CICB CHEMICON PVT LTD vs. COMMISSIONER OF INCOME TAX

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ITA.CROB/14/2009HC KarnatakaKAHC01076695200922 July 2014Bench: B.MANOHAR,N.KUMAR9 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the appeals filed by the Revenue lacked merit. Both the Commissioner of Income Tax (Appeals) and the ITAT had concurrently held that the sale was a slump sale after considering the entire material on record. These authorities relied on prior decisions concerning the assessee's sister concern, as well as judgments from the Apex Court (CIT Vs. Mugneeram Bangur & Co.) and the jurisdictional High Court (Syndicate Bank Ltd.). Consequently, the substantial questions of law framed were answered in favour of the assessee and against the Revenue. The High Court also dismissed the cross-objections filed by the assessee as not maintainable, following its own precedent in Jyoti Kumari Vs. Assistant Commissioner of Income Tax, which held that cross-objections are not permissible under Section 260-A of the Income Tax Act, 1961, as it is a creature of statute without an express provision for such objections. The operative direction was to dismiss both the appeals and the cross-objections.

What were the facts?

The assessee, CICB-CHEMICON PVT.LTD. (formerly COASTAL GASAS & CHEMICALS PVT. LTD.), transferred a part of its business of manufacturing, sales, and distribution of Pure Carbondioxide (CO2) Liquid and Storage Systems to M/s. Praxair Carbondioxide Pvt. Ltd. for a consideration of Rs. 2.2 Crores. The Assessing Officer re-opened the assessment under Section 148, noting that not all assets were transferred, including buildings, machinery, office equipment, computers, vehicles, and some cylinders. The Assessing Officer held that this was not a slump sale and sought to tax the consideration under Section 50. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal (ITAT) both held that the sale was a slump sale, relying on previous decisions concerning the assessee's sister concern and judgments from the Apex Court and the jurisdictional High Court. The Revenue has appealed these decisions.

What were the issues?

1. Whether the Appellate Authorities were correct in holding that the consideration of Rs. 2.2 Crores received by the assessee was for a slump sale of a going concern at a slump price, and not taxable under Section 50 of the Income Tax Act, 1961, especially when the assessee retained some company assets? (Question of law and fact, concerning Section 50). Assessee's Contention: The assessee argued that the sale was a slump sale, and the appellate authorities correctly determined this. The judgment does not explicitly record the assessee's arguments before the High Court, but their position is implied by their cross-objections and the outcome of the appeals. Revenue's Contention: The Revenue contended that the sale was not a slump sale because not all assets forming part of the business were transferred. They argued that the nomenclature used in the agreement did not make it a slump sale, and therefore, the consideration should be taxed as held by the Assessing Officer. The Revenue relied on the Assessing Officer's finding that the entire assets were not sold.

Which sections of the Income-tax Act were involved?

Section 50,Section 148,Section 260-A

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF KARNATAKA, BANGALORE

DATED THIS THE 22ND DAY OF JULY, 2014

PRESENT

THE HON'BLE Mr. JUSTICE N. KUMAR

AND

THE HON'BLE Mr. JUSTICE B. MANOHAR

ITA CROB No. 14/2009 C/W. ITA NO.136/2008 AND ITA CROB No. 15/2009 C/W. ITA NO.137/2008

IN ITA CROB No. 14/2009:

BETWEEN:

CICB-CHEMICON PVT.LTD., (FORMERLY COASTAL GASAS & CHEMICALS PVT. LTD.), NO.239, MAHALAKSHMIPURAM LAYOUT, BAGALORE – 560 086.

….CROSS-OBJECTOR

(BY SRI. C.R. PANDIT, ADVOCATE)

AND:

1.

COMMISSIONER OF INCOME TAX,

C.R. BUILDING, QUEEN’S ROAD, BAGALORE.

2.

ASSISTAT COMMISSIONER OF

INCOME –TAX, CIRCLE- 11(2), C.R. BUILDING, QUEEN’S ROAD, BANGALORE.

….RESPONDENTS

THIS ITA-CROB IS FILED UNDER ORDER 41 RULE 1 R/W ORDER 41 RULE 22 OF CPC PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND TO ALLOW THE CROSS- OBJECTION ARISING OUT OF THE ORDER OF THE TRIBUNAL BEARING ITA NO.453/BANG/2006 DATED 19.09.2007 IN THE INTEREST OF JUSTICE AND EQUITY.

IN ITA NO.136/2008:

BETWEEN:

1.

THE COMMISSIONER OF INCOME TAX,

C.R. BUILDING, QUEEN’S ROAD, BAGALORE.

2.

THE ASSISTAT COMMISSIONER OF

INCOME –TAX, CIRCLE- 11(2), C.R. BUILDING, QUEEN’S ROAD, BANGALORE.

(SRI. K.V. ARAVIND, ADVOCATE)

….APPELLANTS AND:

M/S. CICB-CHEMICON PVT.LTD., (FORMERLY KNOWN AS COASTAL GASAS & CHEMICON PVT. LTD.), NO.239, MAHALAKSHMI LAYOUT, BAGALORE – 560 086.

….RESPONDENT

(BY SRI. C.R. PANDIT, ADVOCATE)

THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND TO ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY

3 THE ITAT BANALORE IN ITA NO.453/BNG/2006 DATED 19.09.2007 AND TO CONFIRM THE ORDERS OF THE APPELLATE COMMISSIONER AND ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-11(2), BANGALORE.

IN ITA CROB No. 15/2009: ` BETWEEN:

CICB-CHEMICON PVT.LTD., (FORMERLY CHEMICON PVT. LTD.), NO.239, MAHALAKSHMIPURAM LAYOUT, BAGALORE – 560 086.

….CROSS-OBJECTOR

(BY SRI. C.R. PANDIT, ADVOCATE)

AND:

1.

THE COMMISSIONER OF INCOME TAX,

C.R. BUILDING, QUEEN’S ROAD, BAGALORE.

2.

THE ASSISTANT COMMISSIONER OF

INCOME –TAX, CIRCLE- 11(2), C.R. BUILDING, QUEEN’S ROAD, BANGALORE.

….RESPONDENTS

THIS ITA-CROB IS FILED UNDER ORDER 41 RULE 1 R/W ORDER 41 RULE 22 OF CPC PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND TO ALLOW THE CROSS- OBJECTION ARISING OUT OF THE ORDER OF THE TRIBUNAL BEARING ITA NO.454/BANG/2006 DATED 19.09.2007 IN THE INTEREST OF JUSTICE AND EQUITY.

4 IN ITA NO.137/2008:

BETWEEN:

1.

COMMISSIONER OF INCOME TAX,

C.R. BUILDING, QUEEN’S ROAD, BAGALORE.

2.

ASSISTANT COMMISSIONER OF

INCOME –TAX, CIRCLE- 11(2), C.R. BUILDING, QUEEN’S ROAD, BANGALORE.

(SRI. K.V. ARAVIND, ADVOCATE)

….APPELLANTS AND:

M/S. CICB-CHEMICON PVT.LTD., (FORMERLY KNOWN AS CHEMICON PVT. LTD.), NO.239, MAHALAKSHMI LAYOUT, BAGALORE – 560 086.

….RESPONDENT

(BY SRI. C.R. PANDIT, ADVOCATE)

THIS ITA FILED UNDER SECTION 260-A OF I.T. ACT, 1961 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND TO ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT BANALORE IN ITA NO.454/BNG/2006 DATED 19.09.2007 AND TO CONFIRM THE ORDERS OF THE APPELLATE COMMISSIONER AND ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-11(2), BANGALORE.

THE ABOVE ITA-CROBs AND ITAs ARE COMING ON FOR ORDERS AND FINAL HEARING RESPECTIVELY THIS DAY, N. KUMAR, J., DELIVERED THE FOLLOWING:

J U D G M E N T

The revenue has preferred these two appeals against the common order passed by the Tribunal affirming the findings recorded by the First Appellate Authority that the sale was a slump sale and therefore, computation of capital gain should be on that basis.

2.

These two appeals are admitted for considering the following substantial question of law:-

“Whether the Appellate Authorities were correct in holding that the consideration amount of Rs.2.2 Crores received by the assessee from M/s. Praxair Carbondioxide Pvt. Ltd., was a consideration received for a slump sale of a going concern for a slump price and cannot be brought to tax under Section 50 of the Act as held by the Assessing Officer especially when the assessee continued to own some of company assets ?”

3.

The assessee is engaged in the business of manufacturing, sales and distribution of Pure Carbondioxide (CO2) Liquid and Storage Systems. The assessee had transferred a part of business as a going concern to M/s. Praxair Carbondioxide Pvt. Ltd,. and the

6 consideration received was not offered to tax. Notice under Section 148 was issued to the assessee on 08.04.2002 after recording the reasons for re-opening. In response to the said notice, the assessee furnished the details as called for. Thereafter, the assessing authority found that the assessee has not sold all the assets. Some buildings, machinery, office equipments, computers and vehicles have not been sold by the assessee and some cylinders have also been retained by the assessee even after the transfer of CO2 business. Therefore, the assessing authority was of the view that the entire assets forming part of the business are not sold. The nomenclature used in the agreement with M/s. Praxair Carbondioxide Pvt. Ltd., does not make the sale, a slump sale. In the case of slump sale, all assets have to be transferred, which is not the case here in the assessee’s case. Therefore, the authorities proceeded to levy tax. Aggrieved by the said order, the assessee preferred appeal to the Commissioner of Income Tax (Appeals-I), Bangalore.

7 4. The Appellate Authority after referring to various judgments and also sale which took place in the case of Sister Concern and the orders passed in respect of the said assessment years, held that the facts in the present case are identical. But in the case of the Sister concern M/s. CICB Chemicon Pvt. Ltd,. the Tribunal has issued a direction to consider the liability and the capital gains, on the basis of that, it is a case of slump sale and the assessing authority was directed to follow the directions contained in various judgments, as considered by the Tribunal. Therefore, following those judgments in this case also it was held that, it was a case of slump sale. Aggrieved by the said order, the Revenue has preferred appeal before the Tribunal. The Tribunal, on re-appreciation of the entire materials on record, held that the instant case is covered by the decision of the Tribunal in the case of CICB and Mahalsa case, in which case also all the assets and liabilities were not transferred. Still the Tribunal in its order in the case of Mahalsa Gases and Chemicals Pvt. Ltd., has held that the sale is a slump sale. Reliance was placed on the decisions of the Apex Court in the cases of

8 CIT Vs. Mugneeram Bangur & Co. [57 ITR 299] and also the decision of the Jurisdictional High Court in the case of Syndicate Bank Ltd. [155 ITR 681]. Therefore, it affirmed the findings of the First Appellate Court. It is against the said order of the Tribunal, the appeals are filed. From the aforesaid facts, it is clear that two Appellate courts on consideration of the entire material on record have concurrently held that the sale is a slump sale and while coming to the said conclusion, they have relied on the orders passed by the Tribunal in connection with the sister concern of the assessee. They have also followed the judgment of the Apex Court as well as this Court. Under these circumstances, we do not see any merit in these appeals. Accordingly, the substantial questions of law framed in these cases are also answered in favour of the assessee and against the revenue.

5.

The assessee has also preferred cross-objections to the appeals. This court in the case of Jyoti Kumari Vs. Asistant Commissioner of Income Tax [(2012) 344 ITR 60 (Kar)] has held that an appeal being a creature of a

9 statute, a cross-objection in terms of Rule 22 being barred with an appeal, until and unless there is express provision on settling the legal provisions one cannot hold that the implication or a right of cross-objection should be read into either the provisions of Order 42 r/w. Sections 100 and 108 of CPC or under the provisions of sub-section (7) of Section 260A of the Income Tax Act. Therefore, it is held that the cross-objection is not maintainable under Section 260-A of the Income Tax Act. Following the said judgment these cross-objections are dismissed as not maintainable. Hence, we pass the following order:

Both the appeals and cross-objections are dismissed. Consequently, all the pending applications are dismissed.

Sd/- JUDGE

Sd/- JUDGE

KGR*

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