ITO 20(2)(1), MUMBAI v. P.V. LEELA AMMA, MUMBAI

ITA 1277/MUM/2010 | 2006-2007
Pronouncement Date: 21-11-2014 | Result: Allowed

Appeal Details

RSA Number 127719914 RSA 2010
Assessee PAN AAFPN5693M
Bench Mumbai
Appeal Number ITA 1277/MUM/2010
Duration Of Justice 4 year(s) 9 month(s) 5 day(s)
Appellant ITO 20(2)(1), MUMBAI
Respondent P.V. LEELA AMMA, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-11-2014
Appeal Filed By Department
Order Result Allowed
Bench Allotted C
Tribunal Order Date 21-11-2014
Date Of Final Hearing 11-11-2014
Next Hearing Date 11-11-2014
Assessment Year 2006-2007
Appeal Filed On 16-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH MUM BAI BEFORE SHRI SANJAY ARORA AM AND SHRI AMIT SHUKLA JM ./ I.T.A. NO. 1277/MUM/2010 ( / ASSESSMENT YEAR: 2006-07) INCOME TAX OFFICER 20(2)(1) 701 PIRAMAL CHAMBERS LALBAUG MUMBAI-400 012 / VS. P. V. LEELA AMMA LEELA BAUG SIR M. V. ROAD ANDHERI (E) MUMBAI ! ./' ./PAN/GIR NO. AAFPN 5693 M ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !# & ' / APPELLANT BY : SHRI PREMANAND J $%!# & ' / RESPONDENT BY : SHRI NITESH JOSHI () * & + / DATE OF HEARING : 11.11.2014 -. & + / DATE OF PRONOUNCEMENT : 21.11.2014 / O R D E R PER SANJAY ARORA A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-31 MUMBAI (CIT(A) FOR SH ORT) DATED 12.11.2009 ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .143(3) OF THE INCOME TAX ACT 1961 (THE ACT) FOR THE ASSESSMENT YEAR (A.Y.) 2006-07 VIDE ORDER DATED 30.12.2008. 2. THE ISSUE ARISING IN THE INSTANT APPEAL RAISING AS MANY AS FOUR GROUNDS GROUND NOS. 5 & 6 BEING GENERAL IN NATURE WARRANTING NO A DJUDICATION AS DISCERNED FROM THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE ARGU MENTS MADE BEFORE US IS THE EXIGIBILITY TO TAX U/S. 45(1) OR UNDER ANY OTHER PROVISION OF T HE ACT OF THE INCOME IF ANY ARISING TO THE ASSESSEE ON THE TRANSFER OF HER BUSINESS. 2 ITA NO. 1277/MUM/2010 (A.Y. 2006-07) ITO VS. P. V. LEELA AMMA 3. THE ASSESSEE A SOLE PROPRIETOR OF A FIRM VIVEK INDUSTRIES IS IN THE BUSINESS OF MANUFACTURE OF GARMENTS ON JOB WORK BASIS VIDE THRE E PROPRIETARY CONCERNS VIZ. M/S. BOMBAY FASHIONS M/S. DESIGN CREATIONS AND M/S. APP AREL INDUSTRIES. THE GARMENTS ARE MANUFACTURED PRIMARILY FOR THE GROUP CONCERN DESIG N CREATIONS (MUMBAI) PVT. LTD. (DCPL FOR SHORT). VIDE THREE SEPARATE AGREEMENTS DATED 29.03.2005 THE ASSESSEE AGREED TO SELL HER SAID BUSINESS ON A GOING CONCERN BASIS EFFECTIVE 01.04.2005 TO THE SAID COMPANY DCPL (NAME SUBSEQUENTLY CHANGED TO M/S. LEE LA SCOTTISH LACE (P.) LTD.) A COMPANY INCORPORATED UNDER THE COMPANIES ACT 1956 WITH ITS REGISTERED OFFICE AT ANDHERI (E) MUMBAI. CLAUSE 3 OF THE RELEVANT AGREE MENTS IDENTICALLY WORDED IS IN RESPECT OF CONSIDERATION FOR THE TRANSFER AND READ S AS UNDER: 3. CONSIDERATION 3.1 THE CONSIDERATION FOR THE PURCHASE OF BUSINESS SHALL AMOUNT TO RS.10 000/- SUBJECT TO PARAGRAPH 3.3 BELOW. 3.2 THE CONSIDERATION SHALL BE DISCHARGED BY DCPL I N CASH WITHIN 7 (SEVEN) DAYS FROM THE COMPLETION DATE OR WITHIN SUC H TIME AS MAY BE MUTUALLY AGREED UPON BETWEEN THE PARTIES. 3.3 THE CONSIDERATION SHALL BE ADJUSTED AS FOLLOWS: (A) IF THE FINAL NET ASSETS EXCEEDS THE CONSIDERATI ON THE CONSIDERATION SHALL BE INCREASED TO AN AMOUNT EQUAL TO THE FINAL NET ASSETS; (B) IF THE FINAL NET ASSETS IS LESS THAN THE CONSID ERATION THE CONSIDERATION SHALL BE REDUCED TO AN AMOUNT EQUAL T O THE FINAL NET ASSETS. 3.4 FOR THE PURPOSES OF THIS AGREEMENT FINAL NET ASSETS MEANS ASSETS LESS LIABILITIES AS ON THE COMPLETION DATE. THE NET WORTH OF THE THREE FIRMS AS ON THE TRANSFER DATE (01.04.2005) AS FURNISHED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS I.E. AT AN AGGREGATE OF RS. 73 LACS WAS AS UNDER: (AM OUNT IN RS. LACS) A) BOMBAY FASHIONS 205.29 B) DESIGN CREATIONS (-) 99.78 C) APPAREL INDUSTRIES (-) 32.51 3 ITA NO. 1277/MUM/2010 (A.Y. 2006-07) ITO VS. P. V. LEELA AMMA IN THE VIEW OF THE ASSESSING OFFICER (A.O.) THE AS SESSEE HAD NOWHERE PROVED THAT THE NET WORTH OF THE LATTER TWO FIRMS AFORE-REFERRED WAS IN THE NEGATIVE SO THAT THEIR ENTIRE CAPITAL HAD BEEN WIPED OFF AND THAT THE ASSESSEE HAD INCUR RED LOSS TO THAT EXTENT. THAT BEING THE CASE THE CONSIDERATION FOR THEIR TRANSFER WAS TO B E CONSIDERED AT RS.10 000/- RATHER THAN BEING ADJUSTED BY THE NEGATIVE SUM OF THEIR NET WOR TH AS CONTENDED BY THE ASSESSEE. FOR THE THIRD FIRM M/S. BOMBAY FASHIONS THE CONSIDERA TION (RS.10 000/-) WAS TO BE FURTHER INCREASED BY ITS POSITIVE NET WORTH OF RS.205.29 LA CS. ACCORDINGLY THE TOTAL CONSIDERATION WAS TAKEN BY HIM AT RS.205.59 LACS WHICH WAS CONSI DERED AS THE BENEFIT ARISING TO THE ASSESSEE FROM THE TRANSFER. FURTHER SECTION 47(XIV ) WOULD NOT APPLY IN-AS-MUCH AS THE ASSESSEES SHAREHOLDING IN THE TRANSFEREE-COMPANY ( DCPL) WAS ONLY 31% AS AGAINST A MINIMUM OF 50% AS SPECIFIED IN THE SAID PROVISION. IN FACT THE ASSESSEE HAD HERSELF ADMITTED TO BOTH I.E. SECTION 47(XIV) AND S. 50B AS BEING NOT APPLICABLE TO THE TRANSACTION/S UNDER REFERENCE. THE SAME WAS ACCORDI NGLY ASSESSABLE U/S.56 FALLING UNDER THE RESIDUARY HEAD INCOME FROM OTHER SOURCES WHE RE-UNDER INCOME OF EVERY KIND NOT SPECIFICALLY EXCLUDED FROM THE TOTAL INCOME WOULD BECOME CHARGEABLE TO INCOME-TAX. IN APPEAL THE ASSESSEE FOUND FAVOUR WITH THE LD. C IT(A). THE CONSIDERATION FOR THE TRANSFER WAS IN EFFECT THE NET WORTH OF THE TRANS FEROR-UNDERTAKING/S WHETHER POSITIVE OR NEGATIVE. THE ASSESSEE HAD NOT RECEIVED ANYTHING BE YOND RS.73 LACS I.E. THE NET WORTH OF THE THREE FIRMS SAVE THE AGGREGATE CASH AND BANK B ALANCES OF THE THREE FIRMS AS AT THE COMPLETION DATE (RS.5.45 LACS) WHICH WAS NOT SUBJE CT TO TRANSFER. NOR IT IS IN FACT THE A.O.S CASE THAT IT IS SO. THE ASSESSEES CASE WAS THUS COVERED U/S.50B. FURTHER THE SALE CONSIDERATION FOR ALL THE THREE UNDERTAKINGS TRANSF ERRED BEING THEIR RESPECTIVE NET WORTHS NO ADDITION WAS CALLED FOR IN-AS-MUCH AS THE TRANSA CTION DID NOT GIVE RISE TO ANY CAPITAL GAINS. THE ENTIRE ADDITION MADE BEING DELETED THUS; AGGRIEVED THE REVENUE IS IN APPEAL. 4. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD. 4.1 THE TRANSFER OF THE UNDERTAKINGS VIDE SEPARATE AGREEMENTS IS NOT DENIED BY IT. THE PRINCIPAL ISSUE RAISED BY THE A.O. IS WITH REGARD T O THE CONSIDERATION. THE SAME IS NOT RS.10 000/- SUBJECT TO A FURTHER INCREASE OR DECRE ASE BY THE AMOUNT OF FINAL NET ASSETS (NET WORTH) OF THE TRANSFEROR-ENTITY AS CONSTRUED BY TH E A.O. BUT ITS NET WORTH ITSELF. IN FACT 4 ITA NO. 1277/MUM/2010 (A.Y. 2006-07) ITO VS. P. V. LEELA AMMA AS IT APPEARS TO US THE CONSIDERATION CLAUSE IN THE AGREEMENTS HAS BEEN STATED IN THE MANNER IT HAS BEEN I.E. RATHER THAN SIMPLY STATIN G IT TO BE THE BOOK VALUE OF THE FINAL NET ASSETS IN VIEW OF THE SAME BEING IN THE NEGATIVE F OR TWO OF THE THREE CONCERNS BEING TRANSFERRED. BE THAT AS IT MAY THE A.O.S CONFUSIO N AS IT WOULD APPEAR TO US IS AS TO HOW THE CONSIDERATION COULD BE IN THE NEGATIVE? THE LD. AUTHORIZED REPRESENTATIVE (AR) THE ASSESSEES COUNSEL ON BEING SO QUERIED DURING THE COURSE OF HEARING WOULD OBJECT THERETO STATING IT AS NOT SO BUT ONLY THAT THE AS SESSEE HAD NOT BEEN ABLE TO SHOW THAT THE NET WORTH OF THE SAID TWO FIRMS HAD BEEN LOST. WE A RE SURPRISED. IN OUR VIEW THE A.O.S CONFUSION STEMS PRINCIPALLY ON ACCOUNT OF THE NEGAT IVE NET WORTH OF TWO OF THE THREE UNDERTAKINGS TRANSFERRED. HOW COULD THE CONSIDERATION WHICH IS PEGGED AT THE NET WORTH WHETHER POSITIVE OR NEGATIVE BE IN THE NEGATIVE ? HOW FOR INSTANCE ONE MAY ASK WOULD IT BE CONVEYED ? AS SUCH EVEN ASSUMING THE LD. AR TO BE CORRECT I N STATING THAT TO BE NOT THE (OR A) SOURCE OF THE AOS CONFUSION HOW WE WONDER IT WOULD NOT BE AN ISSUE ARISING IN THE MATTER AND THUS NOT RELEVANT FOR BEING QUESTI ONED AND EXAMINED IN DECIDING THE SAME. WE WOULD RATHER CONSIDER THIS TO BE THE ISSUE ARISING IN THE INSTANT CASE. THE LD. AR IN OUR VIEW OUGHT TO HAVE ADDRESSED THE QUERY BEING GERMANE TO THE ISSUE. IN FACT WE FIND COPIES OF THE ORDER BY THE TRIBUNAL IN THE CASE OF ZUARI INDUSTRIES LTD. VS. ASST. CIT [2007] 105 ITD 569 (MUM) (MARKED AS AR) IN THE AP PEAL FOLDER. VIDE ITS SAID DECISION THE TRIBUNAL HAS HELD PRECISELY WHAT THE A.O. HAS DONE IN THE INSTANT CASE EXCEPT THAT HE HAS BROUGHT THE SAME TO TAX U/S. 56 WHICH THOUGH IS NOT UNDERSTANDABLE. THERE IS IN FACT MORE THAN ONE COPY OF THE SAID ORDER IN FILE SO TH AT IT MAY WELL HAVE BEEN THAT RELIANCE THEREON STOOD PLACED I.E. ON AN EAR LIER DATE/S OF HEARING ON BEHALF OF THE REVENUE AS WELL. THE TRIBUNAL IN THE SAID CASE HELD THAT THE COST OF ACQUISITION OF AN ASSET WHERE THE NET WORTH WAS IN THE NEGATIVE SO THAT THE VALUE OF THE LIABILITIES EXCEEDED THAT OF THE ASSETS IS TO BE TAKEN AT NIL. NOT SO DOING WOULD A MOUNT TO THE CAPITAL GAINS BEING IN EXCESS OF THE SALE CONSIDERATION WHICH CANNOT BE. A GAIN WHICH WOULD ARISE ONLY WHERE THE SALE CONSIDERATION IS MORE THAN THE COST IS ALWAYS A PART OF THE CONSIDERATION. RATHER WHERE THE COST EXCEEDS THE SALE (OR TRANSFE R) CONSIDERATION CAPITAL GAIN WOULD BE 5 ITA NO. 1277/MUM/2010 (A.Y. 2006-07) ITO VS. P. V. LEELA AMMA IN THE NEGATIVE I.E. A CAPITAL LOSS. HOW COULD THEREFORE IT WONDERED CAPITAL GAIN EXC EED THE SALE CONSIDERATION ? THAT IS A SCENARIO OF CAPITAL GAIN BEING IN EXCE SS OF OR HIGHER THAN THE SALE CONSIDERATION COULD NEVER ARISE IN RE ALITY. THE SAME AS WHERE A NEGATIVE COST OR NET WORTH IS CONSIDERED AS THE COST OF ACQU ISITION AND/OR IMPROVEMENT IT CONSIDERED TO ARISE OUT A MATHEMATICAL JUGGLERY WI TH NO BASIS IN FACTS. HOW COULD IT QUESTIONED THE COST OF AN ASSET BE NEGATIVE ? THE VALUE OF A CAPITAL ASSET OR PROPERTY COULD THEREFORE AT BEST BE NIL AND THERE IS NO CONCEPT OF NEGATIVITY WITH REFERENCE TO THE EXPRESSIONS NET WORTH OR COST OF ACQUISITION . SURPRISINGLY; MORE SO AS IT OBTAINED DESPITE OUR DIRECT QUERY IN THE MATTER NEITHER THE LD. AR NOR THE LD. DR ADVERTED TO THIS DECISION PLACED IN THE FILE FOLDER DURING HEARING . THE TRIBUNAL IN THE SAID CASE CONSIDERED THE ISSUE FROM BOTH THE COMMON LAW AND TAX LAW PERSPECTIVE AS WELL AS IN FACT A MATHEMA TICAL ONE. THE SAID DECISION BEING ALSO RENDERED IN THE CONTEXT OF SECTION 50B WHICH STOOD ALSO CONSIDERED THE MATTER WOULD REQUIRE BEING REFERRED TO A LARGER BENCH I.E. WHE RE THE VIEW EXPRESSED BY THE TRIBUNAL IN ZUARI INDUSTRIES LTD. (SUPRA) WAS TO BE NOT ADOPTED OR FOLLOWED BY US ST ATING OUR REASON/S FOR THE SAME. THE LD. DR HOWEVER RELIED BEFORE US ON THE DECISION IN THE CASE OF DY. CIT VS. SUMMIT SECURITIES LTD. [2012] 15 ITR (TRIB) 1 (MUM) (SB) WHICH DISAPPROVE S THE DECISION IN THE CASE OF ZUARI INDUSTRIES LTD. (SUPRA) AS ALSO DISSENTS FROM ANOTHER IN THE CASE OF PAPER BASE CO. LTD. VS. ASST. CIT [2008] 19 SOT 163 (DEL). IT STANDS CLARIFIED THEREIN THAT SECTION 2(14)) OF THE ACT WHICH DEFIN ES A CAPITAL ASSET TO MEAN PROPERTY OF ANY KIND HELD BY THE ASSESSEE NO DOUBT REFERS TO S OME POSITIVE POSSESSION. HOWEVER THE CONTENTION THAT ITS COST THEREFORE CANNOT BE NEGAT IVE FAILS IN THE CONTEXT OF SECTION 50B AS THE CAPITAL ASSET REFERRED TO THEREIN IS AN UNDE RTAKING WHICH WOULD ENCOMPASS NOT ONLY ASSETS BUT ITS LIABILITIES AS WELL AS WHERE THEIR VALUE EXCEEDS THAT OF THE ASSETS. SECTION 50B(2) MAKES IT ABUNDANTLY CLEAR THAT THE U NDERTAKING OR A DIVISION AS A WHOLE IS CONSIDERED AS A ONE ASSET AND THE NET WORTH OF THIS CAPITAL ASSET IS TO BE CONSIDERED AS THE COST OF ACQUISITION AND IMPROVEMENT FOR THE PURPOSE S OF SECTIONS 48 & 49 AND WHICH IS TO BE REDUCED FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER. THE OBJECT OF SECTION 50B IS THUS SIMPLY TO DETERMINE AND SUPPLY THE FIGURE OF 6 ITA NO. 1277/MUM/2010 (A.Y. 2006-07) ITO VS. P. V. LEELA AMMA COST OF ACQUISITION AND COST OF IMPROVEMENT OF THE UNDERTAKING/S TO SECTION 48 SO AS TO EVENTUALLY COMPUTE THE CAPITAL GAINS U/S.45. THE TR IBUNAL ALSO ANSWERED THE QUESTION WITH REGARD TO THE TRIBUNALS POWER; THE QUESTIONS ADDRE SSED BY IT NOT ARISING FROM THE GROUNDS BEFORE IT OR EVEN THOSE POSED BEFORE THE SPECIAL BE NCH PLACING RELIANCE ON THE DECISION IN THE CASE OF AHMEDABAD ELECTRICITY CO. LTD. VS. CIT [1993] 199 ITR 351 (BOM) (FB). 4.2 WE NEXT CONSIDER THE APPLICABILITY OF THE SAID DECISION BY THE SPECIAL BENCH IN THE CASE OF SUMMIT SECURITIES LTD. (SUPRA) IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE SAME APPARENTLY EVEN AS OBSERVED DURING THE COURS E OF HEARING BY THE BENCH SUPPORTS THE CASE OF THE ASSESSEE RATHER THAN THAT OF THE R EVENUE. THE TRIBUNAL HAS CLARIFIED THE CAPITAL ASSET TO BE SOMETHING POSITIVE IN-AS-MUCH A S IT CONNOTES AND IS ONLY A PROPERTY SO THAT SOMETHING OF WORTH I.E. VALUE IS BEING T RANSFERRED. TO THAT EXTENT IT IS IN AGREEMENT WITH AND ENDORSES THE VIEW EXPRESSED BY T HE TRIBUNAL EARLIER IN ZUARI INDUSTRIES LTD. (SUPRA). WHERE IT DIFFERS FROM THE LATTER IS WITH R EGARD TO ITS VALUATION. AN UNDERTAKING/S WHICH IS THE SUBJECT MATTER OF TRANS FER U/S.50B IN-AS-MUCH AS IT INCLUDES ITS LIABILITIES ALSO COULD AS WELL BE NEGATIVE I .E. WHERE THEIR VALUE EXCEEDS THAT OF ITS ASSETS. THAT IS WHILE WHAT IS BEING TRANSFERRED IS A PROPERTY AND THUS A CAPITAL ASSET BY DEFINITION ITS NET WORTH WHICH ITS COST OF ACQU ISITION AND/OR IMPROVEMENT IS DEEMED AS (SECTION 50B(2)) COULD BE NEGATIVE I.E. WHERE TH E VALUE OF THE LIABILITIES EXCEEDS THAT OF THE ASSETS. THIS IS AS SECTION 50B ENTAILS A SPECIE S OF CAPITAL ASSETS AN UNDERTAKING WHICH IS AN AMALGAM OF ASSETS AND LIABILITIES WHICH CANN OT BE SEGREGATED CONSTITUTE AS THEY DO AN INTEGRAL PART OF THE UNDERTAKING OR A BUSINESS A CTIVITY AS A WHOLE. SECTION 2(14) DEFINING CAPITAL ASSET DOES NOT OVERRIDE SECTION 5 0B WHICH PRESCRIBES THE MODE AND MANNER OF COMPUTING THE CAPITAL GAIN IN A DEFINED S ET OF CIRCUMSTANCES I.E. SLUMP SALE OF AN UNDERTAKING/S. FURTHER CONSIDERATION BY DEFINITION CANNOT BE NE GATIVE. A NEGATIVE CONSIDERATION IMPLIES TRANSFER OF AN OBLIGATION WHICH CANNOT BE SAID TO BE AN ASSET MUCH LESS IN THE CAPITAL FIELD OR A CAPITAL ASSET BY DEFINITION; WE HAVING CLARIFIED PROPERTY TO BE SOMETHING POSITIVE I.E. OF VALUE. AN UNDERTAKING IS AND TH US HAS TO BE SEEN AS A CONCEPT OR ENTITY DISTINCT AND APART FROM ITS COST OF ACQUISITION AN D/OR IMPROVEMENT VALUED ON A VALID 7 ITA NO. 1277/MUM/2010 (A.Y. 2006-07) ITO VS. P. V. LEELA AMMA BASIS. THE MOMENT THIS IS DONE THE MATHEMATICAL IDENTITY THAT CAPITAL GAIN CANNOT EXCEED THE SALE CONSIDERATION WHICH PREVAILED WITH THE TR IBUNAL IN ZUARI INDUSTRIES LTD. (SUPRA) SHALL NO LONGER OBTAIN DISSOLVING ALL THE CONFUSIO N AND AMBIGUITY IN THE MATTER . 4.3 COMING TO THE FACTS OF THE PRESENT CASE WHAT T HE ASSESSEE HAS TRANSFERRED IS ITS BUSINESS OF MANUFACTURE/STITCHING OF GARMENTS (ON J OB WORK BASIS) UNDERTAKEN THROUGH ITS THREE PROPRIETARY FIRMS. THOUGH PER SEPARATE AGREEM ENTS THE SAME IS IN EFFECT ONE SINGLE TRANSACTION OF TRANSFER OF THE ASSESSEES SAID BUSI NESS TO ANOTHER ENTITY DCPL AND WHAT THE ASSESSEE HAS RECEIVED IN CONSIDERATION IS A S INGLE POSITIVE SUM FROM THE SAID TRANSFEREE-COMPANY. CONSIDERATION AS AFORE-STATED CANNOT BE NEGATIVE AND IS NOT SO IN THE INSTANT CASE AND WHICH WOULD ALSO STAND TO ANS WER THE QUERY MADE DURING HEARING. TO THIS EXTENT WE ARE IN DISAGREEMENT WITH THE LD. CIT (A) WHO THOUGH HAS FINALLY COMBINED THE NET WORTH OF ALL THE THREE FIRMS AT RS.78.45 L ACS I.E. BY ADJUSTING THE NEGATIVE NET WORTH OF THE TWO FIRMS WITH THAT OF THE THIRD HAVI NG A POSITIVE FIGURE. THE TRANSACTIONS BEING CONSIDERED AS DISPARATE OR AT LEAST SEPARATE IN OUR VIEW STOOD SO PERCEIVED BY BOTH THE AUTHORITIES BELOW ON ACCOUNT OF THE DISJOINTED MANNER IN WHICH THE TRANSACTION HAS BEEN STRUCTURED I.E. BY EXECUTING THREE SEPARATE AGREEMENTS OF EVEN DATE FOR PARTS OF THE SAME BUSINESS AND ON LIKE TERMS BETWEEN THE SAME PARTIES. EXPLANATION 1 TO SECTION 2(19AA) DEFINING UNDERTAKING SPEAKS OF THE BUSI NESS ACTIVITY AS A WHOLE. SIMILARLY SECTION 2(42C) DEFINING SLUMP SALE SPEAKS OF ON E OR MORE UNDERTAKINGS. THE SALE OF ALL THE THREE FIRMS HAS THEREFORE TO BE VIEWED AS A PAR T OF ONE AND THE SAME SLUMP SALE. THE ASSESSEE FURTHER CONFOUNDED THE MATTER BY STATING O F SECTION 50B AS BEING NOT APPLICABLE TO THE TRANSACTION. THIS COULD PERHAPS BE FOR THE R EASON OF THE DECISION IN THE CASE OF ZUARI INDUSTRIES LTD. (SUPRA) HOLDING OF IGNORING THE NEGATIVE (NET) WOR TH DECIDED THE MATTER AGAINST THE ASSESSEE. WHATEVER MAY HAVE BEEN THE REASON IT IS NOT THE VIEW OR THE STANCE ADOPTED BY THE PARTIES THAT WOULD BE DECISIV E OF THE MATTER. THE ASSESSEES VIEW IN ANY CASE DOES NOT BIND THE A.O. WHO IS DUTY BOUND TO REGARDLESS ASCERTAIN THE ASSESSEES CORRECT TAX LIABILITY. HERE WE MAY ALSO CLARIFY THAT THE NON-TRANSFER OF THE CASH AND BANK BALANCES OF THE THREE FIRMS (RS.5.45 LACS) ADMITTED BEFORE US BY THE LD. AR WOULD NOT IN THE FACTS AND CIRCUMSTANCES OF THE CA SE REMOVE THE ASSESSEES CASE FROM THE 8 ITA NO. 1277/MUM/2010 (A.Y. 2006-07) ITO VS. P. V. LEELA AMMA PURVIEW OF SECTION 50B WHICH ENVISAGES THE TRANSFE RS OF ALL THE ASSETS AND LIABILITIES SO THAT EXCLUSION OF EVEN ONE MAY OPERATE TO PRECLUDE THE SAME. WE STATE SO AS THE CONSIDERATION IN THE PRESENT CASE IS IN CASH. THE C ASH/BANK BALANCE WITH THE ASSESSEE CAN THUS BE CONSIDERED AS HAVING BEEN GIVEN BY HER TO A ND RECEIVED BACK FROM THE TRANSFEREE SO THAT IT CONTINUES TO REMAIN IN HER POSSESSION AN D THUS OF NO CONSEQUENCE. WE MAY ALSO REFER TO THE DECISION BY THE APEX COURT IN THE CASE OF CIT VS. ATTILI N. RAO [2001] 252 ITR 880 (SC) DISTINGUISHED BY THE TRIBUNAL IN THE CASE OF ZUARI INDUSTRIES LTD. (SUPRA). WE CONSIDER THIS AS INCUMBENT UPON US AS THE TRIBUNAL ON AN EARLIER OCCASION I.E. VIDE ORDER SHEET ENTRY DATE D 25.04.2011 SPECIFICALLY SOUGHT CLARIFICATION ON THE APPLICABILITY OR OTHERWISE OF THE SAID DECISION IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE. THE PARTIES AGAI N DID NOT REFER THERETO DURING HEARING. SO HOWEVER IN OUR VIEW THE SAID DECISION IS QUA ANOTHER ASPECT OF THE MATTER. IN THE FACTS OF THE SAID CASE THE ASSESSEE IN ABKARI BUS INESS HAD MORTGAGED HIS IMMOVABLE PROPERTY TO THE STATE GOVERNMENT (IN THE EXCISE DEP ARTMENT) WHICH IN THE RECOVERY PROCEEDINGS UNDER THE EXCISE ACT AUCTIONED THE SAME AND DEDUCTING THERE-FROM ITS DUES PAID OVER THE BALANCE TO THE ASSESSEE. THE ASSESSEE SOUGHT DEDUCTION OF THE AMOUNT RETAINED BY THE GOVERNMENT IN THE COMPUTATION OF CA PITAL GAINS IN-AS-MUCH AS THE PROPERTY SOLD WAS UNDER CHARGE OR MORTGAGE FOR THAT AMOUNT WHICH THEREFORE NEVER REACHED HIM SO THAT THERE WAS THUS A DIVERSION BY OVERRIDING TITLE. WHILE THE TRIBUNAL AND THE HIGH COURT HELD IN ASSESSEES FAVOUR THE APEX COURT REVERSING THE SAME HELD THAT WHAT HAS BEEN DISCHARGED BY THE ASSESSEE WAS ONLY A DEBT OUT OF THE SALE PROCEEDS OF HIS PROPERTY AND THEREFORE THE ASSESSEE HAD RECEIVED THE FULL PRICE. GIVEN OUR FINDING THAT WHAT HAS BEEN TRANSFERRED BY THE ASSESSEE ARE HER U NDERTAKINGS AS GOING CONCERNS FORMING PART OF HER BUSINESS FOR A LUMPSUM CONSIDE RATION AND NOT THEIR INDIVIDUAL ASSETS THE SAID CASE HAS NO APPLICATION IN THE FACTS OF TH E PRESENT CASE. DECISION 5. THE PRESENT CASE IS OF A SLUMP SALE; THE ASSESSE E TRANSFERRING ITS BUSINESS CARRIED ON THROUGH THREE UNDERTAKINGS. THE PROVISIONS OF SE CTION 50B SHALL APPLY; THERE BEING NO 9 ITA NO. 1277/MUM/2010 (A.Y. 2006-07) ITO VS. P. V. LEELA AMMA FINDING OF ANY ASSET OR LIABILITY OF THE SAID BUSIN ESS AS HAVING NOT BEEN TRANSFERRED WITH WE HAVING ALREADY CLARIFIED THE ASPECT OF NON-TRAN SFER OF CASH AND BANK BALANCE/S. THE SALE CONSIDERATION IS A SINGLE SUM OF RS.78.45 LACS I.E. THE COMBINED NET WORTH OF ALL THE THREE FIRMS AS AT THE COMPLETION DATE RECEIVED BY THE ASSESSEE IN CASH. FURTHER AS THIS NET WORTH IS ALSO DEEMED AS THE COST OF ACQUISITION AND /OR IMPROVEMENT U/S. 50B(2) NO CAPITAL GAIN WOULD STAND TO ARISE. WE THEREFORE A PPROVE THE ASSESSEES CLAIM IN PRINCIPLE. THE ASSESSEE HOWEVER HAS ADMITTEDLY NOT FURNISHED A REPORT/S FROM AN ACCOUNTANT INDICATING THE COMPUTATION OF NET WORTH OF THE UNDE RTAKINGS AND FURTHER CERTIFYING THE SAME I.E. IN TERMS OF S. 50B(3). THIS PERHAPS IS FOR THE REASON THAT THE ASSESSEE WAS AT THE RELEVANT TIME UNDER THE BELIEF THAT SECTION 50B IS NOT APPLICABLE TO ITS CASE. WE HOWEVER HAVING HELD IT AS SO; THE ASSESSEE RATHER ITSELF PL EADING IT AS SO IN THE APPELLATE PROCEEDINGS IT WOULD BE INCUMBENT ON HER TO SATISF Y THE SAID REQUIREMENT ALBEIT PROCEDURAL OF THE SAID SECTION. THE MATTER IS ACCO RDINGLY RESTORED BACK TO THE FILE OF THE FIRST APPELLATE AUTHORITY WHICH HAD FOUND S. 50B T O BE APPLICABLE IN THE FIRST INSTANCE. SUBJECT TO THE LD. CIT(A) RETURNING A POSITIVE FIND ING OF THE ASSESSEE HAVING COMPLIED WITH THE SAID CONDITION RENDERED UPON OBSERVING TH E DUE PROCESS OF LAW AND AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE PARTIES BEFORE HIM SO THAT THE REQUIREMENTS OF LAW ARE SATISFIED WE ALLOW THE ASS ESSEES CLAIM. WE MAY HOWEVER CLARIFY THAT IN CASE OF ANY DIFFERENCE BETWEEN THE SALE CON SIDERATION SINCE CRYSTALLIZED AND RECEIVED AT RS.78.45 LACS AND THE NET WORTH AS SO DETERMINED IF ANY THE SAME SHALL BE THE CAPITAL GAIN OR CAPITAL LOSS AS THE CASE MAY B E CHARGEABLE U/S. 45(1) R/W S. 50B OF THE ACT. WE DECIDE ACCORDINGLY. 6. IN THE RESULT THE REVENUES APPEAL IS DISPOSED ON THE AFORESAID TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 21 2014 SD/- SD/- (AMIT SHUKLA) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /* MUMBAI; 0( DATED : 21.11.2014 10 ITA NO. 1277/MUM/2010 (A.Y. 2006-07) ITO VS. P. V. LEELA AMMA ).(../ ROSHANI SR. PS !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. 3)4 5 $(67 + 67. /* / DR ITAT MUMBAI 6. 5 9: ; * / GUARD FILE !' / BY ORDER )/* + (DY./ASSTT. REGISTRAR) /* / ITAT MUMBAI