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DATE: May 16, 2018 (Date of pronouncement)
DATE: July 3, 2018 (Date of publication)
AY: 2007-08
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CITATION:
S. 2(42C)/ 50B: A transaction by which an undertaking is transferred in consideration of the allottment of shares is an "exchange" and not a "sale". The fact that the agreement refers to the parties as "seller" and "purchaser" is irrelevant. S. 2(42C)/ 50B apply only to "sale" and not to "exchange". Entire law on "estoppel" explained. As there is no estoppel against a statute, an assessee is entitled to raise the claim regarding non-taxability at any stage of the proceedings

In the present case the consideration was not money but equity shares and debentures and hence the transaction was not a “Sale” but an “Exchange” and consequently, the provisions of Section 50B of the I.T. Act, are not attracted. In the case of CIT vs. Bharat Bijlee Ltd. (365 ITR 258) where an undertaking was transferred under a Scheme of Arrangement to a company which allotted preference shares and bonds as consideration to the Transferor company. Following the decision of the Hon’ble Supreme Court in Motor & General Stores (P) Ltd. (66 ITR 692), the jurisdictional High Court held that the provisions of section 50B were inapplicable to the transaction

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DATE: December 12, 2017 (Date of pronouncement)
DATE: December 30, 2017 (Date of publication)
AY: 2004-05
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CITATION:
S. 32/ 43(6): The slump price paid to acquire a business has to be bifurcated between tangible and intangible assets for purposes of allowing depreciation. If the allocation is done in a systematic manner by an independent valuer and there is no fallacy, the AO is bound by the allocation. If an asset forms part of the block of assets and depreciation is allowed, it loses its identity and depreciation cannot be denied in a later year

The learned Departmental Representative for the Revenue also was of the view that no part of slump price is to be attributed to the know-how, patents and trademarks, since the same has not been acquired by the assessee. Even if we accept the said stand of learned Departmental Representative for the Revenue, ultimately after the slump price has been attributed first to the value of tangible assets, then the balance is to be attributed to intangible assets and once the same is done and whether it is under the umbrella of know-how, trademarks, patents or goodwill, it makes no difference since all these are covered under the umbrella of intangible assets, which are eligible for claim of depreciation under section 32(1)(ii) of the Act. The goodwill is also an intangible asset eligible for said depreciation as held by the Hon’ble Supreme Court in CIT Vs. Smifs Securities Ltd. (2012) 348 ITR 302 (SC)

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DATE: April 18, 2017 (Date of pronouncement)
DATE: April 21, 2017 (Date of publication)
AY: 1991-92
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CITATION:
S. 45/ 50(2): If an undertaking is sold as a running business with all assets and liabilities for a slump price, no part of the consideration can be attributed to depreciable assets and assessed as a short-term capital gain u/s 50(2). If the undertaking is held for more than three years, it constitutes a "long-term capital asset" and the gains are assessable as a long-term capital gain

In our considered opinion, the case of the respondent (assessee) does not fall within the four corners of Section 50 (2) of the Act. Section 50 (2) applies to a case where any block of assets are transferred by the assessee but where the entire running business with assets and liabilities is sold by the assessee in one go, such sale, in our view, cannot be considered as “short-term capital assets”. In other words, the provisions of Section 50 (2) of the Act would apply to a case where the assessee transfers one or more block of assets, which he was using in running of his business. Such is not the case here because in this case, the assessee sold the entire business as a running concern

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DATE: November 22, 2016 (Date of pronouncement)
DATE: December 8, 2016 (Date of publication)
AY: -
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CITATION:
S. 2(42C)/ 50B: The fact that certain assets of the "undertaking" are left out of the sale transaction because it would cause inconvenience for the purchaser does not mean that the transaction is not a "slump sale". To expect a purchaser to buy and pay value for defunct or superfluous assets flies in the face of commercial sense

The sale transaction was reported for a total consideration of Rs.45.83 crores. The sale was for a going concern, which included ongoing service contracts, employment contracts and other tangible assets, and intangible assets such as technical know-how etc. To expect a purchaser to buy and pay value for defunct or superfluous assets flies in the face of commercial sense. Unfortunately, the Revenue’s understanding is that in a going concern the buyer is bound to pay good money, transact and purchase bad and irrecoverable debts. Not only does it fly in the face of common and commercial understanding, but it is not even a pre-condition , as is evident from the definition of “undertaking”, cited in Explanation (1) to Section 2 (19) (A) of the Act

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DATE: October 18, 2016 (Date of pronouncement)
DATE: October 20, 2016 (Date of publication)
AY: -
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CITATION:
S. 50B: Important law explained on what constitutes a "slump sale" and whether capital gains on liquidation of a firm are chargeable to tax

The assessees, however, are attempting the wriggle out from payment of capital gain tax on the ground that it was a “slump sale” within the meaning of Section 2(42C) of the Act and there was no mechanism at that time as to how the capital gain is to be computed in such circumstances, which was provided for the first time by Section 50B of the Act with effect from April 01, 2000. However, this argument fails in view of the fact that the assets were put to sale after their valuation. There was a specific and separate valuation for land as well as building and also machinery. Such valuation has to be treated as that of a partnership firm which had already stood dissolved

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DATE: January 6, 2016 (Date of pronouncement)
DATE: January 25, 2016 (Date of publication)
AY: 2001-02
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CITATION:
S. 50B/43(6)(c): In computing the net worth for computing capital gains from a slump sale, depreciation on assets have to be deducted even if not claimed by the assessee

Plainly, the purpose of clause (a) of Explanation 2 to Section 50B of the Act is to provide a methodology to compute the written down value of the block of assets transferred by an Assessee as a part of the undertaking or division sold by way of a slump sale. The reference to Clause C is clearly not for the purposes of computing the block of assets remaining with the Assessee after the slump sale. It is apparent from the above that the intended object and scope of Clause C as used in Section 50B of the Act is totally different than the purpose of the said provision when read as a part of Section 43 of the Act. In the circumstances, clause (a) of Explanation 2 to Section 50B of the Act must be read in a manner to expressly include the computation provisions of Clause C without reference to other the import of the said provisions of Section 43 of the Act. In our view, the ITAT fell into error in importing the interpretation of Clause C read as a part of Section 43 of the Act, to interpret the scope of clause (a) of Explanation 2 to Section 50B of the Act

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