ANAND ELECTRIC CO. LTD. VS COMMISSIONER OF INCOMETAX, 2000 PTD-BOMBAY-HIGH-COURT-INDIA 3236 (1998)

(a) Income-tax---

----Income---Solatium received by assessee is taxable.

The solatium of Rs.2,20,000 received by the assessee was taxable.

Akola Electric Supply Co. (Pvt.) Ltd. v. CIT (1978) 113 ITR 265 (Bom.) fol.

(b) Income-tax---

----Profits chargeable to tax ---Assessee's undertaking taken over by purchaser---Did not constitute a slump sale but only sale of individual assets of undertaking---Indian Income Tax Act, 1961, S.41(2).

Taking over of the undertaking of the assessee-company did not constitute a slump sale but only the sale of the individual assets of the undertaking for purposes of section 41(2) of the Income Tax Act, 1961.

CIT v. Artex Manufacturing Co. (1997) 227 ITR 260 (SC) fol.

Ms. V.B. Patel with U.I. Dalai for the Assessee.

R.V. Desai with B.M. Chattarjee for the Commissioner.

JUDGMENT

DR. B.P. SARAF, J.---By this reference under section 256(1) of the Income Tax Act, .1961, the Income-tax Appellate Tribunal has referred the following three questions of law to this Court for opinion at the instance of the assessee:

"(1) Whether, on the facts and in the circumstances of the case, the taking over of the undertaking of the assessee-company did not constitute a slump sale but only the sale of the individual assets of the undertaking?

(2) Whether, on the facts and in the circumstances of the case in determining the cost of the assets for the purpose of capital gains the consumers contribution has to be deducted from the cost of the assets for capital gains and the application of section 41(2) and if so by following what procedure?

(3) Whether, on the facts and in the circumstances of the case, the solatium given to the applicant of Rs.2,20,000 was taxable?" .

So far as question No.3 is concerned, the controversy therein is covered by the decision of this Court in Akola Electric Supply Co. (Pvt.) Ltd. v. CIT (1978) 113 ITR 265. Following the same, question No.3 is answered in the affirmative and in favour of the Revenue.

So far as question No.2 is concerned, Ms. V.B. Patel, learned counsel for the assessee, fairly stated before us that the controversy therein has become academic as the factual controversy pertaining to this question has been remanded by the Tribunal to the Assessing Officer. This question has become academic and need not be answered. In view of the above, we return question No.2 unanswered.

So far as question No.l is concerned, the controversy therein is, whether the taking over of the undertaking of the assessee-company did not constitute a slump sale but only sale of the individual assets of the undertaking. The law in this regard is now settled by the decision of the Supreme Court in CIT v. Artex Manufacturing Co. (1997) 227 ITR 260. That was a case of sale of the entire business as a going concern by a firm to a company formed for the purpose of such take-over. The question was whether the provisions of section 41(2) were applicable. The Supreme Court held that though in the agreement there was no reference of the value of the plant, machinery and dead stock, on the basis of the information that was furnished by the assessee before the Income-tax Officer, it became evident that the amount Rs.11,50,400 had been arrived at by taking into consideration the value of the plant, machinery and dead stock as assessed by the valuer at Rs.15,87,296. The Supreme Court held that it was not a case in which it- could not be said that the price attributed to the items transferred was not indicated and hence section 41(2) of the Income Tax Act, 1961, could not be applied. We have heard learned counsel for the parties and perused the facts of the case. In this case also there is a finding of the Tribunal that the assets had been taken over at a stipulated price. It is in view of this finding that the Tribunal held that it was not a case of slump sale and section 41(2) would apply. In view of the above finding of the Tribunal, the ratio of the decision of the Supreme Court in CIT v: Artex Manufacturing Co. (1997) 227 ITR 260, squarely applies to the facts of the present case. Accordingly, we answer question No. 1 in the affirmative i.e., in favour of the Revenue and against the assessee.

Reference is disposed of accordingly. No order as to costs.

M.B.A./42/FC

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