M/s. Universal Dairy Products P. Ltd., New Delhi V. ACIT, New Delhi

MA 269/DEL/2013

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1659 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 9 month(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 12-06-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Next Hearing Date: 23-02-2023
• Assessment Year: 2008-2009
• Appeal Filed On: 12-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital Gains
• Section: 254(2); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “I-1” DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR US, JUDICIAL MEMBER MA No.269/DEL/2013 (Arising from ITA No.2217/DEL/2012) Assessment Year 2008-09 M/s. Universal Dairy Products P. Ltd., F-2/7, Okhla Indl. Area, Phase-I New Delhi Vs. ACIT, Circle-18(1) New Delhi TAN/PAN: AAACU5759P (Applicant-Assessee) (Respondent) Applicant by: Shri Rajat Jain, Chartered Accountant Shri Akshat Jain, Chartered Accountant Respondent by: Shri Vivek Vardhan, Sr.DR Date of hearing: 17 05 2024 Date of pronouncement: 13 06 2024 O R D E R PER PRADIP KUMAR KEDIA - A.M.: The assessee has moved a Misc. Application under Section 254(2) of the Act dated 13.09.2013 arising from the order passed by the Tribunal dated 14.06.2013 under Section 254(1) of the Act. 2. As per the Misc. Application, the assessee has sought rectification of the mistake committed by the Tribunal while computing the net worth of an undertaking sold for the purposes of determining capital gains under Section 50B of the Act. 3. Briefly stated, the assessee is engaged in manufacturing and selling of ice- cream and related dairy products during the Assessment Year 2008-09 under consideration. During the year under consideration, the assessee disposed of its MA No.269/Del/2013 2 specified business namely Ice-Cream Division on Slump Sale basis and declared certain capital gains in terms of provisions of Section 50B of the Act. The short term capital gains under Section 50B of the Act were determined by the deducting net worth of the hived off undertaking from its sale consideration. The AO in the course of the assessment revised the net worth and consequently revised the taxable short term capital gains. The revision in the taxable short term capital gains was challenged by the assessee. The matter travelled before the Tribunal. The Tribunal as per paragraph 12 of order passed under Section 254(1) of the Act, determined the net worth as under: a) WDV of depreciable assets Rs.13,81,63,094/- b) Book Value of other assets Rs.1,34,64,003/- c) Aggregate if total assets d) Value of liabilities relatable to the undertaking as appearing in the books of account Rs.1,51,62,7097/- i) Current liabilities Rs.4,44,45,399/- ii) Bank liabilities Rs.9,32,61,378/- Rs.13,77,06,777/- e) Net worth Rs.1,39,20,320/- 4. The assessee in the present Misc. Application seeks to submit that the computation of net worth determined by the Tribunal is plaughed with apparent mistake in computation of Net Worth and thus calls for rectification of the arithmetical errors in terms of the application made under Section 254(2) of the Act. 4.1 Adverting to the Misc. Application, the ld. counsel pointed out that Section 50B is a special provision which is applicable in the cases involving ‘Slump Sale’ and which prescribes a particular method to calculate the capital gains earned by the assessee for the purposes of calculation of net worth of the undertaking. The value of liability relatable to undertaking as appearing in the books of account is to be deducted from the value of assets for the purposes of calculation of Net Worth. As per paragraph 12 of the Tribunal order, the MA No.269/Del/2013 3 computation of net worth has been carried out for the purposes of determining the taxable short term capital gains. While computing the net worth in the impugned order of the Tribunal, following liabilities namely (i) current liabilities – Rs.4,44,45,399/- and (ii) bank liability of Rs.9,32,61,378/- were deducted from the aggregate value of total asset. In this regard, the ld. counsel submitted that no such bank liabilities of Rs.9,32,61,378/- on the closing date of Slump Sale Agreement was even existing as per the books of account and therefore, the bank liabilities of such amount has been wrongly reduced by the Tribunal for the purposes of determining of net worth which in turn has the bearing on the determination of taxable short term capital gains. 4.2 The ld. counsel thereafter adverted to the Business Acquisition Agreement dated 1 st November, 2007 which is the basis of entering into Slump Sale of its Ice-Cream Division. The ld. counsel referred to clause (1.1) of Article 1 & Article 8 of the Business Acquisition Agreement and submitted that the sale consideration of the Ice-Cream Division was determined based on ‘assumed liabilities’ to be taken over by the purchaser while acquiring the division on slump sale basis. As per definition of assumed liabilities as provided in clause (1.1) of Article 1 of the agreement, such liabilities means the sundry creditors and accounts payable as specified in schedule-1 thereto which was quantified at Rs.4,44,45,399/-. There is no reference to any ‘bank liability’ to be taken over by the purchaser as per the agreement. Such fact is again reiterated in clause 8.1 of Article 8 of such agreement, where also, it is stated that the purchaser shall acquire the assumed liability as defined in Article 1 of the Agreement. The Tribunal while computing the Net Worth of Ice-Cream Division committed mistake and also reduced the non- existing bank liabilities of Rs.9,32,61,378/- and accordingly undervalued the Net Worth of the Division under Slump Sale to the extent of such non-existing bank liabilities. The bank liabilities in consideration already stood paid to the bank in discharge of liabilities before the closing data of the agreement and therefore, neither such liabilities were existing in the books nor were ever mutually agreed to be transferred to the acquirer of the MA No.269/Del/2013 4 undertaking as demonstrated from the Business Acquisition Agreement. The ld. counsel thus submitted that the reduction of bank liabilities for the purposes of calculation of Net worth of the undertaking by the Tribunal is contrary to facts on record as well as opposed to the basic document, i.e. Business Acquisition Agreement. The ld. Counsel thus submitted that the ‘assumed liability’ as defined and quantified in Schedule -1 to Business Acquisition Agreement to the tune of Rs.4,44,45,399/- only requires to be deducted from the value of assets of the division for the purposes of determination of Net worth. The bank liabilities of Rs.9,32,61,378/- reduced by the Tribunal has no rational basis and thus requires to be omitted and the Net worth so computed in para 12 of the order requires to be enhanced to this extent. The ld. counsel submitted that the assessee could not suffer on account of ex-facie mistake committed by the Tribunal and continuity of such mistake would lead to palpable injustice to the assessee. 5. The ld. DR for the Revenue, on the other hand, relied upon the order passed by the Tribunal under Section 254(1) of the Act. 6. On consideration of the rival submissions and on perusal of the case records, we find apparent merit in the plea of the assessee seeking rectification. The terms of Business Acquisition Agreement are plain and categorical. It clearly describes and quantifies the liabilities, i.e., assumed liabilities to be deducted from the value of assets for the purposes of fixation of sale consideration of specified business i.e., Ice-Cream Division. The assumed liability transferred to the acquirer of the undertaking was determined and quantified at Rs.4,44,45,399/- only and not anything beyond. This being so, the deduction of bank liabilities which was never transferred to the acquirer along with assets of the specified business, cannot be taken into consideration for the purposes of calculation of Net Worth of such business and eventual short term capital gains arising therefrom. The arithmetical mistake committed by the Tribunal thus calls for rectification under Section 254(2) of the Act to prevent miscarriage of justice. 7. Paragraph 12 of the order of the Tribunal is giving calculation of net worth MA No.269/Del/2013 5 is thus modified as under: a) WDV of depreciable assets Rs.13,81,63,094/- b) Book Value of other assets Rs.1,34,64,003/- c) Aggregate of total assets d) Value of liabilities relatable to the undertaking as appearing in the books of account Rs.15,16,27,097/- i) Current liabilities Rs.4,44,45,399/- Rs.4,44,45,399/- e) Net worth Rs.10,71,81,698/- 8. Consequential effect of such modification in paragraph 12 of the order of the Tribunal shall also apply mutatis mutandis elsewhere and the modified figure of the Net Worth shall be adopted for the purposes of computation of taxable Capital Gains arising to assessee. 9. In the result, the Misc. Application of the assessee is allowed. Order pronounced in the open Court on 13 June, 2024. Sd/- Sd/- [YOGESH KUMAR US] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: June, 2024 Prabhat