NETMATRIX CROP CARE PRIVATE LIMITED,HYDERABAD vs. DCIT., CIRCLE-5(1), HYDERABAD

ITA 599/HYD/2025Status: DisposedITAT Hyderabad04 July 2025AY 2020-202119 pages

AI SummaryAllowed

Facts

The assessee company made a slump sale of its SEZ manufacturing unit, which included land, and claimed a deduction of Rs. 50 lacs under Section 54EC against the capital gains. The Assessing Officer allowed this deduction in the original assessment under Section 143(3). The Principal Commissioner of Income Tax (Pr. CIT) invoked Section 263 to revise the order, holding it erroneous and prejudicial, arguing that Section 54EC only applies to the transfer of 'land or building or both' and a slump sale involves an entire undertaking, not individual assets.

Held

The Tribunal held that the precondition for Section 54EC deduction is satisfied to the extent the slump sale consideration is linked to the book value of the land or building component. It noted that the ITR-6 form itself provides for claiming Section 54EC deduction against slump sale consideration, implying the AO's original view was plausible. Consequently, the Tribunal found the Pr. CIT was not justified in revising the assessment under Section 263, vacating the Pr. CIT's order and restoring the AO's original order.

Key Issues

Whether the Principal Commissioner of Income Tax was justified in invoking Section 263 to revise an assessment order that allowed a Section 54EC deduction on capital gains arising from a slump sale which included land, given the specific conditions of Sections 54EC and 50B of the Income Tax Act.

Sections Cited

263, 143(3), 144B, 54EC, 50B, 2(42C)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad

Pronounced: 04.07.2025

करदाता का प्रतततितित्व/ Assessee : Shri Jaydeep, C.A. Represented by राजस्व का प्रतततितित्व/ Department : Shri B. Bala Krishna, CIT-DR Represented by सुिवाई समाप्त होिे की ततति/ Date of : 30.06.2025 Conclusion of Hearing घोर्णध की तधरीख/Date of Pronouncement : 04.07.2025 O R D E R प्रनत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M.

The present appeal filed by the assessee company is directed against the order passed by the Principal Commissioner of Income Tax (for short "Pr. CIT"), Hyderabad – 4, under Section 263 of the 2 Netmatrix Crop Care Pvt. Ltd. Income Tax Act, 1961 (for short “the Act”), dated 10.02.2025, which in turn arises from the order passed by the A.O under Sec.143(3) r.w.s. 144B of the Act, dated 12.09.2022 for A.Y. 2020- 21. The assessee company has assailed the impugned order on the following grounds of appeal before us:

3 Netmatrix Crop Care Pvt. Ltd.

Succinctly stated, the assessee company, which is engaged in the business of manufacturing of crop protection chemicals/ insecticides, had filed its return of income for A.Y. 202-21 on 04.11.2020, declaring an income of Rs. 75,19,06,190/-. The return of income was initially processed as such under Section 143(1)(a) of the Act. Thereafter, the A.O., vide his order passed under Section 143(3) r.w.s. 144B of the Act dated 12.09.2022, assessed the income of the assessee company at Rs. 75,19,06,190/-, i.e. as was originally returned.

The Pr. CIT, after the culmination of the assessment called for the assessment record of the assessee company. On a perusal of the record, it was inter alia observed by him that the assessee company had during the subject year carried out the slump sale of its manufacturing unit no.2 at the Special Economic Zone (SEZ), Atchutapuram, District: Visakhapatnam. The Pr. CIT observed that the assessee company had, against the profits/gains arising from the aforesaid slump sale of its unit, raised a claim for deduction under Section 54EC of ₹ 50 lacs. The Pr. CIT held a firm conviction that the assessee company was not entitled to claim 4 Netmatrix Crop Care Pvt. Ltd. deduction u/s 54EC of the Act, as it was available only in the case of the sale of a long-term capital asset [“being land or building or both”]. Elaborating further on his conviction, the Pr. CIT was of the view that the assessee company had sold its ongoing business concern, being the SEZ unit, as a slump sale attracting the provisions of Section 50B of the Act, therefore, it was not entitled to claim deduction u/s 54EC of the Act. The Pr. CIT, based on his aforesaid observation, called upon the assessee company to put forth its explanation regarding its claim of deduction u/s 54EC of the Act. In reply, it was the claim of the assessee company that as it had sold the SEZ unit as a slump sale, which included land of ₹ 7,00,10,000/-, on which sale consideration tax was deducted at source, therefore, its claim for deduction u/s 54EC of the Act was in order. It was further stated by the assessee company that there was no restriction under the provisions of Section 54EC or Section 50B of the Act for raising a claim under Section 54EC against the sale consideration received under slump sale. Apart from that, the assessee company to fortify its aforesaid contention, had drawn support from its return of income filed in ITR-6, wherein at Column No. 2(d), there was a provision for raising a claim for 5 Netmatrix Crop Care Pvt. Ltd. deduction under Section 54EC against the full value of consideration received from the slump sale.