ITO 9(3)(4), MUMBAI v. WINDMILL HOTELS P. LTD, MUMBAI

ITA 6584/MUM/2009 | 2006-2007
Pronouncement Date: 19-01-2011 | Result: Dismissed

Appeal Details

RSA Number 658419914 RSA 2009
Bench Mumbai
Appeal Number ITA 6584/MUM/2009
Duration Of Justice 1 year(s) 25 day(s)
Appellant ITO 9(3)(4), MUMBAI
Respondent WINDMILL HOTELS P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 19-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 19-01-2011
Date Of Final Hearing 13-01-2011
Next Hearing Date 13-01-2011
Assessment Year 2006-2007
Appeal Filed On 24-12-2009
Judgment Text
I.T.A NO.6584/ MUM/2009 ASSESSMENT YEAR: 2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH MUMBAI. [ CORAM: PRAMOD KUMAR AM AND V. DURGA RAO JM ] I.T.A NO.6584/ MUM/2009 ASSESSMENT YEAR: 2006-07 INCOME TAX OFFICER 9(3)(4) .. APPELLANT AAYAKAR BHAVAN M.K. ROAD MUMBAI. VS WINDMILL HOTELS P. LTD. . RESPONDEN T 6 PARASAMPURIA APARTMENTS MILLAN SUBWAY ROAD NO.1 SANTACRUZ(W) MUMBAI-54. PA NO.AAACL 0791 Q APPEARANCES: PAVAN VED FOR THE APPELLANT HARIDAS BHAT FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL THE ASSESSING OFFICER HA S CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 29.10.2009 FO R THE ASSESSMENT YEAR 2006-07 ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD CIT (A) ERRED IN HOLDING THAT THERE WAS NO SLUMP SA LE OF THE UNDERTAKING/DIVISION BEING WINDMILL RESORT HELD BY THE ASSESSEE AND THEREFORE THE PROVISIONS OF SECTION 50B OF THE INC OME TAX ACT 1961 WERE NOT APPLICABLE IN RESPECT OF COMPUTATION OF LO NG TERM CAPITAL GAIN ON SLUMP SALE. I.T.A NO.6584/ MUM/2009 ASSESSMENT YEAR: 2006-07 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD CIT (A) ERRED IN DIRECTING THE AO TO ACCEPT THE QUA NTUM OF CAPITAL GAIN RETURNED BY THE ASSESSEE WITHOUT APPRECIATING THE F ACT THAT PROFITS AND GAINS AROSE FROM SLUMP SALE EFFECTED DURING THE PRE VIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND WAS CHARGEABLE AS LONG TERM CAPITAL GAIN AS PR THE PROVISIONS OF SECTION 5 0B OF THE INCOME TAX ACT 1961. 2. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEES IS ENGAGED IN THE BUSINESS OF SALE OF FOOD ITEMS BEVERAGES AND HIRE CHARGES OF OPEN GROUND AND CONFERENCE ROOMS FOR PRACTICES AT ALIBAUG. THE ASS ESSEE WAS ALSO OWNER OF A RESORT NAMELY WINDMILL RESORT WHICH DURING THE RELEVANT P REVIOUS YEAR WAS SOLD BY THE ASSESSEE. THIS SALE WAS ENTERED INTO BY WAY OF TWO AGREEMENTS. THE FIRST AGREEMENT I.E. AGREEMENT DATED 13.3.2006 IS BETWEEN THE ASSES SEE AND FUTURE INDIA COMPANIES LTD. FOR A CONSIDERATION OF RS.3.7 CRORES FOR SALE OF LAND BUILDING AND CAPITAL WORK IN PROGRESS. THERE IS ANOTHER AGREEMENT DATED 31.3.20 06 WHICH SHOWS SALE OF FURNITURE AND FIXTURE PLANT AND MACHINERY CUTLERY & CROCKERY COMPUTER ETC TO M/S. PANTALOON RETAIL INDIA LTD. FOR A TOTAL CONSIDERAT ION OF RS.3.3 CRORES. WHILE IN RESPECT OF FIRST AGREEMENT THE SALE RESULTED A SHO RT TERM CAPITAL LOSS OF RS.1 89 27 167/- TRANSACTION IN SECOND AGREEMENT R ESULTED IN LONG TERM CAPITAL GAIN OF ` ` .2 58 51 535 DULY DISCLOSED IN THE TAX RETURN. THE AO WAS NOT SATISFIED WITH THE SHORT TERM CAPITAL LOSS AND LONG TERM CAPITAL GAIN SO DISCLOSED BY THE ASSESSEE AS HE WAS OF THE VIEW THAT THE ENTIRE CONSIDERATION OF RS .7 CRORES SHOULD BE ASSESSED TO TAX U/S.50B AS A SLUMP SALE BASIS. THE AO WAS OF THE V IEW THAT THE TRANSFER OF ONE OR MORE UNDERTAKING AS A RESULT OF THE SALE FOR LUMPSU M CONSIDERATION AND THE LUMPSUM CONSIDERATION IS DETERMINED WITHOUT VALUES BEING ASSIGNED TO THE INDIVIDUAL ASSETS AND LIABILITIES AND THAT FOR THES E REASONS IT IS A SLUMP SALE. ACCORDINGLY HE INVOKED THE PROVISIONS OF SECTION 5 0B(2) AND PROCEEDED TO BRING TO TAX BY COMPUTING THE SALE ON SLUMP SALE BASIS. AGG RIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A). I.T.A NO.6584/ MUM/2009 ASSESSMENT YEAR: 2006-07 3 3. THE CIT (A) NOTED THAT THE TRANSACTIONS WERE TO DIFFERENT PARTIES AND THAT THE AGREEMENTS WITH FICL/PRIL REFLECT SHOW TRANSFER CE RTAIN ASSETS OF THE HOTEL RESORT AND THESE AGREEMENTS DO NOT SHOW TRANSFER OF THE L IABILITIES OR THE MANPOWER OF THE HOTEL BUSINESS AND THAT ON THE FACTS OF THE PRE SENT CASE IT CANNOT BE TREATED AS TRANSFER OF THE ENTIRE BUSINESS AS IS WHERE IS BAS IS. HE WAS OF THE VIEW THAT THE TRANSFER OF SLUMP SALE DID NOT EXIST IN THE PRESENT CASE. THE ACTION OF THE ASSESSING OFFICER WAS THEREFORE REVERSED AND THE AO WAS DIR ECTED TO ADOPT THE QUANTUM OF CAPITAL GAINS RETURNED BY THE ASSESSEE. THE ASSESS ING OFFICER IS NOT SATISFIED BY THE STAND SO TAKEN BY THE CIT (A) AND IS IN APPEAL BEFO RE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CA SE AS ALSO THE APPLICABLE LEGAL POSITION. 5. WE FIND THAT NOT ONLY THE ASSESSEE HAS SOLD IT S ASSETS TO TWO DIFFERENT ARTIFICIAL JUDICATURE PERSON BUT ALSO SPECIFIC VALU ATIONS HAVE BEEN ASSIGNED TO EACH OF THE ASSETS WHICH HAS BEEN SOLD. THE ASSETS WERE B EING USED IN THE RESORT BY THE ASSESSEE WHEREAS IT IS BEING USED AS A TRAINING CEN TRE BY THE PURCHASER. IT IS NOT A CASE OF SALE OF BUSINESS AS IS WHERE IS BASIS. A S LONG AS SPECIFIC VALUES ARE ASSIGNED TO EACH OF THE ASSET AND IT IS NOT A SALE OF BUSIN ESS ON AS IS WHERE IS BASIS AND PARTICULARLY WHEN THE ASSETS OF FORMER BUSINESS ARE SOLD TO TWO DIFFERENT JURIDICAL PERSONS IT CANNOT BE TREATED AS SALE ON SLUMP SALE BASIS. UNDER THESE CIRCUMSTANCES LEARNED CIT (A) RIGHTLY POINTS OUT IT IS NOT A CASE OF SLUMP SALE BUSINESS. IT IS DIFFICULT TO APPREHEND AS TO HOW C AN IT BE OPENED TO THE AO TO DISREGARD THE SPECIFIC AGREEMENT STATING THE ASSET SOLD THAT THE ASSESSEE HAS ENTERED INTO WITH TWO DIFFERENT ENTITIES BELONGED TO SAME G ROUP AND PROCEEDED ON THE BASIS THAT THE ENTIRE BUSINESS HAS BEEN SOLD FOR A COMMON CONSIDERATION WHICH IS AGGREGATED CONSIDERATION IN THESE TWO AGREEMENTS. I.T.A NO.6584/ MUM/2009 ASSESSMENT YEAR: 2006-07 4 6. FOR THE REASONS SET OUT ABOVE WE APPROVE THE C ONCLUSIONS ARRIVED AT BY THE CIT (A) AND DECLINE TO INTERFERE. 7. IN THE RESULT REVENUES APPEAL STANDS DISMISSED . PRONOUNCED IN THE OPEN COURT ON 19 TH JANUARY 2011 SD/- (V. DURGA RAO ) (JUDICIAL MEMBER) SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI DATED 19 TH JANUARY 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-20 MUMBAI 4. COMMISSIONER OF INCOME TAX IX MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH G MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI I.T.A NO.6584/ MUM/2009 ASSESSMENT YEAR: 2006-07 5 I.T.A NO.6584/ MUM/2009 ASSESSMENT YEAR: 2006-07 6