONSIDER ATION AS WELL TO AVOID THE DUPLICITY OF THE CLAIM. 48. THE ASSESSEE HAS ALSO FILED THE COPY OF ASSESSMENT ORDER FOR A.Y. 2006-07 UNDER SECTION 143(3) DATED 31.12.2008 FOR A LLOWING LOSS OF EMBEZZLEMENT OF RS. 5.00 CRORE, COPY OF ASSESSMENT ORDER UNDER SECTION 153A RWS 143(3) FOR NOT ALLOWING THE LOSS OF EMBEZZ LEMENT OF RS. 5.00 CRORE AND FINAL REPORT OF ECONOMIC OFFENCE WING ON THE COMPLAINT OF EMBEZZLEMENT OF RS. 5.00 CRORE BY AN EMPLOYEE. 49. ON THE OTHER HAND THE LD. DR FOR THE REVENUE SUBMI TS THAT THIS GROUND OF APPEAL DOES NOT ARISE FROM THE IMPUGNED ASSESSMENT ORDER OR FROM THE ORDER OF LD. CIT(A). SINCE THE LD. AR DURING THE HE ARING SUBMITTED THAT IN ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 41 ITA NO. 2967-2971/M/16 FOR A.Y. 2006-07 TO 2009-10 THE TRIBUNAL SET ASIDE THE MATTER TO THE AO AND SUBMITTED THAT DEFAL CATION LOSS MUST BE ALLOWED IN ONE OR THE OTHER AND MATTER MAY BE SET A SIDE TO THE FILE OF AO. THE LD. DR SUBMITS THAT ISSUE MAY BE RESTORED TO TH E FILE OF AO AND NO COMMENT ON THE MERIT OF GROUNDS WAS MADE. 50. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PA RTIES AND HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. WE HAV E NOTED THAT IN ASSESSEES APPEAL FOR A.Y. 2006-07 TO 2009-10 IN IT A NO. 2967- 2971/M/16 THE CLAIM OF ASSESSEE WITH REGARD TO DEFA LCATION LOSS HAS BEEN RESTORED TO THE FILE OF AO. THEREFORE, TO AVOID THE DUPLICITY, THE ISSUE IS RESTORED TO THE FILE OF AO TO EXAMINE THE CLAIM AND PASS THE ORDER IN ACCORDANCE WITH LAW. IN THE RESULT THIS GROUND OF A PPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 51. WE FOUND ON RECORD THAT THE ASSESSEE VIDE APPLICATI ON DATED 01.09.2017 AND THE REVENUE VIDE ITS APPLICATION DATED 24.10.20 17 MADE APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE. HOWEVER, WE H AVE NOTED THAT WHILE MAKING SUBMISSION AS WELL AS IN WRITTEN SUBMISSION, NONE OF THE PARTIES HAVE MADE THEIR SUBMISSION FOR ADMISSION OF THE ADD ITIONAL GROUND NOR WAS REFERRED ANY CONTENTS FOR OTHER REFERENCE, THER EFORE, BOTH THE APPLICATIONS ARE DISMISSED. ANY OTHER APPLICATION I F PENDING AND NOT BROUGHT TO OUR NOTICE FOR ANY ORDER OR DIRECTION IS ALSO DISMISSED. ITA NO. 4418 M 16 & C.O. 268 M 1 7-UNIVERSAL MEDICARE PVT. LTD. 42 52. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. C.O. NO. 268/MUM/2017 BY REVENUE 53. THE ADDITIONAL GROUND OF APPEAL OF ASSESSEE AND THE CROSS OBJECTION OF REVENUE ARE INTERCONNECTED. WE HAVE NOTED THAT WHIL E MAKING SUBMISSION, THE LD. AR OF THE ASSESSEE HAS NOT MADE ANY SPECIFIC SUBMISSION ON THE ADDITIONAL GROUND OF APPEAL NOR F ILE ANY WRITTEN SUBMISSION, THEREFORE, THE SAME IS TREATED AS NOT P RESSED AND DISMISSED ACCORDINGLY. AS WE HAVE DISMISSED THE ADDITIONAL GR OUND OF APPEAL, THEREFORE, THE GROUNDS IN CROSS OBJECTION ARE BECOM E ACADEMIC. 54. IN THE RESULT, ADDITIONAL GROUND OF APPEAL AND CROS S OBJECTION OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/03/2020. SD/- SD/- S. RIFAUR RAHMAN PAWAN SING H ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 06.03.2020 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR F BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI