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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: 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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