THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE- 1(1), MYSURU vs. M/S. BHORUKA ALUMINIUM LIMITED, MYSURU

ITA 2551/BANG/2019Status: DisposedITAT Bangalore16 August 2022AY 2014-1518 pages
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What did the Tribunal hold?

The Tribunal held that Section 50B of the Income Tax Act mandates that capital gains on a slump sale are to be computed in the year of transfer, irrespective of deferred payments. The provisions of Section 50B override the general principles of receipt or accrual for determining the taxability of such gains.

What were the facts?

The assessee company sold its aluminum extrusion business via a slump sale for a total consideration of Rs. 110 Crores. A portion of this consideration was deferred, contingent on achieving sales targets and resolving legal disputes. The Assessing Officer sought to tax the entire Rs. 110 Crores in the year of transfer, while the assessee offered only the amount received initially.

What were the issues?

Whether deferred consideration in a slump sale is taxable in the year of transfer as per Section 50B, or only upon receipt/accrual as per general capital gains provisions.

Which sections of the Income-tax Act were involved?

Section 50B,Section 45,Section 2(42C),Section 48,Section 49

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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE

Before: SHRI N. V. VASUDEVAN & SHRI LAXMI PRASAD SAHU

For Appellant: Shri. S. Ramasubramanian, CA
For Respondent: Dr. Manjunath Karkihalli, CIT(DR)(ITAT), Bengaluru
Hearing: 08.08.2022Pronounced: 16.08.2022

Per N. V. Vasudevan, Vice President :

This is an appeal filed by the Revenue against order dated 30.09.2019 of CIT(A), Mysuru, relating to Assessment Year 2014-15. 2. The only issue that arises for consideration in this appeal is as to whether the CIT(A) was justified in holding that a sum of Rs.10 Crores cannot be brought to tax as capital gain under section 50B of the Income Tax Act, 1961 (hereinafter called ‘the Act’) on slump sale of one it’s undertaking by the assessee under business transfer agreement dated 01.03.2013, in AY 2014-15. As per section 2(42C) of the Act, ‘slump sale’ means the transfer of one or more undertakings as a result of

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