Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
आदेश / O R D E R महावीर ससुंह, न्याययक सदस्य/ PER MAHAVIR SINGH, JM:
This appeal by assessee is arising out of order of the Commissioner of Income Tax (Appeals)]-21, Mumbai [in short CIT(A)], in Appeals No. CIT(A)-21/DCIT-13(1)(1)/IT-214/2015- 16 vide dated 21.09.2016. The Assessment was framed by the Dy. Commissioner of Income Tax, Mumbai (in short DCIT/ ITO/ AO) for the A.Y. 2012-13 vide order dated 31.03.2015 under 2 | P a g e 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in treating the amount received on transfer of business by the assessee which qualify as “Slum Sale” as business income and enhancing the same to a sum of ₹ 3,85,39,349/- as against assessed by the AO at ₹ 3,75,00,000/-. For this, assessee has raised the following grounds: - “1.1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) [CIT (Appeal)] erred in confirming the assessment made by the learned Assessing Officer as alleged Business Income at ₹3,75,00,000/- on the ground that transfer of business by the appellant does not qualify as “Slum Sale” and enhancing the same to ₹3,85,39,349/-. 1.2 The learned CIT (Appeals) erred in enhancing the assessment by a sum of ₹10,39,349/- by re-working the Net Worth of the business transferred by the appellant disregarding the actual 3 | P a g e transaction. The learned CIT(Appeals) failed to appreciate the explanation offered and submissions made by the appellant. 1.3 It is submitted that the assessment of alleged Business Income made by the learned Assessing Officer and confirmed by the learned CIT (Appeals) is unwarranted, unjustified and unreasonable as well as contrary to the relevant provisions of the Act. The appellant had correctly disclosed the income arising on transfer of business as Long-term Capital Gains at ₹87,99,886/- in line with the provisions of the Section 50-B of the Act.”
3. Briefly stated facts are that the assessee is engaged in the business of operations, maintenance, industrial and commercial cleaning, business support services, gardening and landscaping, integrity facility management and allied services. During the year under consideration, the assessee entered into an agreement dated 21.07.2011, wherein business was transferred to assessee’s sister concern Sodexo Facilities Management Services India P Ltd. for a sale consideration of ₹ 3.75 crores. The AO noted that the assessee has reduced its profit for the year for an amount of ₹ 1,76,37,688/- being net profit earned
4 | P a g e from the transfer of business. As per the valuation report of independent valuer, the business of the assessee has been valued at ₹ 3,02,36,793/- only. The AO has not accepted the claim of assessee in regard to Slum Sale on account of transfer of business for the following reasons: - (i) The assessee has write off of bad debt immediately prior to the transfer of this business. (ii) The assessee’s claim is that assets and liabilities has been transferred at their respective value but in order to term transaction as slum sale, no specific value can be assigned to any assets or liabilities and once specific value are assigned to any assets and liabilities then the said transaction cannot be recorded as slum sale. (iii) The assessee’s mutually agreed and based on representation of the assessee, the realizable value of debtors at the value of ₹8,41,79,891/-, the said consensus for the takeover would have been agreed upon and this does not amount to slum sale. (iv) The wright off of bad debts in the books of accounts immediately before take over confirms agreed value of debtors and value
5 | P a g e 30.06.2011. The AO also noted from the agreement entered into by the assessee for the transfer of business that there are employees, whose liability to the date of transfer shall be borne by the seller and thus it can be concluded that the transferee shall not take over the liability in respect of employees and this is the case where it can be concluded that it is not slum sale. (v) As per sub-clause (b) of clause 2.5.4 of the agreement of the liabilities to the date of transfer shall be borne by the seller and the liabilities of any employee upto the date of 30.06.2011 for the purpose of takeover has been arrived at ₹Nil.” This clearly proves that the business of the assessee has not been sold by the assessee as on where basis. Apart from the above, the value of business arrived while an independent valuer at ₹3,02,36,793/-, the actual transaction has been effected at a much higher value of 3.75 crores and this is clearly means that the value of goodwill arrived in the said takeover is ₹72,63,207/-. Even, as per the provisions of section 2(42C) of the Act defines Slum Sale of ₹3.75 crores received by the assessee company on transfer of business is treated as business 6 | P a g e income. Aggrieved, against the above findings, assessee preferred the appeal before CIT(A).
4. The CIT(A) after considering the submissions of the assessee confirmed the action of the AO vide Para 4.15 to 4.20 as under: - “4.15 I have considered the submissions of the appellant carefully. The appellant is part of Sodexo Group. During the year it has transferred its assets and liabilities of business of management of housekeeping services to sister concern Sodexo Facilities Management Services Pvt. Ltd. It is claimed that this is 'slump sale' as covered by the definition u/s 2(42C) of the IT Act. The assessing officer has not accepted the same. One of the key reasons given by the assessing officer was the bad debts write-off of Rs 76,57,171/- just before the transfer w.e.f. 30.06.2011. As per the appellant this is routine exercise as mandated under Generally Accepted Accounting and Auditing Principles. What is noted is that this further write off is in just 3 months after the year ended 31-3-2011 when already another Rs 76,12,685 was written off. The 7 | P a g e 0.3% of turnover and in FY 2010-11 was 1.6% which shot up to 8.2% for the 3month period prior to transfer. There is no explanation for what significant event occurred in these 3 months to claim such write off not considered in March 2011. Thus, there is merit in the argument of the assessing officer that this exercise is with intention of stating the debts at their realizable value with a special focus and not a routine exercise. 4.16. It is further noted that a valuation exercise was carried out as per instructions of buyer as per which the value of the business transferred was estimated as Rs 3,02,36,793/- Now the valuer arrived at this amount by taking an average of Net Asset Value (NAV) and Profit Earning Capacity Value (PECV). While PECV is independent of the itemized asset value, the same is not true for NAV. The value as per PECV was Rs. 4,06,11,274/- whereas the NAV was Rs 198,62,312/- The NAV was determined by considering each item of asset and liability. Had the amount of consideration
8 | P a g e Rs 4,06,11,274/- it could perhaps be said that consideration is not based on the individual asset value. However, by reducing the consideration to Rs 375,00,000/- on the basis of individual asset value considered for NAV, one of the conditions for treating the transaction as 'slump sale 'is violated. 4.17. In the case of CIT vs. Artex Mfg. Co. vs CIT (1997) 227 ITR 260 (SC) the Hon'ble Apex Court overturned the decision of the Hon'ble High Court that had held the transfer to be a 'slump sale'. The Apex Court held that Held It was the admitted case of the assessee before the ITO that the plant, machinery and deadstock had been revalued by a valuer at the time of the agreement for sale and the amount of Rs. 11,50,400 was fixed after taking into account the value of the plant, machinery and deadstock at Rs. 15,87,296 as per valuation by the valuer. This shows
9 | P a g e 31st March, 1967 the value of the plant, machinery and deadstock that were transferred was Rs. 15,87,296. it is no doubt true that in the agreement there is no reference to the value of the plant, machinery and deadstock. But on the basis of the information that was furnished by the assessee before the ITO it became evident that the amount of Rs. 21,50,400 had been arrived at by taking into consideration the value of the plant, machinery and deadstock as assessed by the valuer at Rs. 25,87,296. This is not a case in which it cannot be said that the price attributed to the items transferred is not indicated and, hence s. 42(2) cannot be applied. It is, therefore, not possible to agree with the view of the High Court that s. 41(2) is not applicable. But the liability under s. 41(2) is limited to the amount of surplus to the extent of difference between the written 10 | P a g e Artex M/b. Co, vs. CIT (1981) 21 CTR (Guj) 31: (1981) 131 ITR 559 (Gui): TC 29R.221 set aside on this point set aside on this point. Conclusion In case of transfer of business as a going concern with all assets and liabilities for a slump price, there being evidence that plant, machinery and deadstock were got revalued by a valuer though not separately shown in the agreement of transfer, S. 41(2) will apply. 4.17. It is further noted from the Notes to Accounts no. 3 in the audited accounts of Sodexo Facilities Management Services India Pvt. Ltd. for FY 2011-12 that it has executed an agency agreement with the appellant company dated July 22, 2011 to operate the business transferred. 4.18. A perusal of the details called for and filed shows that the value of transferred assets as per books is ₹12,91,28,055/- and liabilities as per 11 | P a g e books is ₹10,92,65,743/- giving the value as net worth of ₹198,62,312/- against sales consideration of ₹375,00,000/- and therefore the profit on transfer as per books is reflected as ₹176,37,688/- Replacing the book value of net fixed assets of ₹36,45,112/- by WDV of fixed assets as per Income Tax of Rs 124,82,914/-, the net worth is computed at ₹287,00,114/- and gain is computed at ₹87,99,886/- which was offered as long term capital gain u/s 8OB. A perusal of the balance sheet drawn as on 30.6.2011 before and after transfer of the appellant company shows that certain assets and liabilities have not been transferred. On assets side advance tax and TDS of Rs 1,17,34,624/- and on the liability side amount due to Sodexo Food Solutions India Pvt. Ltd. of ₹2,97,39,461/- contingencies of ₹32,29,260/- has not been transferred. It is further seen that the Business Transfer Agreement dated 21.07.2011 has listed the assets and liabilities transferred as per Annex A and C. Since the liability not transferred has resulted in computation of higher value of 12 | P a g e 251(2) to put forth its facts and arguments since this would have the effect of enhancement of income. 4.19. In its submission the Ld. AR submitted that UNISOL (appellant company) was a 100% subsidiary of Sodexo Food Solutions India Pvt. Ltd. (SFS). The liability reflected in books of UNISOL to SFS represents current account transactions between the two entities. These transactions are in the nature of funding by the Holding Company to its subsidiary from time to time. These were therefore not transferred as part of business transfer. A reference was also made to a letter issued by the Sodexo Facilities Management Services India Pvt. Ltd. to its valuer AMJ & Co. Chartered Accountants (the Ld. AR representing this appeal) wherein they were instructed to not consider contingent liabilities and loans from SF5 which was not being transferred. Hence the NAV was determined by excluding these items. If 13 | P a g e these were to be transferred the net consideration would have been higher. 4.20. I have considered the submission. This clearly again shows an admission on the part of the appellant that the consideration is not based on the value of the business undertaking as a whole but rather based on individual assets and liabilities being transferred. The Business Transfer Agreement dated 21.07.2011 refers to the assets transferred in para 1.1.3. listed in Schedule A and liabilities in para 1.1.12 listed as Schedule C. In para 1.1.4. business includes all assets and liabilities other than Excluded items as per Schedule E. This Schedule is NIL. The initial submission did not give the Schedule A and C and hence the same was called. Further, perusal of the Schedule A and C submitted shows that the total value of assets transferred (net of depreciation) is Rs.12,91,28,054/- and liabilities is ₹13,90,05,205/- The list shows that the TOS and advance tax and contingent liabilities are not included in these lists of assets and liabilities transferred. Based on these Schedule A 14 | P a g e C, the net worth to be considered is (-) 9877151/- as per books and which after considering and replacing the net fixed assets with WDV of block of fixed assets will be (-) 10,39,349/- and not Rs 287,00,114/- considered by the appellant, in essence the difference is on account of the liability to SFS which was to be transferred as per the Business Transfer Agreement but has not been transferred and to that extent further amount should have been received as consideration or alternatively, the net worth has to be taken considering the transfer of this liability. It doesn't help that the appellant company and the buyer are group concerns and the valuer is the AR of the seller /appellant and buyer company who can now issue any extent of clarifications. 4.20. In light of the above facts and discussions, it is held that the business transfer in this case does not qualify as 'slump sale' and Income Is to be assessed as business income. Further, the net worth has to be reduced from the sale consideration as rightly contended by the appellant. However, the net worth is not 15 | P a g e (-) ₹10,39,349/- and the business income to be assessed on this transfer is ₹3,85,39,349/- and not ₹3,75,00,000/- considered by the assessing officer. The income is therefore enhanced by ₹10,39,349/-.”
5. From the above, it is noted that the CIT(A) has also enhanced the sale consideration at ₹10,39,349 as noted above. Aggrieved, assessee preferred the appeal before Tribunal.
We have heard rival contentions and gone through the facts and circumstances of the case. We first noted the facts from the case records including the assessment order and the order of CIT(A). We have also considered the arguments of both the sides. The facts are that Shri Raju R. Shette and the members of Shette family and their associates (Radhekrishna Group) owned four different companies, which is as under: (i) Radhakrishna Hospitality Services Pvt. Ltd (RKHS)- engaged in the business of providing hospitality and catering and allied services in different fields. (ii) RKHS Food and Allied Services Pvt. Ltd. - engaged in the business of providing catering, vending and allied services including hiring of vending machines and selling pre-mix products for vending machines; 16 | P a g e (iii) Skyline Catering Services Pvt. Ltd. - 100% subsidiary of RKHS - engaged in the business of providing catering and allied services; (iv) Unisol Infraservices EM. Ltd. - 100% subsidiary of RKHS - engaged in the business of providing integrated facilities management services.
During the year ended 31.03.2009 the Radhakrishan Group had sold the shares/stake held by them in all the above referred companies to Sodexo group of France. Thus, all the above referred companies became part of Companies of the Sodexo Group with effect from 01.04.2009. Subsequently, name of Radhakrishna Hospitality Services EM Ltd. was changed to Sodexo Food Solutions India Pvt. Ltd. and name of RKHS Food and Allied Services Pvt. Ltd. was changed to Sodexo Food and Allied Services Pvt. Ltd. Sodexo Facilities Management Services Pvt. Ltd. (“FMS”) was the already existing flagship company of Sodexo group which was engaged in the business of catering and allied services and vending and vending solutions (collectively known as Food Services) and integrated facilities management services. During the year ended 31.03.2012, the Sodexo Group had undertaken re-structuring and consolidation of various business activities carried on by above referred companies. The re-structuring involved as under: - (i) FMS acquired business of management of Housekeeping Services from Unisol Infraservices Pvt. Ltd; 17 | P a g e (ii) FMS acquired the business of food services and Vending Solutions from RKHS Food and Allied Services Pvt. Ltd.; (iii) FMS transferred part of the Food Service Business to Sodexo Food Solutions India Pvt. Ltd.
Similarly, it was decided by FMS to amalgamate other two companies of Sodexo group namely Sodexo India Pvt. Ltd. and Sodexo Project Management Services Pvt. Ltd. with FMS and Scheme of arrangement was filed with the Hon'ble Bombay High Court in July, 2012. (Refer Note No. “3” to the Financial Statements for the year ended 31.03.2012 in case of FMS, enclosed herewith – Assessee Paper book Page No.205). Subsequently, as per the order of the Hon’ble Bombay High Court dated 1807.2013, Unisol Infraservices Pvt. Ltd. and Skyline Caterers Pvt. Ltd. got amalgamated with Sodexo Food Solutions India Pvt. Ltd. from the appointed date i.e. 01.04.2012. These facts were narrated by the Ld Counsel for the assessee but not disputed by Ld SR DR.
We have noted that the assessee company claimed before us that it had transferred its business of management of housekeeping service to Sodexo Facilities Management Services Pvt. Ltd. (SFMS) on 'slump sale' basis. The total consideration received on such stump sale amounted to Rs.375,00,000/- resulting in gain of Rs.1,76,37,688/- on net assets transferred of Rs.1,98,62,312/-. However, since the net worth of the 18 | P a g e Rs.2,87,00,114/-, Long Term Capital Gain was computed at Rs.87,99,886/- which was offered as income. We also noted that the Ld Counsel meeting the objection of the AO, regarding creation of provision for doubtful debts and write off, it was stated that generally accepted accounting and auditing principles (GAAP) in India requires that as on each balance sheet date the debtors remaining outstanding are reviewed and provision made in respect of debtors considered doubtful of recovery. The debts considered irrecoverable are written off as bad debts and excess provision, if any, is written back in the accounts. As per group restructuring process, the assessee company had decided to sell its business of housekeeping service, facilities management service, with all the assets goodwill, rights, obligations, liabilities, entitlements and benefit related to the said business to SFMS. The business was transferred in terms of Business Transfer Agreement dated 21.07.2011 as a 'going concern' on 'slump sale' basis & as is where is basis. The balance sheet as on 30.06.2011 was prepared. The position of the provisions for bad debts in the preceding years was stated to be as follows: - Sr. No. Financial Year Turnover Provision for Bad debts doubtful debts written off 1. 2007-08 39,00,14,040 15,63,206 12,41,074 2. 2008-09 50,66,39,514 83,39,463 32,67,501 3. 2009-10 48,36,34,426 1,09,64,154 37,21,166 4. 2010-11 45,69,37,729 79,26,928 76,12,685 5. 2010-12 9,17,35,272 (1,12,78,680) 76,57,172 Thus the provisions made for bad debts and its write off immediately prior to business transfer at Rs.52,41,123/- was 19 | P a g e 30.06.2011.
As regards the comment relating to employee’s liability, it was stated that as per clause 2.5.4 of the business transfer agreement, all the existing employees together with the respective liabilities have been transferred by the seller to the buyer. It is not stated in that clause that liabilities of the claim of the value due to employees have been arrived at Rs. Nil. The liabilities relating to employees i.e. (employee payables) aggregating to Rs.6,15,34,427/- was transferred to the buyer. Thus the liabilities were not transferred at Nil value.
We have gone through the provision of section 2(42C) of the Act, which was referred to by the assessee, which is as follows: - “(42C) slump sale means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales. Explanation 1. - For the purposes of this clause ‘undertaking' shall have the meaning assigned to it in Explanation I to clause (19AA).
20 | P a g e Explanation 2. - For the removal of doubts, it is hereby declared that the determination of the value of an asset or liability for the sole purpose of payment of stamp duty, registration fees or other similar taxes or fees shall not be regarded as assignment of values to individual assets or liabilities;)”
We noted from the above provisions the business transfer agreement entered into by assessee is as regards to the transfer of business for a lump sum consideration of ₹3.75 crores and the said business transfer agreement does not contain any breakup / working / basis of such consideration. Even, the balance sheet as on 30.06.2011 is prepared to ascertain the assets and liabilities to be transferred under the said agreement but it in no way can be relied on to conclude that specific values have been assigned to individual assets and liabilities and hence, it is not the case of slum sale. The fact that consideration is fixed at ₹3.75 crores as against net worth of the business of the assessee at ₹ 2.87 cores, itself establishes that it is not based on any individual value of assets and liabilities. We noted from the audit report filed in form No. 3CEA containing relevant details and working of net worth of the business, it is clear that the book value appearing in the balance sheet has wrongly been concluded by the lower authorities including the AO as well as by CIT(A) that the value has been assigned for assets and liabilities being transferred. The list of 21 | P a g e assets and liabilities being transferred is attached to the said agreement and perusal of the same clearly reveals that no particular has been assigned to any of the items therein for arriving at a consideration. Even the details regarding provision for doubtful debts and bad debts written off, as noted above, we find that the above referred transactions of bad debts had nothing to do with slump sale of the business of UNISOL. Even, after write back of the excess provision i.e. provision for doubtful debts is carried forward in balance sheet as on 30.06.2011 i.e. immediately prior to business transfer at an amount of ₹ 52,41,123/-. Even, clause 2.5.4 and 2.5.6 in regard to employees and liabilities clarifies that this is a business transfer and perusal of the same clearly reveals that various liabilities related employees payable aggregating to ₹6,15,34,427/- are being transferred to the buyers and further the procedure for effective transfer of all liabilities existing in the books of accounts of UNISOL has clearly been laid down. The relevant clause 2.5.4 and 2.5.6 are reproduced herein below: - “2.5.4 (a) From the Effective Date, the Buyer shall take on its own payroll all the Employees on terms and conditions that are in aggregate no less favourable than their existing employment terms. The services of the permanent employees shall be continuous in accordance with the applicable law and shall not be interrupted 22 | P a g e Business to the Buyer as contemplated in this Agreement. (b) The Seller shall be liable to pay to the Employees all amounts due and payable to them up to the Effective Date, whether pursuant to any agreement between Seller and the Employees or pursuant to the terms of employment or statutory provisions by way of salary, bonus, compensation for unused paid leave, settlement of any employment- related claims (including claims arising our of Employees as a direct result of the Transaction contemplated under this Agreement), save and except where Seller has made sufficient provision for the some in its accounts and has transferred the same as part of the transfer of the Business to the Buyer. 2.5.6 Liabilities. All rents, rent charges, rates, insurance premium including premium towards Employee policies, gas, water, electricity and telephone charges, royalties, taxes 23 | P a g e Business up to the Effective Date shall be to the account of, and shall be to the account of, and shall be borne and payable by the Buyer. This liabilities shall be transferred by the seller to the Buyer by executing such documents, letters, contracts etc. as may be necessary with the creditors of Seller, concerned party, Government Authorities and / or as agreed between the parties for effectively transferring the Liabilities to the Buyer.”
13. Now, we will go through the case law refer by assessee of Hon’ble Supreme Court in the case of CIT vs. Mahindra and Mahindra Ltd. (2018) 404 ITR 1 (SC), wherein exactly identical facts are discussed and the relevant facts are as under: - “(a) For the proper appreciation of the issue in the case at hand, we deem it apposite to mention the gist of the facts. The appellant herein is the Department of Income Tax (for brevity 'the Revenue), on the other hand, respondent herein is Mahindra & Mahindra Ltd. (for brevity 'the 24 | P a g e Respondent') - a company registered under the Companies Act, 1956. (b) The Respondent, way back, decided to expand its jeep product line by including FC-150 and FC-170 models. For this purpose, on 18.06.1964, it entered into an agreement with Kaiser Jeep Corporation (for short 'the KJC') based in America wherein KJC agreed to sell the dies, welding equipments and die models to the assessee. The final price of the tooling and other equipments was agreed at $6,50,000/- including cost, insurance and freight (CIF). Meanwhile, the Respondent took all the requisite approvals from the concerned Government Departments. The said toolings and other equipments were supplied by the Kaiser Jeep Corporation through its subsidiary Kaiser Jeep International Corporation (KJIC). (c) However, for the procurement of the said toolings and other equipments, the KJC agreed to provide loan to the Respondent at the rate of 6% interest repayable after 10 years in installments.
25 | P a g e For this purpose, the Respondent addressed a letter dated 07.06.1965 to the Reserve Bank of India (RBI) for the approval of the said loan agreement. The RBI and the concerned Ministry approved the said loan agreement. (d) Later on, it was informed to the Respondent that the American Motor Corporation (AMC) had taken over the KJC and also agreed to waive the principal amount of loan advanced by the KJC to the Respondent and to cancel the promissory notes as and when they got matured. The same was communicated to the Respondent vide letter dated 17.02.1976. (e) On 30.06.1976 the Respondent filed its return and shown Rs. 57,74,064/- as cessation of its liability towards the American Motor Corporation. After perusal of the return, the Income Tax Officer (ITO) concluded that with the waiver of the loan amount, the credit represented income and not a liability. Accordingly, the ITO, vide order dated 03.09.1979, held that the sum of Rs 57,74,064/- was 26 | P a g e Section 28 of the Income Tax Act, 1961 (for brevity 'the IT Act'). (f) Being dissatisfied, the Respondent preferred an appeal before the Commissioner of Income Tax (Appeals) being No. CIT(A) V/CCIV/IT/261/79-80. After perusal of the matter, learned CIT (Appeals), vide order dated 23.03.1981, dismissed the appeal and upheld the order of the ITO with certain modifications. (g) Being aggrieved, the Respondent as well as the Revenue preferred appeals being Nos. 2007 (Bomb.) of 1981 and 2132 of 1981 respectively before the Tribunal. The Tribunal, vide order dated 16.08.1982, set aside the order passed by learned CIT (Appeals) and decided the case in favour of the Respondent. (h) Being aggrieved, the Revenue filed a Reference before the High Court at Bombay. In that Reference, three applications were filed, one by the assessee and rest two by the Revenue. Vide impugned common judgment and 27 | P a g e 29.01.2003, the High Court confirmed certain findings of the Tribunal in favour of the Respondent. (i) Hence, these instant appeals have been filed by the Revenue.”
On the above facts, Hon’ble Supreme Court in regard to applicability to section 28(iv) of the Act, for assessing the business income of the assessee held that the assessee should have taken any benefit or perquisite arising out of the business shall in the form of benefit or perquisite other than in the shape of money is not satisfied in the present case. Hon’ble Supreme court finally held as under: - “12. The first issue is the applicability of Section 28 (iv) of the IT Act in the present case. Before moving further, we deem it apposite to reproduce the relevant provision herein below: — '28. Profits and gains of business or profession. — The following income shall be chargeable to income-tax under the head "Profits and gains of business profession”, — (iv) the value of any benefit or perquisite, whether convertible into
On a plain reading of Section 28 (iv) of the IT Act, prima facie, it appears that for the applicability of the said provision, the income which can be taxed shall arise from the business or profession. Also, in order to invoke the provision of Section 28 (iv) of the IT Act, the benefit which is received has to be in some other form rather than in the shape of money. In the present case, it is a matter of record that the amount of Rs. 57,74,064/- is having received as cash receipt due to the waiver of loan. Therefore, the very first condition of Section 28 (iv) of the IT Act which says any benefit or perquisite arising from the business shall be in the form of benefit or perquisite other than in the shape of money, is not satisfied in the present case. Hence, in our view, in no circumstances, it can be said that the amount of Rs 57,74,064/- can be taxed under the provisions of Section 28 (iv) of the IT Act.”