Kol/2013 For The Assessmentyear 2006-07, Ita v. Akzo Noble India Ltd., Reported In (2020) 121Taxmann.com 216 (Calcutta). There Is Nothing On Record To Show

OD-18 ITAT/31/2018IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE PRINCIPAL COMMISSIONER OF INCOME TAX, KOLKATA-4VERSUSM/S. AKZO NOBLE INDIA LIMITED(FORMERLY KNOWN AS M/S. ICI INDIA) BEFORE : THE HON’BLE JUSTICE T.S. SIVAGNANAMAndTHE HON’BLE JUSTICE HIRANMAY BHATTACHARYYA Date : 24[th] November, 2021 Appearance :- Mr. P.K. Bhowmick, Adv.… For AppellantMr. Avra Majumder, Adv.Mr. Vishal Karla, Adv.Md. B. Hosen, Adv.… For Respondent The Court : This appeal by the revenue filed under Section 260Aof the Income Tax, 1961 (the Act, for brevity) is directed against theorder dated 8[th] March, 2017 passed by the Income Tax AppellateTribunal, “B” Bench, Kolkata in ITA No.1829/Kol/2013 for theassessment year 2006-07, ITA No.2121/Kol/2013 for the assessmentyear 2006-07, ITA No.1830/Kol/2013 for the assessment year 2007-08 and ITA No.2122/Kol/2013 for the assessment year 2007-08. Theappellant revenue has framed the following substantial question of lawfor consideration :- “Whether on the facts and in the circumstances of the case theLearned Income Tax Appellate Tribunal, “B” Bench, Kolkata haserred in law in deleting the disallowance of sum of Rs.3.50Crores and Rs.2.11 Crores for the assessment year 2006-07 and2007-08 respectively on account of slump sale of chemicalundertaking under Section 50B of the Income Tax Act, 1961 byrelying on its own decision for assessment year 1994-95 whichhas not been accepted by the revenue and the appeal has beenfiled before this Hon’ble Court which is pending adjudication ?” We have heard Mr. P.K. Bhowmick, learned Standing Counselappearing for the appellant revenue and Mr. Vishal Kalra, learnedCounsel, assisted by Mr. Avra Majumder and Mr. B. Hosen, learnedAdvocates appearing for the respondent assessee. The appellant revenue has challenged the order of the Tribunalby contending that the Tribunal ought not to have followed thedecision in the assessee’s own case for the assessment year 1994-95.Learned Senior Counsel appearing for the respondent assesseesubmitted that the order passed by the Tribunal in the assessee’s owncase for the assessment year 1994-95 has been upheld by the Hon’bleDivision Bench of this Court in the case of Commissioner of IncomeTax, Kolkata-IV Vs. AKZO Noble India Ltd., reported in (2020) 121Taxmann.com 216 (Calcutta). There is nothing on record to show whether the said decision has been reversed or modified. Therefore,the issue stands concluded in favour of the assessee. The operativepart of the judgment reads as follows :- “11. The matter went up to the tribunal. The tribunal made adetailed analysis of the agreements. It came to the conclusionthat the entire businesses of the undertakings were transferred toits subsidiary. The transfer was on an as is where is basis. Itheld that the transfer was genuine, although it was by a holdingto a subsidiary company. The objection of the Revenue was with regard to "excluded assets"mentioned in the agreement. They were described in the saidagreement as follows:— "(f) Excluded Assets means— (a) cash in bank, cheques deposited in bank account and other unrealizedcheques of ICI.cheques of ICI. (b) all unpaid and outstanding insurance claims pertaining to the FertilizerBusiness as at the Transfer Date;Business as at the Transfer Date; (c) all other assets whether tangible or intangible pertaining exclusively toICI's various business other than the Fertilizer Business".ICI's various business other than the Fertilizer Business". 12. The Revenue contended that since these assets were left out, it wasnot a sale of the entire undertaking and did not qualify as a slump sale. The objection of the Revenue was with regard to "excluded assets"mentioned in the agreement. They were described in the saidagreement as follows:— "(f) Excluded Assets means— (a) cash in bank, cheques deposited in bank account and other unrealizedcheques of ICI.cheques of ICI. (b) all unpaid and outstanding insurance claims pertaining to the FertilizerBusiness as at the Transfer Date;Business as at the Transfer Date; (c) all other assets whether tangible or intangible pertaining exclusively toICI's various business other than the Fertilizer Business".ICI's various business other than the Fertilizer Business". 12. The Revenue contended that since these assets were left out, it wasnot a sale of the entire undertaking and did not qualify as a slump sale. 13. Mr. Dutta, learned counsel for the appellant reiterated thissubmission. The tribunal by its impugned judgment and order dated29th February, 2008 held that the entire fertilizer and fibre businessesof the assessee had been transferred as a going concern to CCFC. Allassets and liabilities relating to these businesses had also beentransferred. The left out assets were bank balance and the outstandinginsurance claim. It opined: "Merely because these two assets have been excluded from theassets transferred, it cannot be said that it is not the transfer of theundertaking as a going concern Land, building, plant andmachinery, raw material, industrial licences, technology, trade markhave been transferred to CCFC. The employees of the assessworking in fertilizer business have also been taken over by theCCFC. All current liabilities relating to fertilizer business has beentaken over by CCFC. The sale consideration of the undertaking as awhole has been fixed at a "slump price" of Rs. 70.00 Crores withoutspecifying any specific value to any asset. The assets transferredincludes tangible as well as intangible asset. Moreover, the selleri.e. the assessee has also agreed for not carrying on the similarbusiness of manufacturing and marketing of urea fertilizer for aperiod of 10 years." 14. Relying on the case of Coromondal Fertilisers Ltd. v. Dy. CIT [2004]90 ITD 344 (Hyd.), it held that the transaction was a slump sale andthat it fell under section 45 of the said Act and further that fordetermining the capital gain from the full value of the consideration, thecost of acquisition of assets as well as the cost of any improvementwere to be deducted. Since the cost of acquisition of intangible assetscould not be determined the income was not chargeable to capital gainstax. It upheld the order of the CIT (Appeals). 15. This concept of slump sale was discussed in CIT v. MugneeramBangur & Co. [1965] 57 ITR 299 (SC). At this stage it is quite importantto appreciate the ratio of CIT v. Artex Manufacturing Co. [1997] 93Taxman 357/227 ITR 260 (SC). The written down value of the plant,machinery and dead stock according to the assessee's books was Rs.4,36,896/-. The undertaking was sold on a valuation of these items asRs. 15,87,296/-. According to the department, the written down valuewas Rs. 3,32,276/-. The difference between (Rs. 15,87,296 - Rs. 3,32,276) = Rs. 12,56,020 was the bone of contention in this case.Whether it would be taxed as capital gains or under the head"business"? 16. The Supreme Court ruled that if the value of the individual assetscould not be determined, then the value of all the assets together shouldbe taken. In that case, the profit or gain made would be taxed as capitalgain. In other cases, it would be taxed as business income. The entirematter was referred to the tribunal for a decision. In that decision theIncome-tax Act, 1922 was under consideration. 17. Mr. Bajoria, learned Senior Advocate appearing for the respondentassessee cited PNB Finance Ltd. v. CIT [2008] 175 Taxman 242/307ITR 75 (SC). 3,32,276) = Rs. 12,56,020 was the bone of contention in this case.Whether it would be taxed as capital gains or under the head"business"? 16. The Supreme Court ruled that if the value of the individual assetscould not be determined, then the value of all the assets together shouldbe taken. In that case, the profit or gain made would be taxed as capitalgain. In other cases, it would be taxed as business income. The entirematter was referred to the tribunal for a decision. In that decision theIncome-tax Act, 1922 was under consideration. 17. Mr. Bajoria, learned Senior Advocate appearing for the respondentassessee cited PNB Finance Ltd. v. CIT [2008] 175 Taxman 242/307ITR 75 (SC). 18. In that case the assessment year 1970-71 was involved. The caserelated to the nationalization of the Punjab National Bank Ltd. PunjabFinance Ltd., on nationalization of the bank in 1969 received Rs. 10.20crores as compensation calculated on capitalization of profits for the last5 years. The compensation was received in 1969. From the saleconsideration, cost of acquisition, improvement and expenses inconnection with the transfer were deductible in computing capital gainsunder section 48 of the Income-tax Act, 1961. The assessee contendedthat it was not possible to allocate the full value of the consideration ofRs. 10.20 crores amongst various assets of the undertaking.Consequently, and became the assets including intangible assets likegradually value of licences, manpower etc. could not be determined, thecost of acquisition and cost of improvement could not be determined.Since this could not be done the charging Section 45 of the said Act forcomputation of capital gains did not apply. Hence, it was not possible tocompute capital gains. Therefore, Rs. 10.20 crores was not taxableunder section 45 of the said Act. This submission was upheld by the court. 19. Mr. Justice Kapadia delivering the judgment and referring toMugneeram Bangur & Co. case (supra) and Artex Manufacturing Co.case (supra). The case was different from Artex Manufacturing Co.(supra), according to his lordship. It is now very important to know the issues before the tribunal. The firstissue was whether the alleged agreement of transfer was a genuine oneor an eyewash. 20. The second issue was whether the transaction in question was aslump sale. The Revenue contended that it was not so because theentire undertaking was not sold. Some assets like cash in the bank andthe insurance claim had been left out. 21. The third issue was if it was determined that the transaction wasindeed a slump sale, whether the gain or profit would be computed as ashort term capital gain or a long term capital gain or something else.” Thus, the above decision in the assessee’s own case goesagainst the revenue. Therefore, we find that the appeal does not meritconsideration. In the result, the appeal is dismissed and thesubstantial questions of law are answered against the revenue. (T.S. SIVAGNANAM, J.) (HIRANMAY BHATTACHARYYA, J.)