Case Law Details
DCIT Vs Accelerated Freeze Drying Co. Ltd. (ITAT Cochin)
The issue under consideration is whether sale of industrial unit as a whole as a continuing business with land, building, plant, machinery and all equipment as a going business with assets and liabilities taxable under section 50B as slump sale or not?
ITAT states that Section 50B is the only provision which provides for computation of capital gains in the case of slump sale, even though sale of business undertaking as a going concern will involve sale of assets forming block of assets on which depreciation was being allowed. Assessee’s counsel contended that when depreciable assets are sold, provision to be applied for assessment of capital gain is Section 50. However we are of the view that Section 50 applies only when an independent asset or a block of asset are sold on which depreciation was allowed and not when the industrial undertaking with depreciable assets are sold as a whole. In fact, when Section 50B provides for computation of capital gain on the sale of the undertaking it covers capital gain payable on depreciable assets forming part of the industrial undertaking also. In other words the distinction between Section 50 and 50B is that while Section 50 provides for computation of capital gain on the sale of only depreciable assets Section 50B provides for computation of capital gain on the sale of an undertaking as a whole which includes depreciable assets as well. In fact there is also difference in the mode of computation of capital gains under Section 50 for depreciable assets and for “slump sale” under Section 50B. Section 50 is a full code for computation of capital gains on depreciable assets. On the other hand under Section 50B the asset has to be first classified between long term or short term capital asset and then for the purpose of Sections 48 and 49 net worth has to be computed in terms of explanation 1 of the said Section. The capital gain under Section 50B is the sale proceeds as reduced by the net worth. From the above findings, ITAT hold that the sale of the undertaking is a stump sale within the meaning of Section 2(42C) assessable under Section 50B of the Act.
FULL TEXT OF THE ITAT JUDGEMENT
These appeals filed by the assessee and the Revenue are directed against the different orders of the CIT(A)-IV, Kochi for the assessment year 2002-03. These appeals were originally disposed of by the Tribunal vide order dated 13th November,2009. Against this, the Revenue went in appeal before the High Court in ITA No. 201 & 281/2010 wherein the High Court vide judgment dated 02-08-2018 remitted the issue to the file of the Tribunal with the following observation:
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