Case Law Details
Brief of the Case
Delhi High Court held In the case of Triune Energy Services Pvt. Ltd. vs. DCIT that if ITAT have no doubt on slump sale agreement and do not thinks that it is a colourable device than the agreement between the parties must be accepted in its totality. Indisputably, the transaction in question is a slump sale which does not contemplate separate values to be ascribed to various assets (tangible and intangible) that constitute the business undertaking, which is sold and purchased. The Agreement itself indicates that slump sale included sale of goodwill and the balance sheet drawn up on 22nd September, 2006 specifically recorded goodwill at Rs.40,58,75,529.40/-. As Goodwill includes a host of intangible assets, which a person acquires, on acquiring a business as a going concern and valuing the same at the excess consideration paid over and above the value of net tangible assets is an acceptable accounting practice. Thus, a further exercise to value the goodwill is not warranted.
Facts of the Case
The Assessee Company (formerly known as “Saijem Triune Energy Pvt. Ltd.) was incorporated during the financial year 2006-07. Fifty percent (50%) of the issued and subscribed share capital of the Assessee Company are held by M/s Saipem, Italy and a balance 50% are held by one Mr Binoy Jacob. The Assessee is a Design Engineering and Consultancy Company servicing industries engaged in Oil and Gas production and processing (offshore and onshore), Petroleum Refining, Petroleum Storage and Transportation, Chemicals and Petrochemicals.
Mr Binoy Jacob was also, at the material time, one of the principal shareholders/promoters of the company Triune Projects Pvt. Ltd. (TPPL) and held 76.42% of the issued and subscribed share capital of TPPL. TPPL was also a company, inter alia, engaged in providing engineering and design services to the oil and gas industry. On 22nd September, 2006, the Assessee entered into a “slump sale/business transfer agreement” in terms of which TPPL sold its business, as a going concern to the Assessee for a consideration of Rs.45,85,00,000/-.The Assessee took over the assets, liabilities and the business of TPPL with effect from the closing date, i.e., 22nd September, 2006. The balance sheet drawn up by the Assessee as on 22nd September, 2006 indicated that the Assessee had taken over the block of fixed assets at a depreciated value of Rs.2,56,24,470.60/- and net current assets at Rs.2,71,00,000/-. The balance consideration paid to TPPL, Rs.40,58,75,529.40/-, was capitalized as goodwill.
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