Income Tax Appellate Tribunal - Hyderabad
Hyderabad Industries Ltd., Hyderabad vs Department Of Income Tax on 25 May, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "A", HYDERABAD
BEFORE SHRI CHANDRA POOJARI, A.CCOUNTANT MEMBER
AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
ITA Nos. 917, 918 & 919/HYD/2009
Assessment Years : 2004-05, 2005-06 & 2006-07
Dy. Commissioner of Income-tax, ... Appellant
Circle 2(2), Hyderabad
Vs.
Hyderabad Industries Ltd., ...Respondent
Appellant by : Mr. V. Srinivas
Respondent by : Mr. S. Ravi & A.V. Raghuram
Date of Hearing : 25/05/2012
Date of Pronouncement : 02/07/2012
ORDER
PER ASHA VIJAYARAGHAVAN, J.M.:
All these three appeals filed by the revenue are directed against a common order of the CIT(A)-III, Hyderabad for the assessment years 2004-05, 2005-06 & 2006-07. As identical issues are involved in these appeals, they were heard together and, therefore, a common order is passed for the sake of convenience.
ITA No 917/H/09 - AY : 2004-05
2. The first ground of appeal of the department is against the allowance of write off of bad debt in the books of account under Section 36(1)(vii) of the Act.
2ITA NOS. 917, 918 & 919/Hyd/2011 M/s Hyderabad Industries Ltd.
3. The AO noted that the assessee debited a sum of Rs. 1,36,38,272/- in AY 2004-05 and Rs. 83,26,183/- in AY 2005-06 towards bad debts written off. The assessee explained before the AO that the said amounts represented irrecoverable sale amounts of earlier years. Since no further details could be furnished by the assessee, the AO disallowed the said amounts by holding that the assessee could not prove that the said amounts formed part of the income in earlier years as required u/s 36(2) of the Act, and also held that the assessee did not file any evidence to prove that it had taken all necessary steps to recover the disputed amounts. Aggrieved by the order of the AO, the assessee carried the matter in appeal before the CIT(A).
4. The assessee before the CIT(A), filed copies of sale invoices of earlier years in respect of which 'bad debts' were claimed as additional evidences under rule 46A of the Act. The CIT(A) forwarded the said evidences to the AO for necessary verification. After considering the submissions of the assessee and the remand report submitted by the AO, the CIT(A) allowed the appeal of the assessee observing as under:-
"2.3 I have duly considered the submissions of the appellant and the material available on record. The additional evidences filed by the appellant clearly show that the debts in question are in the nature of short recovery/non-recovery of the sale proceeds of the sales made in the earlier years. The said sale proceeds were offered to tax in the respective years and the debts were written off in the books in the current year. The relevant sales and the debtors shown in the balance sheet have been accepted in the earlier years. Hence the existence of the debts has been established by the appellant. The appellant has written off the bad debts in the account books and it is not incumbent on him to prove that all necessary measures have been taken for the recovery of debts or the debts 3 ITA NOS. 917, 918 & 919/Hyd/2011 M/s Hyderabad Industries Ltd.
written off have indeed become bad in this year. Decisions in the case of Morgan Securities and Credits Pvt. Ltd. (292 ITR 339 Delhi), Autometers Limited (292 ITR 345 Delhi), Brilliant Tutorials Pvt. Ltd. (292 ITR 339 Madras) and Oman International Bank (100 ITD 285 Mumbai SB) support the case of the appellant. I also agree with the contention of the appellant that no permission of RBI or any other authority is required to write off the bad debts. AO has not cited any such provisions under any Act. Considering the entire conspectus of the case, I allow the claim of the appellant in respect of bad debts of Rs.1,32,76,837/- in AY 04-05 and Rs.79,99,373/- in AY 05-06"
Aggrieved, the revenue is in appeal before us.
5. After hearing both the parties and perusing the record as well as the orders of the authorities below, we find that this issue is squarely covered in favour of the assessee by the decision of Apex Court in the case of TRF Ltd Vs CIT reported in 323 ITR 397(SC), wherein it has been held as under:-
"After the amendment of section 36(1)(vii) of the Income-tax Act, 1961, with effect from April 1, 1989, in order to obtain a deduction in relation to bad debts, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable, it is enough if the bad debt is written off as irrecoverable in the accounts of the assessee.
The Supreme Court accordingly remanded the matter to the AO to examine, solely to the extent of write off, whether the debt or part thereof was written off in the accounts of the assessee."
Respectfully following the decision of the Apex Court in the case of TRF Ltd Vs CIT reported in 323 ITR 397 we dismiss the revenue's appeal on this issue.
4ITA NOS. 917, 918 & 919/Hyd/2011 M/s Hyderabad Industries Ltd.
6. The next ground of appeal is against the order of CIT(A) treating sale tax collection as capital receipt when the assessee has been granted subsidy in respect of sales tax receipt.
7. The facts of the issue are that the assessee set up a new unit in the backward district of Wada in Maharashtra in the FY 2000-01. The unit was entitled to sales tax subsidy under the Maharashtra Govt. Scheme - "Package Scheme of Incentives, 1993" for dispersal of industries. SICOM granted eligibility certificate allowing the appellant to a total subsidy of Rs.27,81,76,700/- in the shape of non payment of sales tax. The sales tax receipts were shown as revenue receipts in the books of accounts. However, in the returns of income filed, the same were treated as capital receipts, exempt from tax following the decision of Special Bench of ITAT, Mumbai in the case of Reliance Industries Ltd. (88 ITD 273)(SB). The AO disallowed the claim of the assessee for the reasons that sales tax collected is a trading receipt as held in the cases of Chowringhee Sales Bureau Pvt. Ltd. (87 ITR 542)(SC), Sinclaire Murray & Co. Pvt. Ltd. (97 ITR 615) & Jonnala Narasimha Rao & Co. (200 ITR 558). It was observed that exemption of payment of sales tax after collection does not alter the nature of receipt. In all the earlier years similar receipts were offered for tax by the assessee itself. Aggrieved, the assessee carried the matter in appeal before the CIT(A).
8. In the written submissions filed during the appeal proceedings stated that the sales tax incentive was given to the appellant company to eat off the locational disadvantage of setting up the unit in the backward district. The assessee was 5 ITA NOS. 917, 918 & 919/Hyd/2011 M/s Hyderabad Industries Ltd.
entitled to the sales tax subsidy equivalent to 130% of the capital invested in the new project. The method of release of this subsidy by the Government in the form of exemption from levy of sales tax is irrelevant as subsidy was given to set up an industry in the backward area and not to assist unit to merely improve the bottom line. Ld. AR submitted that on similar facts, Hon'ble Special Bench of ITAT, Mumbai in the case of Reliance Industries (supra) held that the sales tax receipts were capital receipts not liable for tax. He also relied on the decision of ITAT, Mumbai in the case of Oceanic Farms (Export) Pvt. Ltd. (91 TTJ 921). After considering the submissions of the assessee, the CIT(A) allowed the appeal of the assessee observing as under:-
"3.3 I have duly considered the submissions of the appellant and the material available on record. I have also perused the Maharashtra Government Scheme under which the appellant was allowed the sales tax incentive. The purpose of the said scheme was to achieve dispersal of industries outside the Mumbai-Thane-Pune belt and to attract industries to the under developed and developing areas of the State. The object of the scheme was thus, to provide incentives for establishment of industries in backward areas of the State. The incentive granted under the scheme was based on a certain percentage of the total capital investment. It is a trite law now that the determination of a subsidy as revenue receipt or capital receipt, is dependent upon the objective of the scheme under which the subsidy is granted. The Hon'ble Supreme Court in the case of Sahana Steel and Press Works Ltd. (228 ITR 253) and Ponni Sugars & Chemicals Ltd. (306 ITR 392) held that if a subsidy was given to an assessee to assist him to set up his business or to complete a project, it was a capital receipt. It was further observed by the Court that in determination of the character of the subsidy, the source, the form and the time of grant of the subsidy would be immaterial.6
ITA NOS. 917, 918 & 919/Hyd/2011 M/s Hyderabad Industries Ltd.
The appellant's case is squarely covered by the decision of Hon'ble Special Bench of ITAT, in the case of Reliance Industries Ltd. (supra). In that case also, the assessee has setup a unit in a notified backward area and became eligible for incentives in the form of exemption from payment of sales tax. The assessee's claim of sales tax receipts as capital receipts was rejected by the AO. The question which arose before the Tribunal was whether in deciding capital / revenue character of subsidy, the purpose and object of the scheme under which the subsidy was granted, was of more importance than the fact that the subsidy was received after commencement of production or conditional upon production. The Hon'ble Tribunal held that for determining the nature of subsidy, the object with which the subsidy was given, was decisive and it took primacy over the fact that it was given after commencement of production or conditional upon it. The Tribunal considered and distinguished the decisions of Hon'ble Supreme Court in the case of Chowringhee Sales Bureau Pvt. Ltd., Sinclaire Murray & Co. Pvt. Ltd & Jonnala Narasimha Rao & Co., relied upon by the AO. The subsequent decision of the Mumbai Tribunal in the case of Oceanic Farms Exports Pvt. Ltd. (supra) also supports the case of the appellant. In this case, the Tribunal considered the 1998 scheme of Maharashtra Government for dispersal of industries which was similar to the scheme under which the appellant got the subsidy. It was held that the subsidy received in the form of exemption from payment of sales tax, was in the nature of capital subsidy. Similar view was also taken by the Hon'ble Allahabad High Court in the case of Kalpana Palace (275 ITR 365). It was held by the Court that grant-in-aid given in order to promote construction of cinema buildings in the small towns was capital receipt, even though given after the business had been set up. Considering the entire conspectus of the case, I hold that since the sales tax subsidy was granted to the appellant to set up the industrial unit in a backward area, the same was capital in nature. The mode of payment of the incentive through exemption of payment of sales tax would not be sufficient to construe the incentive as a revenue receipt. It is also not material that the appellant had shown the sales tax receipts as revenue receipts in its book of accounts. It is well settled proposition of law that the treatment given by an assessee in his books of account is in no way relevant to the tax treatment in respect of the receipt/payment, which has to be determined in accordance with the applicable taxation 7 ITA NOS. 917, 918 & 919/Hyd/2011 M/s Hyderabad Industries Ltd.
law. Reliance is placed on the decisions of Hon'ble Supreme Court in the case of Kedarnath Jute Manufacturing Co. Ltd. (82 ITSR 363) and Sutlej Cotton Mills Ltd. (116 ITR 1). In the result, the ground raised by the Appellant is allowed.
Aggrieved by the order of the CIT(A), the revenue is in appeal before us.
9. We have heard both the parties, perused the record and gone through the orders of the authorities below. We find in the scheme of subsidy what is granted is under Maharastra Government Scheme. The MP high Court in the case of CIT v Dusad Industries Ltd (162 ITR 784) had held that sales tax subsidy is a capital receipt. But this decision has been overruled by the Apex Court in the case of Sahney Steel & Press Works Ltd v CIT (228 ITR 253), wherein the Apex Court has held that the subsidy by way of refund of sales tax on purchase of machinery is operational subsidy and hence revenue receipt. The Assessee relied on the decision of the Mumbai Special bench in the case of CIT v Reliance Industries Ltd (88 ITD 273) wherein it has been held that sales tax subsidy is a capital receipt. In that case the Special bench has considered the decision of the Apex Court in the case of Sahney Steel & Press Works Ltd v CIT (228 ITR 253). This decision has been confirmed by the Bombay High Court in CIT v Reliance Industries Ltd 2010-TIOL-228-HC-MUM- IT. Those decision were in respect of the incentive scheme of Government of Maharashtra 1979, while the in the instant case the subsidy is under a scheme formulated in 1993. We find that the Delhi tribunal in the case of Indorama Synthetics (I) Ltd v DCIT (2009) 31 DTR 42) has set aside a similar issue to the files of the AO to determine whether the scheme was identical with that considered by the special bench and if so treat the subsidy as a capital receipt. In the circumstances, we set aside the issue 8 ITA NOS. 917, 918 & 919/Hyd/2011 M/s Hyderabad Industries Ltd.
to the files of the AO to consider whether the present subsidy scheme enjoyed by the Assessee is identical with that of the scheme framed by the Government of Maharashtra in 1979, considered by the Special bench and the Bombay High Court in the case of reliance Industries supra and if so teat it as a capital receipt. In the result the appeal of the Revenue on this issue is treated as allowed for statistical purposes.
10. In the result, the appeal of the revenue in ITA No 917/H/11 for AY 2004-05 is partly allowed for statistical purposes.
ITA No 918/H/09 - AY : 2005-06
11. The first issue is regarding allowance of bad debts under Section 36(1)(vii). Similar issue has been decided by us in ITA No 917/H/09 for the assessment year 2004-05(supra). Respectfully following the conclusions drawn in AY 2004-05 and the decision of the Apex Court in the case of TRF Ltd Vs CIT reported in 323 ITR 397(SC), we confirm the order of the CIT(A) in allowing bad debt written off in the books of account as a deduction under Section 36(1)(vii) and dismiss the appeal of the revenue on this issue.
12. The next issue is regarding treatment of sales-tax collection should have bee held to be capital receipt on account of subsidy granted by the Government for setting up of industries. Similar issue was decided by this Bench in ITA NO 917/H/2009(supra) , wherein we set aside the issue to the file of the AO to consider whether the present subsidy scheme enjoyed by the Assessee is 9 ITA NOS. 917, 918 & 919/Hyd/2011 M/s Hyderabad Industries Ltd.
identical with that of the scheme framed by the Government of Maharashtra in 1979, considered by the Mumbai Special bench in the case of CIT v Reliance Industries Ltd (88 ITD 273) which was confirmed by the Bombay High Court in CIT v Reliance Industries Ltd 2010-TIOL-228-HC-MUM-IT supra and if so teat it as a capital receipt. In the result the appeal of the Revenue on this issue is treated as allowed for statistical purposes.
13. The next issue on appeal is regarding disallowance of discount given to stockists. The AO disallowed the discount given to stockists on the ground that they are nothing but commission and as tax has not been deducted at source from the same u/s 194H the amount of discount was disallowed.
14. The CIT(A) allowed the claim of the assessee that what was offered was only discount under commission by observing as under:-
"4.3 I have duly considered the submissions of the appellant and also perused the relevant agreements with the stockists. The appellant is following a policy for discounts and commission which can be summarized as under -
i. Discounts such as quality discount, wholesale discount, target discount or incentive in the nature of discount, by whatever name called, shall be passed to the stockiest / customers through issue of credit notes on invoices raised on such stockists / customers. ii. Commissions such as project commission, wholesale commission etc., was passed on to the stockiest through whom the sale had been executed based on invoices to such third party customers at the difference between the billed rate and agreed rate. Credit note for commission were issued after deduction of tax at source.
Thus, the same stockist acted in dual capacity - direct customers where the sales tax / VAT was paid on the sales 10 ITA NOS. 917, 918 & 919/Hyd/2011 M/s Hyderabad Industries Ltd.
made to stockists and the goods were sold on a principle to principle transaction. Secondly, the stockist procured the orders which were directly executed by the assessee company for which commission was paid to the stockist after making TDS. The discounts allowed to the stockists on direct sales made to them cannot be treated as commission. As a matter of fact, discount is not "paid" to the stockists. Discount is an abatement in the sale price. Legal distinction between "discount" and "commission" was explained by the Hon'ble Courts in the case of Ahmedabad Stamp Vendors Association and Kerala Stamp Vendors Association (supra) relied upon by the appellant. The issue was dealt in depth by the Hon'ble ITAT, Delhi in the case of Idea Cellular Ltd. in its order dated 28/03/2008, copy of which was furnished by the ld. AR. The observation of the Hon'ble Bench, in paras 13 and 14 of its order was reproduced hereunder -
"13. From above decision it is clear that discount allowed on transactions resulting in outright purchases cannot be treated as brokerages or commission. There should be in existence the relationship of principal and agent in order to bring the discount in the ambit of commission or brokerage. Section 182 of the Indian Contract Act, 1872 defines the term agent and principal. An agent is a person employed to do any act for another or to represent another in dealing with third person. The person for whom such act is done or who is so represented is called the principal. An agent in whom the principal places trust and confidence stands in a fiduciary position in relation to the principal.
14. In order to ascertain whether the PMAs were acting as agents of the assessee or were outright purchasers of goods supplied by the assessee, it is necessary to discuss the distinction between contract of sale or contract of agency. The essence of contract to sale is the transfer of title to the goods for price paid or to be paid. The transferee in such case becomes liable to the transferor of goods as a debtor for the price to be paid and not an agent for the proceeds of the sale. On the other hand, the essence of agency to sell is the delivery of goods to a person, who is to see them, not as his own property but as the property of the principal 11 ITA NOS. 917, 918 & 919/Hyd/2011 M/s Hyderabad Industries Ltd.
who continues to be the owner of the goods and who is therefore liable to account for the proceeds"
In view of the above judicial pronouncements, I hold that the discount paid to the stockists on direct sales made to them is not in the nature of commission or brokerage covered by section 194H. Hence, the assessee was not required to make TDS from such payments. Hence, the disallowance made u/s 40(a)(i) is deleted. The ground raised by the appellant is accordingly, allowed."
Aggrieved by the order of the CIT(A), the revenue is on appeal.
15. After hearing both the parties and perusing the record as well as the orders of the authorities below, it is observed that as found from the order of the CIT(A) as a matter of fact what was offered by the assessee to the stockists is nothing but discount. The assessee sold stock to the stockists who in turn sold it to the customers. Stockists are allowed discount and commission separately. The assessee issued credit notes to the stockists giving discount on the sales price, on the basis of various scheme, in respect of quality, target, turnover etc., on the basis of the performance of the stockists. As found by the CIT(A), what is offered by the assessee to the stockists are nothing but discount because the assessee sells the goods to the stockists, who is turn sells the goods to the consumer. In the sale transaction between the assessee and the stockists there cannot be payment of commission to the purchaser himself. Brokerage or commission envisaged under section 194H is for the payment received by the person action on behalf of another for services rendered in the course of buying and selling of goods. Here stockists themselves are buying goods and it cannot be said that they are rendering any service in the course of such buying of 12 ITA NOS. 917, 918 & 919/Hyd/2011 M/s Hyderabad Industries Ltd.
goods which will render any payment to them as commission. In the circumstances, we concur with the conclusion and findings of the CIT(A) that what was offered to the stockists is nothing but discount under provisions to sec.194H will not apply. In the circumstances, the CIT(A) has rightly deleted the disallowance of discount paid by the assessee to the stockists to the extent of Rs.113068338/-. We dismiss the departmental appeal on this issue.
16. In the result, the appeal of the revenue in ITA No 918/H/11 for AY 2005-06 is partly allowed for statistical purposes.
ITA No 919/H/2009 - AY : 2006-07
17. Ground No. 1 is regarding treatment of sales-tax collection should have bee held to be capital receipt on account of subsidy granted by the Government for setting up of industries. Similar issue was decided by this Bench in ITA NO 917/H/2009(supra) , wherein we set aside the issue to the file of the AO to consider whether the present subsidy scheme enjoyed by the Assessee is identical with that of the scheme framed by the Government of Maharashtra in 1979, considered by the Mumbai Special bench in the case of CIT v Reliance Industries Ltd (88 ITD 273) which was confirmed by the Bombay High Court in CIT v Reliance Industries Ltd 2010-TIOL-228-HC-MUM-IT supra and if so treat it as a capital receipt. In the result the appeal of the Revenue on this issue is treated as allowed for statistical purposes.
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18. The issue in Ground Nos. 3 & 4 is regarding disallowance of discount given to stockists. Similar issue has been decided by us in AY 2005-06 in ITA No. 918/Hyd/09 wherein we have upheld the order of the CIT(A) deleting the disallowance of discount paid by the assessee to the stockists. Following the conclusions drawn in AY 2005-06 (supra), we uphold the order of the CIT(A) in this year also and dismiss the ground raised by the revenue on this count.
19. The third issue is against the computation of capital gains arising from transfer of undertaking.
20. The assessee transferred its heavy engineering division in Uttarparada, Kolkata. The AO treated the transaction as sale of assets and arrived at capital gains by applying the proviso to Sec.50C. Further, he found that the land was not registered by stamped conveyance deed it was only carried out by handing over possession of the land. The AO felt that the assessee cannot avoid provision of Section 50C by such method. Accordingly they computed long term capital gains at Rs.210038174/- by applying the provisions of Sec.50C. Aggrieved, the assessee carried the matter in appeal before the CIT(A).
21. Before the CIT(A) the assessee contended that unit was considered as going concern by business transfer agreement dated 04.4.2005. In such a case, the value of the land cannot be separately valued under Section 50C. Even otherwise as there is no registered sale deed the provisions of Section 50C cannot be applied. After considering the submissions of the assessee, the CIT(A) allowed the appeal of the assessee holding as under:-
14ITA NOS. 917, 918 & 919/Hyd/2011 M/s Hyderabad Industries Ltd.
"5.3 I have duly considered the submissions of the appellant and the facts brought on record by AO. The Sale deed dated 08/07/2005 through which the land was transferred to TWL was not registered. On this fact alone, I agree with the contention of the ld. AR that the provisions of section 50C do not apply in the instant case. These provisions apply only where a document is registered and it was found by AO that the consideration received or accrued was less than the value adopted or assessed by the registration authority. Sub-section(2) of Sect. 50C further provides that the value so adopted or assessed by the stamp valuation authority, if questioned, in an appeal or revision or reference before any other authority or Court, then reference has to be made to the Valuation officer. This is a valuable right for a tax payer whereby the arbitrary determination of the value by the stamp valuation authority can be challenged before the AO. In such an event, section 50C will operate with the modification as contained in sub section (2) thereof. The remedy by way of an appeal, revision or reference can be availed only if there is an assessment for stamp duty. This sub section also brings out the fact that unless there is such an assessment, AO cannot apply section 50C of the Act. I am supported in my views by the decision of the ITAT, Jodhpur in the case of Navneet Kumar Thakkar (110 ITD 525) where it was held that where the transfer or property was through agreement which was not registered with the stamp duty authority, the provisions of Sec.50C is not applicable. It was further held therein that section 50C embodies a legal fiction by which the value assessed by the stamp duty authority is considered as full value of consideration for the property transfer. It does not go beyond the cases in which the transferred property has not become the subject matter of registration and the question of valuation for stamp duty purposes has not arisen. By no stretch of imagination, the legal fiction confined to restricted operation can be widened to include within its sweep all the cases where such property has not been valued by the registration authorities.
I also agree with the other contention of the appellant that the AO cannot substitute the sale consideration shown in the sale deed by his valuation. There must be some material with the AO to show that the appellant had in fact under-15
ITA NOS. 917, 918 & 919/Hyd/2011 M/s Hyderabad Industries Ltd.
valued the consideration in the sale agreement and received something more. Reliance is placed on the decision of Hon'ble Supreme Court in the case of K.P.Verghese (131 ITR
597) 5.4 It is evident from the perusal of the Business Transfer Agreement dated 04/04/2005, by which the HED was transferred to TWL that the appellant was selling the unit on "as is where is basis and as a going concern". One of the most import clause in the said agreement is clause 1.1.3 which contains the definition of 'assumed liabilities'. The unit had become unviable primarily because of large employee force and huge liabilities to them. This entire liability had been assumed by the transferee of the going concern. The agreement specifies that the consideration payable for the transfer of HED as a going concern is of a sum of Rs.1,00,000/- and assumption of liabilities under Articles 4.4.3 and 4.4.4 of the Business Transfer Agreement.
Apart from this, there is no other consideration. In other words, in so far as the land and building is concerned, there is no assignment of any value whatsoever in the Business Transfer Agreement. Therefore, the entire exercise of executing a sale deed dated 08/07/2005 and that too unregistered sale deed, does not make the Business Transfer Agreement to be the asset transfer agreement of individual assets. Explanation (2) of Section 2(42C) clarifies that the determination of value of an asset for payment of stamp duty, registration fees or other similar taxes or fees, shall not be regarded as assignment of values to individual assets or liabilities. Considering the definition of "slump sale" occurring in Section 2(42C) read with Explanation 2, it is evident that the transfer of HED to TWL by Business Transfer Agreement dated 04/04/2005 was a slump sale. In fact, the AO was also initially of the same view and therefore, he issued a show cause notice to the appellant seeking their objection that why the said transfer should not be treated as a slump sale? The appellant erroneously objected to the said show cause relying on the decision of Hon'ble Supreme Court in the case of Artex Manufacturing Company (227 ITR 260). It is evident from the allocation of net sale consideration of HED made by the appellant that no actual valuation of assets was made by the appellant. The sale value consideration was allocated in the ratio of "net book value of the asset" to the "net book value of the total 16 ITA NOS. 917, 918 & 919/Hyd/2011 M/s Hyderabad Industries Ltd.
assets". Hence, the aforesaid decision of the Hon'ble Supreme Court decision does not apply to the instant case.
Considering the entire conspectus of the case, I hold that the transfer of HED to TWL was a case of slump sale and was not governed by the provisions of Sec.50C of the Act. AO is directed to determine the profits/gains on the said slump sale and tax I as per the provisions of the Act."
Aggrieved by the order of the CIT(A), the revenue is in appeal before us.
22. After hearing both the parties and perusing the record as well as the orders of the authorities below, it is not in dispute that the assessee has transferred its heavy Engineering Division to Titagarh Wagon Ltd. The land was also included in the assets transferred with the division and the Assessee had handed over possession of the land to the Transferee. Merely because the land was not conveyed by means of a registered conveyance deed, it cannot be said that the transferee who was permitted to enjoy complete domain over the land is not owner of the land. (Mysore minerals). Hence we have to hold that the transfer of the undertaking by the Assessee for a lumsum consideration should be considered as a slump sale to which provisions of sec 50B will be applicable. Hence in such cases provisions of sec 50C can not be applied in view of Explanation (2) to sec 2(42C) which has clarified that assignment of value for land and building the purpose of registration would not affect the computation of capital gains u/s 50B. Further in this case there was no stamped conveyance deed for transferring land. For the Assessment Year in appeal, AY 2006-07, sec 50C will not apply to cases where there is no stamped/ registered conveyance deed. In the circumstances, we uphold the order of the CIT(A) that re-
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computation of capital gains on transfer of undertaking by applying the provisions of sec 50C is not correct. We accordingly dismiss the revenue's appeal on this issue.
23. In the result, the appeal of the revenue in ITA No 919/H/11 is partly allowed for statistical purposes.
24. To sum up, the appeals by the revenue in ITA No 917,918 and 918/H/11 for AY 2004-05, 2005-06 and 2006-07 are partly allowed for statistical purposes.
Pronounced in the open court on 02/07/2012.
Sd/- Sd/-
(CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, Dated: 2 n d July, 2012.
kv
Copy to:-
1) Dy. Commissioner of Income-tax-Circle 2(2),
8 th Floor, I.T. Towers, A.C. Guards, Hyderabad
2) M/s Hyderabad Industries Ltd., Sanath Nagar, Hyderabad
3) The CIT (A)-III, Hyderabad
2) The CIT-II, Hyderabad
5) The Departmental Representative, I.T.A.T., Hyderabad.