Calcutta High Court
Principal Commissioner Of Income ... vs Hindustan Engineering And ... on 22 November, 2021
OD-39
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION (INCOME TAX)
ORIGINAL SIDE
ITAT/70/2017
IA NO: GA/2/2017(Old No.GA/677/2017)
PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL -1, KOLKATA
VERSUS
HINDUSTAN ENGINEERING AND INDUSTRIES LIMITED
BEFORE :
THE HON'BLE JUSTICE T.S. SIVAGNANAM
And
THE HON'BLE JUSTICE HIRANMAY BHATTACHARYYA
Date : 22nd November, 2021
Appearance:-
Ms. Sucharita Biswas, Adv.
... For Appellant
Mr. J.P. Khaitan, Sr. Adv.
Mr. Saurabh Bagaria, Adv.
Mr. Indranil Basu, Adv.
... For Respondent
The Court : This appeal by the revenue filed under Section 260A of
the Income Tax Act, 1961 (the `Act' for brevity) is directed against the order
dated 16th March, 2016 passed by the Income Tax Appellate Tribunal, "C"
Bench, Kolkata (the `Tribunal') in ITA No. 330/Kol/2013 for the assessment
year 2009-10.
The revenue has raised the following substantial questions of law for
consideration:-
1. Whether on the facts and in the circumstances of the case the Learned
Tribunal erred in facts as well as in law in treating the sale of the
chemical unit of the assessee company as itemised sale and not a slump
sale?
2. Whether on the facts and in the circumstances of the case, the Learned
Tribunal erred in law in deleting the addition of Rs.31,13,58,000/- made
by the assessing officer under section 50B read with section 2(42C) and
explanation 1 to section 2(19AA) of the Income Tax Act solely relying on
the submissions made by the assessee and ignoring the facts brought on
record by the assessing officer as well as the detailed observation made
by the Commissioner of Income Tax (Appeals)?
3. Whether on the facts and in the circumstances of the case, the Learned
Tribunal erred in treating the sale of the chemical unit of the assessee
company as itemised sale without considering the case laws relied upon
by the revenue in the case of CIT Versus Narkeshari Prakashan Ltd.,
reported in 196 ITR 438 and in the case of Accelerated Freeze Drying Co.
Ltd. reported in 198 Taxmann 18 (Ker) which applies in the facts and
circumstances of the instant case ?
4. Whether the impugned order is perverse, bad in law and a product of
non application of judicial mind ?
The assessee filed its return of income of the assessment year 2009-
2010 which was processed under Section 143 (1) of the Act. Subsequently,
the case was selected for scrutiny and notices under Section 142(1) of the
Act were issued and the case was discussed with the assessee. During the
year under assessment, the assessee company was engaged in activities of
manufacturing and selling of chemicals, castings, steel, wagons, points and
crossings, jute and petrochemicals etc. During the scrutiny assessment
among other things, the assessing officer noticed that the assessee company
is having various business units namely, railway wagon making unit, jute
processing unit and chemical unit at Gujarat and Haldia (West Bengal).
Each of these units was independent profit centres for which separate
books of accounts were maintained by the assessee company. The assessing
officer found that the assessee company has sold its chemical unit at Haldia
to M/s. Petro Carbons and Chemicals Pvt. Ltd. and the copy of the
agreement was produced. On examining the agreement, the assessing
officer was of the view that the same qualified as a slump sale as defined
under Section 2(42C) of the Act and accordingly, proceeded to complete the
assessment by an order dated 28th December, 2011.
Aggrieved by such order the assessee preferred appeal before the
Commissioner of Income Tax (Appeals)-VI, Kolkata [CIT(A)]. It was
contended that the finding of the assessing officer that the sale was a slump
sale was wholly unjustified since the sale was itemised sale and cannot be
treated as a slump sale within the meaning of Section 2(42C) of the Act. The
assessee referred to the documents and the annexures to the documents
whereunder the sale took place to justify their case. Several decisions were
relied on. The CIT(A) by order dated 3rd December, 2012 did not agree with
the assessee and confirmed the finding of the assessing officer and held the
sale to be slump sale. Aggrieved by such order, the assessee preferred
appeal before the Tribunal. The said appeal was allowed and aggrieved by
such order the revenue is before us by way of this appeal.
We have elaborately heard Ms. Sucharita Biswas, learned Standing
Counsel appearing for the appellant revenue. The short question involved in
the present appeal is whether the sale effected by the assessee during the
year under consideration was a slump sale within the meaning of Section
2(42C) of the Act. The learned Standing Counsel for the revenue would
contend that the assessee miserably failed to produce any document before
the assessing officer to establish that the sale was not a slump sale or
rather the sale was an itemised sale and in such circumstances the
Tribunal committed an error in taking note of the conduct of the assessee
both before the assessing officer as well as before the CIT(A).
Therefore, it is submitted that this Court while exercising jurisdiction
under Section 260A of the Act is entitled to consider whether there is any
error committed by the Tribunal, more particularly a factual error
warranting interference by this Court. At the first blush the submission of
the learned Standing Counsel appears to be attractive but on a close
scrutiny we find that the authorities as well as the Tribunal have examined
the documents which were made available before it. The Tribunal after
going through the documents, more particularly the agreement and the
addendum to the agreement and Annexure J found that the unit itself was
never sold and/or transferred as a going concern in toto but only assets of
the unit was sold and transferred to the purchaser on a pre-determined and
agreed price for each type of assets being sold and transferred and the
consideration fixed for all the assets were not in lump sum. After noting the
factual position, the Tribunal has taken note of Section 2(42C) and held
that the assessee entered into a memorandum dated 25th October, 2007
followed by an addendum to the memorandum for sale of some of the assets
of the chemical unit at a pre-determined sale price for selling some of the
assets belonging to the chemical unit at Haldia. Furthermore, the Tribunal
found from the memorandum as well as the addendum that the individual
assets were determined and fixed at a pre-determined and agreed value and
such price has been received by the assessee by different account payee
cheques during the previous year relevant to the assessment year 2009-10.
Further, on perusal of the balance-sheet, the Tribunal found that on the
date of transfer apart from the assets which were sold and transferred, the
said chemical unit had several other assets which were never sold nor
transferred to the purchaser. Furthermore, the Tribunal took note of the
crucial fact that none of the liabilities were transferred to the purchaser and
the same continued to be a liability of the assessee and to be discharged
and were discharged by the assessee.
Therefore, the Tribunal in our view, rightly held that the sale cannot
be regarded as a slump sale. The Tribunal took note of the decision of this
Court in the case of Kwality Ice Cream (India) Ltd. versus CIT reported at
(2011)336 ITR 100 in which it was held that though the sale of the
undertaking was for a lump sum consideration, Section 50 of the Act in
respect of depreciable assets will override all other provisions and for
depreciable assets, the value has to be determined in accordance with the
principles of block of assets, read with Section 43(6) of the Act. There are
other decisions which were also noticed and referred to by the Tribunal.
Thus, we find that the Tribunal has not committed any error of fact calling
for an interference by this Court.
Learned Standing Counsel for the appellant revenue placed reliance
on the decision of the Hon'ble Supreme Court reported in AIR 1976 SC 163
(Afsar Shaikh and Another Versus Soleman Bibi and Others). This decision
has been pressed into service for the proposition regarding the scope of the
power of the High Court under Section 100 of the CPC and as to how the
High Court shall proceed while exercising such power. The learned Standing
Counsel would submit that if the Tribunal has not determined the issue of
fact properly or it has determined the issue wrongly by reason of any
omission or error or defect then this Court in an appeal under Section 260A
of the Act would be entitled to interfere.
In the preceding paragraphs we have pointed out the factual position
which has been taken note by the Tribunal. We find that there is no
erroneous approach by the Tribunal nor can it be said that the Tribunal has
not determined the issue of fact nor can it be said that the issue has been
determined wrongly by reason of any illegality or omission or error for us to
interfere under Section 260A of the Act.
It is pointed out by Mr. J.P. Khaitan, learned Senior Counsel
appearing for the respondent assessee that the Tribunal referred to a
decision of Tribunal of Kolkata Bench in the case of DCIT versus Tongani
Tea Co. Ltd. in ITA No.1233/Kol/2008 for assessment year 2000-1 dated
6th November, 2015. It is submitted that the revenue carried the matter by
way of an appeal before this Court in ITA No. 203 of 2016, which was
dismissed by judgment and order dated 29th June, 2018.
Thus, for the above reasons, we find no merit in this appeal and
accordingly the appeal is dismissed and the substantial questions of law are
answered against the revenue.
With the dismissal of the appeal, the connected application is also
dismissed.
(T.S. SIVAGNANAM, J.)
(HIRANMAY BHATTACHARYYA, J.)
SN/D.Ghosh
AR(CR)
