Vijay Mohan Harde,, Ahmednagar v. Assistant Commissioner of Income-tax,,

ITA 1059/PUN/2015 | 2011-2012
Pronouncement Date: 10-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 105924514 RSA 2015
Assessee PAN ABEPH4172K
Bench Pune
Appeal Number ITA 1059/PUN/2015
Duration Of Justice 2 year(s) 3 month(s) 12 day(s)
Appellant Vijay Mohan Harde,, Ahmednagar
Respondent Assistant Commissioner of Income-tax,,
Appeal Type Income Tax Appeal
Pronouncement Date 10-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 10-11-2017
Date Of Final Hearing 07-11-2017
Next Hearing Date 07-11-2017
Assessment Year 2011-2012
Appeal Filed On 28-07-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH PUNE . BEFORE SHRI D. KARUNAKARA RAO AM AND SHRI VIKAS AWASTHY JM . / ITA NO . 1059 /P U N/201 5 / ASSESSMENT YEAR : 20 1 1 - 12 SHRI VIJAY MOHAN HARDE DEOLALI PRAVRA TAL : RAHURI DISTT. - AHMEDNAGAR PAN : ABEPH4172K ....... / APPELLANT / V/S. THE ASSISTANT COMMISSIONER OF INCOME TAX AHMEDNAGAR CIRCLE AHMEDNAGAR / RESPONDENT ASSESSEE BY : S HRI S.N. PURANIK REVENUE BY : SHRI MUKESH JHA / DATE OF HEARING : 07 - 11 - 2017 / DATE OF PRONOUNCEMENT : 10 - 1 1 - 2017 / ORDER PER VIKAS AWASTHY JM : TH IS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS) - 2 PUNE DATED 30 - 01 - 2015 FOR THE ASSESSMENT YEAR 2011 - 12. 2 ITA NO . 1059/PUN/2015 A.Y. 2011 - 12 2. THE APPEAL IS TIME BARRED BY 2 DAYS. THE ASSESSEE HAS FILED AN APPLICATION SEEKING CONDONATION OF DELAY IN FILING OF THE APPEAL SUPPORTED BY AN AFFIDAVIT. AFTER PERUSAL OF THE SAME WE ARE SATISFIED THAT THE DELAY IN FILING OF THE APPEAL IS NOT INTENTIONAL OR DELIBERATE BUT HAS BEEN CAUSED D UE TO BONAFIDE REASONS AS STATED IN THE AFFIDAVIT. THUS THE DELAY IN FILING OF APPEAL IS CONDONED AND THE APPEAL IS ADMITTED TO BE HEARD AND DISPOSED OF ON MERITS. 3. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS A PROPRIE TOR OF M/S. FOOD LAND AGRO (INDIA) ENGAGED IN MANUFACTURING OF STERILIZED FLAVORED MILK (SFM) AND PROCESSING AND SALE OF MILK. DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL THE ASSESSEE SOLD/TRANSFERRED ITS ENTIRE MILK PROCESSING UNIT TO M/S. PRABHAT DAIRY PVT. LTD. (TRANSFEREE COMPANY). AN AGREEMENT FOR SALE/TRANSFER OF PROJECT WAS EXECUTED BETWEEN THE ASSESSEE AND M/S. PRABHAT DAIRY PVT. LTD. ON 01 - 12 - 2010 I.E. IN FINANCIAL YEAR 2010 - 11. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS TRANSFERRED ITS ENTIRE MILK PROCESSING PROJECT ON GOING CONCERN BASIS TO M/S. PRABHAT DAIRY PVT. LTD. THE ASSESSING OFFICER HELD THE TRANSFER AS SLUMP SALE AND INVOKED THE PROVISIONS OF SEC TION 50B OF THE ACT. THE ASSESSING OFFICER COMPUTED SHORT TERM CAPITAL GAIN ARISING FROM TRANSFER OF MILK PROCESSING UNIT AS UNDER : TOTAL CONSIDERATION ON SALE OF M/S. FOOD LAND AGRO (INDIA) RS.1 36 06 044/ - LESS : NET WORTH OF THE CONCERN RS.44 62 903/ - (ASSETS MINUS LIABILITIES AS PER EXPLANATION 1 OF SEC. 50B) SHORT TERM CAPITAL GAIN RS.91 43 141/ - 3 ITA NO . 1059/PUN/2015 A.Y. 2011 - 12 AGGRIEVED BY THE ASSESSMENT ORDER DATED 2 9 - 01 - 2014 THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) ASSAILING THE FINDINGS OF ASSESSING OFFICER IN TREATING THE SALE OF ASSETS OF M/S. FOOD LAND AGRO (INDIA) AS SLUMP SALE AND MAKING ADDITION ON ACCOUNT OF SHORT TERM CAPITAL GAIN . NOT CONVINCED WITH THE EXPLANATION THE COMMISSIONER OF INCOME TAX (APPEALS) REJECTED THE CONTENTIONS OF THE ASSESSEE AND UPHELD THE FINDINGS OF ASSESSING OFFICER. NOW THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL AGAINST THE ORDER OF FIRST APPELLATE AUTHORITY IN CONFIRMING THE TRANSFER OF ASSETS AS SLUMP SALE. 4. SHRI S.N. PURA NIK APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE AUTHORITIES BELOW HAVE ERRED IN HOLDING THAT IT IS A CASE OF SLUMP SALE. THE ASSESSEE HAS MERELY SOLD PLANT AND MACHINERY AND FACTORY BUILDING TO M/S. PRABHAT DAIRY PVT. LTD. ON 0 1 - 03 - 2011 AT W RI TTEN D OWN V ALUE (WDV) AS PER THE BOOKS OF ASSESSEE. AS SUCH THERE IS NO GAIN OR LOSS ON SALE OF AFORESAID ASSETS. THE ASSESSEE IN ITS BOOKS OF ACCOUNT HAS DISCLOSED PROFIT OF RS.15 11 719/ - FROM MANUFACTURING ACTIVITY TILL THE DATE OF SALE OF PLANT AND MACHINERY AND FACTORY BUILDING. 4.1 THE LD. AR ASSERTED THAT THE AUTHORITIES BELOW HAVE ERRED IN TREATING THE AGREEMENT FOR SALE DATED 01 - 12 - 2010 ( AT PAGES 14 TO 17 OF THE PAPER BOOK ) AS SACROSANCT. THE SAID AGREEMENT WAS NEVER ACTED UPON AS THE TRANSFEREE COMPANY REALIZED HEAVY LIABILITIES OF BANK AND OTHER LIABILITIES OF THE ASSESSEE AS AGAINST VERY LESS CURRENT ASSETS. THE B ANKERS OF THE ASSESSEE DID NOT AGREE FOR TAKEOVER OF BANK LOAN AND INSISTED FOR C ASH C REDIT AND T ERMS L OAN SETTLEMENT BY REPAYMENT ONLY . THUS IN VIEW OF THE OBJECTIONS RAISED BY BANK AS WELL AS TRANSFEREE COMPANY THE ASS ESSEE DECIDED TO S ELL PLANT AND MACHINERY AND FACTORY ALONE. NO OTHER ASSETS OR 4 ITA NO . 1059/PUN/2015 A.Y. 2011 - 12 LIABILITIES WERE TAKEN OVER BY M/S. PRABHAT DAIRY PVT. LTD. THE LD. AR INFORMED THAT THE LAND ON WHICH THE FACTORY BUILDING WAS CONSTRUCTED BY ASSESSEE IS A LEASED LAND TAKE N FROM M/S. PRABHAT DAIRY PVT. LTD. THE LD. AR REFERRED TO BALANCE SHEET OF THE ASSESSEE AS ON 31 - 03 - 2011 AT PAGE 21 OF THE PAPER BOOK TO SHOW THAT THERE WERE STILL SOME CURRENT ASSETS AND CURRENT LIABILITIES AND SECURE/UNSECURE LOANS WHICH W ERE SETTLED B Y THE ASSESSEE. THE LD. AR SUBMITTED THAT THE AUTHORITIES BELOW HAVE FAILED TO CONSIDER THE FACT THAT SOME LIABILITIES WERE PAID OFF BY THE ASSESSEE AFTER TRANSFER OF ASSETS TO M/S. PRABHAT DAIRY PVT. LTD. 5. ON THE OTHER HAND SHRI MUKESH JHA REPRESE NTING THE DEPARTMENT VEHEMENTLY DEFENDED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) AND PRAYED FOR DISMISSING THE APPEAL OF ASSESSEE. THE LD. DR SUBMITTED THAT A PERUSAL OF AGREEMENT FOR SALE CLEARLY INDICATES THAT IT IS A CASE OF SLUMP SALE. IT H AS BEEN CATEGORICALLY MENTIONED THAT THE TRANSFEREE HAS AGREED TO ACCEPT THE TRANSFER OF RUNNING UNIT OF SFM AND ACQUIRE THE RIGHT TITLE AND INTEREST OF TRANSFEROR IN THE SAID PROJECT. THE LD. DR FURTHER POINTED THAT LUMP SUM CONSIDERATION OF RS.1 36 06 044/ - WAS AGREED BETWEEN THE PARTIES FOR TRANSFER OF ASSETS. THERE WAS NO SEPARATE VALUATION OF PLANT AND MACHINERY AND BUILDING. THE TERMS AND CONDITIONS OF THE AGREEMENT CLEARLY INDICATE THAT IT IS A CASE OF TRANSFER OF SFM PROJECT AS GOING CONCERN AND NOT SALE OF PLANT & MACHINERY AND BUILDING ALONE. 6. W E HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW . WE HAVE ALSO EXAMINED THE A GREEMENT FOR S ALE AND BALANCE SHEET OF THE ASSESSEE. THE ASSESSEE IS AGGRIEVED AGAINST THE FINDINGS OF AUTHORITIES BELOW IN TREATING THE TRANSFER OF PLANT & MACHINERY AND BUILDING AS SLUMP SALE AND MAKING 5 ITA NO . 1059/PUN/2015 A.Y. 2011 - 12 ADDITION OF RS.91 43 141/ - AS SHORT TERM CAPITAL GAIN . TO DECID E THE ISSUE WHETHER IT IS A CASE OF SLUMP SALE OR SALE OF INDIVIDUAL ASSETS IT WOULD BE RELEVANT TO REFER TO AGREEMENT FOR SALE/TRANSFER OF PROJECT DATED 01 - 12 - 2010. FOR THE SAKE OF CONVENIENCE THE RELEVANT EXTRACT OF THE AGREEMENT ARE REPRODUCED HERE - IN - BELOW : WHEREAS THE TRANSFEROR HAS PLANNED TO TRANSFER AND SALE HIS EXISTING PROJECT OF MANUFACTURING STERILIZED FLAVORED MILK (SFM) THE TRANSFEROR HAS AVAILED A TERM LOAN OF RS. 1 06 45 000/ - (OUTSTANDING AS ON 10/12/2010 R S.45 45 249/ - ) FROM STATE BANK ON INDIA MAIN BRAN CH AHMEDNAGAR SANCTIONED FOR SFM PROJECT AND THAT ON RECEIPT OF DISBURSEMENT OF THE SAID TERM L OANS WAS PAID TO STATE BANK OF LNDIA BY THE TRANSFEROR. THE TOTAL PRICE WAS AGREED FOR BUILDING AND PLANT & MA CHINERIES RS.1 36 06 044/ - (RUPEES ONE CR O RES THIRTY SIX LAKHS SIX THOUSAND FORTY ONLY) INCLUSIVE OF ALL TAXES. AND WHEREAS TO ALIGN THE PRODU CTS AND BEING THE STRATEG IC DECISION OF THE BOTH THE COMPANY IT HAS BEEN DECIDED BY THE TRANSFEROR TO TRA NSFER THE PROJECT AND WHEREAS THE B OARD OF DIRECTORS OF TRANSFEREE AND THE PROPRIETOR HAVE DULY DELIBERATED UPON AND APPROVED THE TRANSFER OF SFM PROJECT FROM FOOD LAND AGRO (INDIA) TO PRABHAT DAIRY PRIVATE LIMITED AT THEIR RESPECTIVE MEETINGS HELD ON 10 TH FEB 2011 AS PER THE TERMS AND CONDITIONS OF THIS AGREEMENT A S CONTAINED HEREINAFTER; AND WHEREAS THE PARTIES HERETO HAVE AGREED TO REDUCE INTO WRITING THE TERMS AND CONDITIONS ON WHICH THE TRANSFEROR HAS AGREED TO TRA NSFER AND THE TRANSFEREE HAS AGREED TO A CCEPT THE TRANSFER OF RUNNING UNIT OF SFM AND ACQUIRE THE RIGHT TILE AND INTEREST OF THE T RANSFEROR IN THE SAID PROJECT AND THE PARTIES HAVE THEREFORE MUTUALLY AGREED TO RECORD THEIR U NDERSTANDING BY WAY OF THIS AGREEMENT. NOW IN WITNESSSETH WHEREOF AND FOR GOOD AND VALUABLE CONSIDERATION THE RECEIPT AND SUFFICIENCY OF WHICH IS ACKNOWLEDGED B Y THE PARTIES AND ON THE TERMS AND CONDITIONS HEREINAFTER SET FORTH THE PARTIES AGREE AS FOLLOWS: 1. THE TRANSFEROR HEREBY WARRANTS AND REPRESENTS TO THE TRANSFEREE THAT IT HAS FULL RIGHTS AUTHORITY AND POWER TO ENTER INTO AND EXECUTE THIS AGREEMENT. 6 ITA NO . 1059/PUN/2015 A.Y. 2011 - 12 2. T H E TRANSFEREE ALSO HEREBY WARRANTS AND REPRESENT TO THE TRANSFEROR THAT IT HAS FULL RIGHTS AUTHORITY AND POWER TO ENTER INTO AND EXECUTE THIS AGREEMENT . 3. THE TRANSFEREE HEREBY CONFIRMS AND WARRANTS THAT IT HAS THE NECESSARY LICENSE TO CARRY ON THE BUSINESS OF MANUFACTURE AND SALE OF SFM. 4. THE TRANSFEROR HEREBY TRANSFERS ALL THE ASSETS AND LIABILITIES RELATING TO SFM P ROJECT ON A GOING CONCERN BASIS TO THE TRANSFEREE INCLUDING ITS RIGHTS AND INTEREST IN PROJECT. THE TRANSFEROR HEREBY CONFIRM THAT TILL THE DATE OF THIS AGREEMENT THE TRANSFEROR HAS PURCHASE / ACQUIRED ALL THE MACHINERY (AS PER THE LIST ATTACHED HEREWITH FORMING PART OF THIS AGREEMENT ) AND THE SEPARATE ORDERS BEEN PLACED FOR TRANSFER OF BUILDING BY THE TRANSFEREE ORIGINALLY THE LEASE HOLD RIGHTS OF LAND ALSO BEEN TRANSFER AND ALSO TO CONSIDER THE ADVANCES GIVEN BY TRANSFEROR AS GIVEN BY TRANSFEREE. 5. THE TRANSFEREE HEREBY CONFIRM AN D UNDERTAKE THAT IT WILL PURCHASE ALL THE MACHINERY BUILDING AND OTHER CAPITAL ASSETS AS PER THE TERMS OF PURCHASE ORDERS PLACED BY THE TRANSFEROR AND WILL PAY FOR THE SAME TO THE VENDORS AFTER ADJUSTING THE ADVANCES GIVEN BY THE TRANSFEROR TO VENDORS AND PAYOFF TERM LOAN OF STATE BANK OF INDIA BEFORE 26 TH JAN 2011 OR TRANSFEREE WILL PAY OFF THE SAME AS ADVANCE. .................... .................... 7. THE PREAMBLE OF THE AGREEMENT CLEARLY INDICATES THAT THE ASSESSEE HAS TRANSFERRED ITS SFM MANUFACTURING PROJECT TO THE TRANSFEREE COMPANY AS A GOING CONCERN. THE CONSIDERATION AGREED BETWEEN THE PARTIES FOR TRANSFERRING THE MANUFACTURING PROJECT HAS BEEN DECIDED IN LUMP SUM AND NOT SPECIFIC TO THE ASSET OR BLOCK OF ASSET. A FURTHER PE RUSAL OF COVENANTS SHOW THAT IT IS NOT ONLY THE PLANT AND MACHINERY BUT THE LICENSES TO CARRY ON THE BUSINESS FOR MANUFACTURING AND SALE OF SFM THAT HAVE BEEN TRANSFERRED BY THE ASSESSEE TO TRANSFEREE COMPANY. A PERUSAL OF CLAUSE 5 SHOW THAT TRANSFEREE CO MPANY HAS AGREED TO REPAY THE LOANS OF THE 7 ITA NO . 1059/PUN/2015 A.Y. 2011 - 12 ASSESSEE AND WOULD ADJUST THE SAME AGAINST TOTAL CONSIDERATION. THE CLAUSE 4 OF THE AGREEMENT CLEARLY MENTIONS THAT THE ASSESSEE HAS AGREED TO TRANSFER ALL THE ASSETS AND LIABILITIES OF THE PROJECT ON GOING CONCE RN BASIS. THUS IN THE LIGHT OF TERMS AND CONDITIONS MUTUALLY AGREED BETWEEN THE ASSESSEE AND M/S. PRABHAT DAIRY PVT. LTD. THERE IS NO ELEMENT OF DOUBT THAT IT IS A CASE OF SLUMP SALE. 8. THE LD. AR HAS CONTENDED THAT AGREEMENT DATED 01 - 12 - 2010 WAS NOT ACTED UPON AND THE ASSESSEE HAS SEPARATELY SOLD PLANT AND MACHINERY AND BUILDING. WE DO NOT FIND ANY MERIT IN THE SUBMISSIONS OF ASSESSEE. THE ASSESSEE HAS NOT PLACED ON RECORD ANY DOCUMENT TO SHOW THAT THE AGREEMENT DATED 01 - 12 - 2010 WAS CANCELLED AT LATTER POINT OF TIME OR THERE WAS VARIATION IN THE TERMS AND CONDITIONS OF THE SAID AGREEMENT. FURTHER THE PROXIMITY OF DATE OF EXECUTION OF AGREEMENT I.E. 01 - 12 - 2010 FOLLOWED BY TRANSFER OF ASSETS ON 01 - 03 - 2011 ESTABLISHES THE NEXUS BETWEEN THE AGREEME NT AND SUBSEQUENT EVENTS OF TRANSFER OF ASSETS AND PAYMENT OF LIABILITIES. THEREFORE BALD ASSERTIONS MADE BY LD. AR ARE NOT TENABLE AND HENCE REJECTED. 9. THE LD. AR HAS CONTENDED THAT THE ASSESSEE HAS PAID CERTAIN LIABILITIES OF SFM PROJECT ON ITS OW N WHICH HAVE NOT BEEN CONSIDERED WHILE COMPUTING CAPITAL GAINS. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THIS SUBMISSION OF LD. AR. T HOUGH THE LD. AR BEFORE US HAS NOT CLEARLY SPECIFIED THE LIABILITIES WHICH HAVE BEEN PAID SUBSEQUENT TO TRANSFER OF ASSETS AND LIABILITIES RELATING TO SFM PROJECT N EITHER THE TRANSFER AGREEMENT HAS EXPLICITLY MENTIONED THE LIABILITIES TAKEN OVER OR EXCLUDED BY THE TRANSFEREE UNDER SUCH CIRCUMSTANCES WE DEEM IT APPROPRIATE TO DIRECT THE ASSESSING OFFICER TO RE - COMPUTE CAPITAL GAINS AFTER EXAMINING THE 8 ITA NO . 1059/PUN/2015 A.Y. 2011 - 12 PAYMENT S OF LIABILITIES IN CONNECTION WITH SFM PROJECT IF ANY PAID BY THE ASSESSEE AFTER THE DATE OF TRANSFER OF PROJECT. THUS WE ARE RESTORING THIS ISSUE BACK TO ASSESSING OFFICER FOR LIMITED PURPOSE OF RE - COMPUTATION OF CAPITAL GAIN WITH THE DIRECTIONS AFOREMENTIONED. IN PRINCIPLE WE CONCUR WITH THE FINDINGS OF AUTHORITIES BELOW IN HOLDING THAT IT IS A CASE OF SLUMP SALE AND NOT SALE OF ASSETS ALONE. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLO WED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON FRIDAY THE 10 TH DAY OF NOVEMBER 2017 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 10 TH NOVEMBER 2017 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 2 PUNE 4. / THE CIT - I PUNE 5. / DR ITAT B BENCH PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER / PRIVATE SECRETARY / ITAT PUNE