Pr. Commissioner Of Income Tax - 14Aayakar Bhavan, M.k. Road, Mumbai - 400 020 v. Wockhardt Hospitals Limitedwockhardt Towers, Bandra Kurla Complex,Bandra (E), Mumbai - 400 051

IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J. INCOME TAX APPEAL NO. 1393 OF 2017 Pr. Commissioner of Income Tax - 14Aayakar Bhavan, M.K. Road, Mumbai - 400 020. .. Appellant Versus Wockhardt Hospitals LimitedWockhardt Towers, Bandra Kurla Complex,Bandra (E), Mumbai - 400 051.PAN : .. Respondent ................... Mr. Suresh Kumar a/w Ms. Priyanka Tiwary for the Appellant Mr. Suresh Kumar a/w Ms. Priyanka Tiwary for the Appellant Mr. Niraj Sheth a/w Mr. Atul K. Jasani for the RespondentMr. Niraj Sheth a/w Mr. Atul K. Jasani for the Respondent ................... CORAM : UJJAL BHUYAN & MILIND N. JADHAV, JJ. DATE : MARCH 16, 2020. ORDER [PER UJJAL BHUYAN, J] : 1.Heard Mr. Suresh Kumar, learned standingcounsel, revenue for the appellant and Mr. Niraj Sheth alongwith Mr. Atul K. Jasani, learned counsel for the respondent -assessee. 2.This appeal under Section 260A of the Income Tax Act, 1961 ("the Act" for short) is preferred by the revenueassailing the legality and correctness of the order dated 6.1.2017 passed by the Income Tax Appellate Tribunal,Mumbai "G" Bench, Mumbai ("Tribunal" for short) in IncomeTax Appeal No. 7021/Mum/2013 for the assessment year2010-11. 3.The appeal has been preferred on the followingquestions projecting the same as substantial questions oflaw:- "a) Whether, on the facts and in the circumstances of the case,the Tribunal was correct in law in confirming CIT(A)'s orderdeleting the disallowance of Rs.18,43,30,378/- incurred by theassessee in relation to slump sale without appreciating thatSection 50B of the Act is a complete code in itself andexpenses related to slump sale cannot be allowed?the Tribunal was correct in law in confirming CIT(A)'s orderdeleting the disallowance of Rs.18,43,30,378/- incurred by theassessee in relation to slump sale without appreciating thatSection 50B of the Act is a complete code in itself andexpenses related to slump sale cannot be allowed? b) Whether on the facts and in the circumstances of the case, theTribunal was correct in law in confirming CIT(A)'s orderdeleting the enhancement of slump sale consideration fromRs.143,21,082 to Rs.186,58,21,669/-?Tribunal was correct in law in confirming CIT(A)'s orderdeleting the enhancement of slump sale consideration fromRs.143,21,082 to Rs.186,58,21,669/-? c) Whether on the facts and in the circumstances of the case, theTribunal was correct in law in confirming CIT(A)'s orderdeleting the addition of Rs 2,79,53,000 from lump sumconsideration without appreciating the fact that the saidconsideration routed through escrow account being part of theagreement between Wockhardt Hospitals Limited and FortisHospitals Limited and claim would be tantamount to doublededuction which is incurred during the transaction ?Tribunal was correct in law in confirming CIT(A)'s orderdeleting the addition of Rs 2,79,53,000 from lump sumconsideration without appreciating the fact that the saidconsideration routed through escrow account being part of theagreement between Wockhardt Hospitals Limited and FortisHospitals Limited and claim would be tantamount to doublededuction which is incurred during the transaction ? d) Whether on the facts and in the circumstances of the case, theTribunal was correct in law in treating an amount ofRs.317,21,09,994 on slump sale as long term capital gaininstead of short-term capital gain as the property was heldless than a year overlooking the first proviso to section 50B(1)of the Act?Tribunal was correct in law in treating an amount ofRs.317,21,09,994 on slump sale as long term capital gaininstead of short-term capital gain as the property was heldless than a year overlooking the first proviso to section 50B(1)of the Act? d) Whether on the facts and in the circumstances of the case, theTribunal was correct in law in treating an amount ofRs.317,21,09,994 on slump sale as long term capital gaininstead of short-term capital gain as the property was heldless than a year overlooking the first proviso to section 50B(1)of the Act?Tribunal was correct in law in treating an amount ofRs.317,21,09,994 on slump sale as long term capital gaininstead of short-term capital gain as the property was heldless than a year overlooking the first proviso to section 50B(1)of the Act? e) Whether on the facts and in the circumstances of the case, theTribunal was correct in law in deleting the addition made bythe Assessing Officer of Rs 48,71,169 u/s 14A r/w Rule 8D ofIncome Tax Rules, 1962 on account of expenditure incurredfor earning exempt income?"Tribunal was correct in law in deleting the addition made bythe Assessing Officer of Rs 48,71,169 u/s 14A r/w Rule 8D ofIncome Tax Rules, 1962 on account of expenditure incurredfor earning exempt income?" 4.The first question i.e Question (a) deals with theorder of the Tribunal confirming the order of theCommissioner of Income Tax (Appeals) - 21, Mumbai [briefly,'the CIT(A)'or'the First Appellate Authority'hereinafter] deleting the disallowance of Rs. 18,43,30,378.00made by the Assessing OfÏcer under Section 50B of the Act. 4.1.In the assessment proceedings leading to theassessment order dated 28.3.2013 passed under Section143(3) of the Act for the assessment year 2010-11,Assessing OfÏcer disallowed claim of expenditure of Rs.18,43,30,378.00 claimed by the assessee. It may be mentioned that assessee is engaged in the business ofrunning various hospitals in India. During the assessmentyear under consideration, assessee had sold 12 hospitalsunder slump sale vide business transfer agreement dated24.8.2009 to Fortis Hospitals Ltd. Assessing OfÏcerdisallowed the claim of expenditure stating that Section 50Bof the Act itself was a separate code and no furtherdeduction was required for the purpose of the saidexpenditure. 4.2. When the matter came up in appeal before theFirst Appellate Authority i.e CIT(A), it vide the appellate orderdated 25.9.2013 allowed the said claim of the assessee anddeleted the disallowance made. 4.3. On appeal before the Tribunal, it was found by theTribunal that this issue was earlier dealt by it in the case ofDCIT Vs. Summit Securities Ltd[1]. Following the saidorder, Tribunal decided this question against the revenueand in favour of the assessee vide order dated 6.1.2017. 1ITA 4977/Mum/2009 dated 7.3.2012 4.4.To appreciate the rival contentions on this issue, itis apposite to deal with the certain relevant provisions of law. 4.5. 'Slump sale' is defined under Section 2(42C) ofthe Act to mean the transfer of one or more undertakings asa result of the sale for a slump sum consideration withoutvalues being assigned to the individual assets and liabilitiesin such sales. As per Explanation 1, the term 'undertaking'used in the aforesaid provision would have the samemeaning assigned to it in Explanation 1 to clause (19AA) ofSection 2. As per this clause, "undertaking" shall include anypart of an undertaking, or a unit or division of an undertakingor a business activity taken as a whole, but does not includeindividual assets or liabilities or any combination thereof notconstituting a business activity. 4.6.Section 48 is included in Chapter IV - E whichdeals with computation of income from capital gains.Section 48 deals with mode of computation. It says that theincome chargeable under the head "capital gains" shall be 4.6.Section 48 is included in Chapter IV - E whichdeals with computation of income from capital gains.Section 48 deals with mode of computation. It says that theincome chargeable under the head "capital gains" shall be computed, by deducting from the full value of theconsideration received or accruing as a result of the transferof the capital asset the amounts mentioned therein i.eexpenditure incurred wholly and exclusively in connectionwith such transfer; and the cost of acquisition of the assetand the cost of any improvement thereto. 4.7.Section 49 deals with cost with reference tocertain modes of acquisition. As per Section 49(1), wherethe capital asset became the property of the assessee in anyof the manner provided therein, such as, on distribution ofassets following partition of a Hindu undivided family orunder a gift or will; or by succession, inheritance ordevolution etc., the cost of acquisition of the asset shall bedeemed to be the cost for which the previous owner of theproperty acquired it, as increased by the cost of anyimprovement of the assets incurred or borne by the previousowner or the assessee, as the case may be. 4.8.This brings us to Section 50B of the Act whichprovides for special provision for computation of capital gains in case of slump sale. This provision being relevant, thesame is extracted herein under in its entirety; "Special provision for computation of capital gains in case ofslump sale. 50B. (1) Any profits or gains arising from the slump sale effected inthe previous year shall be chargeable to income-tax as capital gainsarising from the transfer of long-term capital assets and shall bedeemed to be the income of the previous year in which the transfertook place : Provided that any profits or gains arising from the transfer under theslump sale of any capital asset being one or more undertakingsowned and held by an assessee for not more than thirty-six monthsimmediately preceding the date of its transfer shall be deemed to bethe capital gains arising from the transfer of short-term capital assets. (2) In relation to capital assets being an undertaking or divisiontransferred by way of such sale, the "net worth" of the undertaking orthe division, as the case may be, shall be deemed to be the cost ofacquisition and the cost of improvement for the purposes of sections48 and 49 and no regard shall be given to the provisions contained inthe second proviso to section 48. (3) Every assessee, in the case of slump sale, shall furnish in theprescribed form along with the return of income, a report of anaccountant as defined in the Explanation below sub-section (2) ofsection 288, indicating the computation of the net worth of theundertaking or division, as the case may be, and certifying that thenet worth of the undertaking or division, as the case may be, hasbeen correctly arrived at in accordance with the provisions of this section. Explanation 1.—For the purposes of this section, "net worth" shall bethe aggregate value of total assets of the undertaking or division asreduced by the value of liabilities of such undertaking or division asappearing in its books of account : Provided that any change in the value of assets on account ofrevaluation of assets shall be ignored for the purposes of computingthe net worth. Explanation 2.—For computing the net worth, the aggregate value oftotal assets shall be,— (a) in the case of depreciable assets, the written down value of theblock of assets determined in accordance with the provisionscontained in sub-item (C) of item (i) of sub-clause (c) of clause (6) ofsection 43; (b) in the case of capital assets in respect of which the whole of theexpenditure has been allowed or is allowable as a deduction undersection 35AD, nil; and (c) in the case of other assets, the book value of such assets. 4.9.Referring to Section 50B of the Act, CIT(A) Provided that any change in the value of assets on account ofrevaluation of assets shall be ignored for the purposes of computingthe net worth. Explanation 2.—For computing the net worth, the aggregate value oftotal assets shall be,— (a) in the case of depreciable assets, the written down value of theblock of assets determined in accordance with the provisionscontained in sub-item (C) of item (i) of sub-clause (c) of clause (6) ofsection 43; (b) in the case of capital assets in respect of which the whole of theexpenditure has been allowed or is allowable as a deduction undersection 35AD, nil; and (c) in the case of other assets, the book value of such assets. 4.9.Referring to Section 50B of the Act, CIT(A) observed that Section 50B only provides for computation ofnet worth which is deemed to be cost of improvement andcost of acquisition. As cost of improvement and cost ofacquisition which is provided under Section 50B as net worthcannot be equated with capital gains. For computation of capital gains, recourse has to be made to Section 48 as perwhich capital gains would be computed by taking intoaccount the full value of consideration reduced by the cost ofimprovement and cost of acquisition and also expenditureincurred for transfer. Therefore, it was held that forcomputation of capital gains, Section 48 has to be adoptedand computed. All the components of Section 48 have to beconsidered. Referring to the decision of the Tribunal in thecase of Summit Securities Ltd., it was held that Section 50Bonly determines cost of acquisition and cost of improvementof the undertaking; evidently capital gain has to becomputed under Section 48. Section 50B is a code for itselfonly for determination of cost of acquisition and cost ofimprovement of the undertaking but not for the computationof capital gains in case of slum sale. Therefore, disallowancemade by the Assessing OfÏcer was interfered with and theclaim of expenditure incurred for the purpose of transferamounting to Rs. 18,43,30,378.00 was allowed. 4.10.Tribunal relied upon its own decision in the case ofSummit Securities Ltd and upheld the findings of the CIT(A). Relevant portion of the order passed by the Tribunal in thecase of Summit Securities Ltd. is extracted herein below:- "(e) Sub-section (2) of section 50B makes it abundantly clear thatthe undertaking or division as a whole is considered as one capitalasset and the net worth of this capital asset is considered as cost ofacquisition and cost of improvement for the purposes of sections 48and 49. Therefore, it becomes patent that section 50B is a code initself only for the determination of cost of acquisition and cost ofimprovement of the undertaking but not for the computation of capitalgains in case of slump sale. The object of section 50B is to simplydetermine and supply the figure of cost of acquisition and cost ofimprovement of the undertaking or division, being its net worth alongwith the decision as to whether the undertaking is a long term orshort term capital asset is decided and forwarded to section 48, thecomputation provision in the later section is activated for determiningthe income chargeable under the head "capital gains" in accordancewith the mode of such computation as prescribed therein. The modusoperandi to compute capital gain from the transfer of undertakingthus provides for reducing the cost of acquisition and cost ofimprovement of the capital asset from the full value of considerationreceived or accruing as a result of the transfer of capital asset.Coming back to the nature of capital asset being undertaking, whichcomprises of "all assets minus all liabilities" of the undertaking, theamount of capital gain means reducing the net worth, being cost ofacquisition and cost of improvement of "all assets minus all liabilities"of the undertaking from the full value of consideration of "all assetsminus all liabilities" of the undertaking. (f) In computing the net worth of the undertaking or the division,as the case may be, the benefit of indexation as provided in thesecond proviso to section 48 has been withheld. The possible reason may be quid pro quo. By extending the benefit of lower rate oftaxation on long term capital gain as provided under section 112 tothe undertaking as a whole notwithstanding the fact that there maybe several assets held by the assessee for a period of not more than36 months, the Legislature though it to curtain the benefit ofindexation to the cost of acquisition and cost of improvement.” 4.11. On thorough consideration of the matter, we donot find any error or infirmity in the view taken by theTribunal. Tribunal was fully justified in confirming the viewtaken by the First Appellate Authority. In the circumstances,we see no good reason to entertain this question forconsideration. 5.Question No. (b) deals with the decision of theTribunal in confirming the order of the First AppellateAuthority deleting the enhancement of slum saleconsideration from Rs. 143.21 crores to Rs. 186.58 crores. 5.1. An agreement was entered into between theassessee and Fortis Hospitals Ltd dated 24.8.2009. Clause(3) of the agreement made it clear that Rs. 186.58 croreswas the negotiated value to which further adjustment wasrequired to be done in case liability of the undertaking exceeded Rs. 599.62 crores. This clause further provided foropening of an escrow account for 2 years for an amount ofRs. 15 crores and if any further claim arose, that was to bededucted from the said amount. 5.2.Assessing OfÏcer did not allow the deductionwhich occurred during the course of transaction stating thatit amounted to double deduction of liabilities which wasincurred during the transaction and hence, the assessee wasnot eligible for such deduction. 5.3.CIT(A) in first appeal held that during the slumpsale transaction excess liability of Rs. 43,36,86,617.00 arose.This amount was not paid by Fortis Hospitals Ltd but wasadjusted from Rs. 186.58 crores. After adjustment, thelumpsum consideration received by the assessee was Rs.143.21 crores. Therefore, addition made by the AssessingOfÏcer was deleted. 5.4.In further appeal, Tribunal referred to theagreement entered into between the parties and held that during the process of transaction, liability of Rs. 43.36 croresarose which was required to be deducted from Rs. 186.58crores where after the lump sum consideration became Rs.143.21 crores, rightly determined by the First AppellateAuthority. Therefore, this ground of appeal by the revenuewas answered against the revenue. 5.5.Since clause (3) of the agreement is relevant, thesame is extracted herein under:- "3.1 In consideration for the transfer of the Business Division bythe Seller to the Purchaser, in accordance with the terms andconditions of this Agreement, the Purchaser shall pay: (A) in case the amount paid by the Purchaser to the lenders pursuantto Clause 6.2(o) below is equal to or exceeds Rs. 599,61,78,301(Rupees Five Hundred Ninety nine crore sixty one lakhs seventyeight thousand three hundred and one only); (a) a lumpsum consideration of Rs. 186,58,21,669 (Rupees OneHundred Eight six crore fifty eight lakhs twenty one thousand sixhundred and ninety nine only) minus (b) the difference between theamounts payable by the Purchaser to the lenders pursuant to Clause6.2(o) below and Rs. 599,61,78,301 (Rupees Five Hundred NinetyNine Crore Sixty One Lakhs Seventy Eight thousand Three hundredand one only); OR (B) In case Rs 599,61,78,301 (Rupees Five Hundred Ninety Nine Crore Sixty One Lakhs Seventy Eight thousand Three hundred andone only) exceeds the amounts payable by the Purchaser to thelenders pursuant to clause 6.2(o) below: (a) a lumpsum consideration of Rs. 186,58,21,669 (Rupees OneHundred Eight six crore fifty eight lakhs twenty one thousand sixhundred and ninety nine only) minus (b) the difference between theamounts payable by the Purchaser to the lenders pursuant to Clause6.2(o) below and Rs. 599,61,78,301 (Rupees Five Hundred NinetyNine Crore Sixty One Lakhs Seventy Eight thousand Three hundredand one only); OR (B) In case Rs 599,61,78,301 (Rupees Five Hundred Ninety Nine Crore Sixty One Lakhs Seventy Eight thousand Three hundred andone only) exceeds the amounts payable by the Purchaser to thelenders pursuant to clause 6.2(o) below: (a) a lumpsum consideration of Rs 186,58,21,699 (Rupees OneHundred Eighty six crore fifty eight lakhs twenty one thousand sixhundred and ninety nine only) plus (b) the difference between Rs599,61,78,301 (Rupees Five Hundred Ninety Nine Crore Sixty OneLakhs Seventy Eight thousand Three hundred and one only) and theamounts payable by the Purchaser to the lenders pursuant toClause 6.2 (o) below; clause 6.2(0) below; ( the amount arrived in (A) or (B), as the case may be, is hereinafterreferred to as the "Consideration") to the seller. The consideration shall be paid on the closing date in the followingmanner: (a) Rs 15,00,00,000 (Rupees Fifteen Crores Only) ('Escrow amount')shall be deposited with an escrow agent mutually appointed by theparties under the Escrow Agreement ('Escrow Agent'); and (b) the difference between the Consideration and the Escrow amountshall be paid by way of wire transfer to the bank account of the Sellerto be notified in writing by the Seller to the Purchaser at least five (5)business days prior to the Closing Date." 5.6.On a reading of the above clause of the agreement, it is evident that though lumpsum considerationwas fixed at Rs. 186.58 crores, provision was made fordeducting / adjusting any liability exceeding Rs. 599.62crores. It was noticed by the First Appellate Authority that in the process of transaction, total liability exceeded Rs. 599.62crores and the excess liability was quantified at Rs. 43.36crores which amount was not paid by Fortis Hospitals Ltd tothe assessee but was adjusted against Rs. 186.58 crores.The First Appellate Authority held that the amount of Rs.43.36 crores had to be accounted on the liability side andhad to be deducted from the lumpsum consideration.Therefore, when this amount was deducted from Rs. 186.58crores, the figure arrived at was Rs. 143.21 crores.Therefore, it was held that Assessing OfÏcer was not justifiedin enhancing the lumpsum consideration from Rs. 143.21crores to Rs. 186.58 crores. 5.7.Tribunal noticed that the assessee and FortisHospitals Ltd had entered into a business agreement and asper the agreement, excess liability arising during thetransition period had to be adjusted from the lumpsumamount of Rs. 186.58 crores. It was further noted by theTribunal that during the process of transaction, excessliability of Rs. 43.36 crores arose which had to be deductedfrom the lumpsum amount of Rs. 186.58 crores to arrive at the lumpsum consideration received by the assessee whichwas Rs. 143.21 crores. Accordingly, the order of the FirstAppellate Authority was afÏrmed. 5.8.On due consideration, we do not find any error orinfirmity in the order passed by the Tribunal. Besides, this isa finding of fact, rather a concurrent finding of fact andrevenue is unable to point out any perversity in theconclusion reached. In the circumstances, no question oflaw, much less any substantial question of law, arises fromsuch finding of the Tribunal. 6.The third question deals with deletion by the FirstAppellate Authority of the addition of Rs. 2.79 crores fromlumpsum consideration made by the Assessing OfÏcer, whichdecision of the First Appellate Authority was afÏrmed by theTribunal. the lumpsum consideration received by the assessee whichwas Rs. 143.21 crores. Accordingly, the order of the FirstAppellate Authority was afÏrmed. 5.8.On due consideration, we do not find any error orinfirmity in the order passed by the Tribunal. Besides, this isa finding of fact, rather a concurrent finding of fact andrevenue is unable to point out any perversity in theconclusion reached. In the circumstances, no question oflaw, much less any substantial question of law, arises fromsuch finding of the Tribunal. 6.The third question deals with deletion by the FirstAppellate Authority of the addition of Rs. 2.79 crores fromlumpsum consideration made by the Assessing OfÏcer, whichdecision of the First Appellate Authority was afÏrmed by theTribunal. 6.1.As noticed above, in clause (3) of the agreemententered into between the assessee and Fortis Hospitals Ltd,assessee and Fortis Hospitals Limited were required to open an escrow account of Rs. 15 crores from lumpsumconsideration of Rs. 186.58 crores for a period of 2 years,and in the event of any further claim, such amount had to bededucted from the above lumpsum consideration. 6.2.During the assessment proceedings, AssessingOfÏcer observed that assessee had claimed Rs. 2.79 croresas deduction in the computation of income. According tothe Assessing OfÏcer, the said amount was lying in theescrow account and by making the said claim, assessee wasresorting to claim of double deduction. Accordingly, suchclaim of the assessee was declined by the Assessing OfÏcer. 6.3. First Appellate Authority, on consideration ofclause (3) of the agreement, took the view that there was nodouble deduction by the assessee for the said amount andaccordingly, deleted the disallowance holding that assesseewas eligible for the said deduction. 6.4. On further appeal, Tribunal afÏrmed the viewtaken by the First Appellate Authority. 6.5.First Appellate Authority on reading of clause (3)of the agreement observed that there was a provision forescrow account for two years by both the parties to theagreement for Rs. 15 crores from the amount of lumpsumconsideration of Rs. 186.58 crores. It was observed that ifthere were any further claims, that would be adjusted fromRs. 15 crores. It was further observed that when the claim ofRs. 2.79 crores was received, that amount was paid throughthe escrow account. The escrow account was for a period oftwo years. On thorough examination, CIT(A) held that therewas no double deduction from the aforesaid amount by theassessee. Assessing OfÏcer had made an error by addingthe said amount in the assets and liabilities side by includingit in lumpsum consideration which was against the principlesof accounting. 6.6.When the matter came up before the Tribunal, itwas noticed that following the agreement, an escrow accountwas opened and Rs. 15/- crores was kept in the said accountfor settling future liabilities and that assessee was to receive the said amount from the escrow account after a period oftwo years. It was noticed that liability amounting to Rs. 2.79crore arose and was settled during the year following whichthe assessee filed a revised return raising a claim ofdeduction for the said amount. Tribunal held that there wasno doubt about incurring of the expenditure. Necessaryevidence in this regard were produced and were found to begenuine. Therefore, there was no need to interfere with theorder of the First Appellate Authority. 6.7.In the light of the discussions made above, we areof the view that no question of law arises out of such orderpassed by the Tribunal which is basically a finding of fact.Consequently, we decline to admit the appeal on Question(c) as framed. 7.The fourth question deals with treating the capitalgain on slump sale as long term capital gain instead of shortterm capital gain initially held by the Assessing OfÏcer. 6.7.In the light of the discussions made above, we areof the view that no question of law arises out of such orderpassed by the Tribunal which is basically a finding of fact.Consequently, we decline to admit the appeal on Question(c) as framed. 7.The fourth question deals with treating the capitalgain on slump sale as long term capital gain instead of shortterm capital gain initially held by the Assessing OfÏcer. 7.1. Assessee had 12 hospitals and 2 nursing schoolswhich it had sold under slump sale basis to Fortis HospitalsLtd. Out of these hospitals, 4 were owned for more thanthree years and the rest were below three years. 7.2. Assessing OfÏcer took the view that percentage ofhospitals on long term basis was less than the number ofhospitals under short term. Therefore, Assessing OfÏcerassessed the income of the assessee from the slump sale ofhospitals as short term capital gain. 7.3.In appeal before the First Appellate Authority,CIT(A) referred to sub-section (1) of Section 50B and theproviso thereto and took the view that for the assets to beassessed under short term capital gain, all the assets shouldbe existing below 36 months; if even one asset exists formore than 36 months, then it had to be treated as long termin nature. Referring to the decision of the Tribunal in SummitSecurities Ltd., CIT(A) held that if at least one asset wasmore than three years, then it was long term in nature. Itwas found that four of the assets were more than three years old. Therefore, capital gain accruing out of slum sale had tobe assessed as long term capital gain. Since reliance wasplaced on Summit Securities Ltd., relevant portion thereof is extracted herein under:- "(b) Where an, industrial undertaking is transferred under slump salewhich was owned and held by the assessee for not more than 36 monthsimmediately preceding the date of its transfer, the profit or gains arisingfrom such transfer is deemed to be capital gain arising from the transferof short term capital assets. The relevant criteria for considering whetherthe undertaking is a short-term or long term is the period of owning andholding the undertaking as a whole and not individual assets of suchundertaking. Suppose the undertaking was set up four years ago andsome of the assets were purchased and held for a period of not morethan 36 months, it is the entire undertaking which will be treated as long-term capital asset for the purposes of computing capital gain on itstransfer. The period of holding of separate assets of the undertakingwere purchased a day before its transfer, they will also form part of theundertaking as a long-term capital asset. So long as the undertaking isowned and held by the assessee for a period of more than 36 months,the capital gain arising from its slump sale is considered as long termcapital gain notwithstanding the period for which its individual assetswere owned and held.” 7.4.In further appeal before the Tribunal, the abovedecision in Summit Securities Ltd. was again adverted towhere after Tribunal held that there was no need to interferewith the order of the First Appellate Authority as fourhospitals of the assessee were owned by it for a period of more than 36 months. Therefore, the capital gain accruingout of the slump sale was nothing but long term capital gain. 7.5.We do not find any reason to disturb such findingof the Tribunal. Rather we concur with the view taken by theTribunal which afÏrmed the decision of CIT(A). The questionframed by the revenue, therefore, does not arise forconsideration. 8.The last question framed is regarding deletion bythe lower appellate authorities of the addition made by theAssessing OfÏcer of an amount of Rs. 48,71,169.00 underSection 14A read with Rule 8D of the Income Tax Rules, 1962(briefly "the Rules" hereinafter). more than 36 months. Therefore, the capital gain accruingout of the slump sale was nothing but long term capital gain. 7.5.We do not find any reason to disturb such findingof the Tribunal. Rather we concur with the view taken by theTribunal which afÏrmed the decision of CIT(A). The questionframed by the revenue, therefore, does not arise forconsideration. 8.The last question framed is regarding deletion bythe lower appellate authorities of the addition made by theAssessing OfÏcer of an amount of Rs. 48,71,169.00 underSection 14A read with Rule 8D of the Income Tax Rules, 1962(briefly "the Rules" hereinafter). 8.1.Assessee had invested in the form of shares inKanishka Housing Development Co Pvt Ltd, which was asubsidiary company of the assessee. The Assessing OfÏcerheld that no exempt income was earned by the assesseethough the investment made by it was capable of earningexempt income in future. Invoking the provisions of Rule 8D(2) of the Rules, the Assessing OfÏcer disallowed Rs. 48.71lakhs under Section 14A read with 8D of the Rules. 8.2. In the appellate proceedings before the First Appellate Authority, CIT(A) held that Kanishka HousingDevelopment Co Pvt Ltd was holding land on which assesseehad erected hospital. For the purpose of businessexpediency, assessee had invested in the shares of KanishkaHousing Development Co Pvt Ltd so that the land could beutilized for the purpose of hospital. As the investment wasfor the purpose of business expediency, no addition wasrequired to be made under Section 14A of the Act.Accordingly, the First Appellate Authority deleted theaddition made by the Assessing OfÏcer. 8.3.When the matter came up before the Tribunal,Tribunal confirmed the view taken by the First AppellateAuthority. 8.4.Section 14A deals with expenditure incurred inrelation to income not includible in total income. As per sub- section (1), for the purpose of computing the total income,no deduction shall be allowed in respect of expenditureincurred by the assessee in relation to income which doesnot form part of the total income under the Act. 8.5. Rule 8D lays down the method for determining theamount of expenditure in relation to income not includible intotal income. 8.6. Tribunal held that assessee had not earned anyexempt income during the assessment year underconsideration, nor it had claimed any expenditure againstany tax free income. Thus, the twin pre-conditions forinvoking the provisions of Section 14A read with Rule 8D ofthe Rules i.e earning of exempt income and claimingexpenditure to earn the same were absent. Therefore, theorder passed by the First Appellate Authority was afÏrmed. 8.7.We are in agreement with the view taken by theTribunal. As rightly held by the Tribunal, assessee hadneither earned any exempt income nor claimed any expenditure for earning such exempt income. That being theposition, Assessing OfÏcer was not justified in making thedisallowance by invoking the aforesaid two provisions. Thesame was rightly deleted by the First Appellate Authoritywhich order has been afÏrmed by the Tribunal. Therefore,this question proposed by the revenue also fails. 9.Consequently, we do not find any merit in theappeal which is accordingly, dismissed. However, there shallbe no order as to cost. [ MILIND N. JADHAV, J. ] [ UJJAL BHUYAN, J. ] Digitallysigned byRavindraRavindra M.AmberkarM.Date:Amberkar2020.03.2015:16:48+0530