Monday, July 21, 2014

Transfer of division in exchange of shares only couldn’t be held as slump sale; rules HC


a)The assessee had transferred its lift division to T Ltd and the said transfer took place under the Scheme of Arrangement under section 391, read with section 394 of the Companies Act, 1956.

b)The disbursement on transfer of division was made by way of allotment or issue of bonds/preference shares. The Assessing Officer (‘AO’) opined that the transfer of division was a slump sale under section 2(24C) and was taxable in terms of section 50B. c)The order of AO was affirmed by CIT(A). However, it was rejected by the Tribunal. The aggrieved revenue filed the instant appeal.

The High Court held in favour of assessee as under:

1)Section 2(42C) of the Income-tax Act defines slump sale as under: ‘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.

2)Thus, from the bare reading of the definition of slump sale, it is clear that sale must be affected for a lump sum consideration to hold it as slump sale.

3)The Tribunal had rightly held that it was not a case where the consideration was determined and decided by parties in terms of money, rather its disbursement was made by way of allotment of bonds/preference shares. Thus, it was a case of exchange and not a sale. Accordingly, the impugned transaction was not a slump sale and the additions made by the Assessing Officer was not sustainable -CIT VS. BHARAT BIJLEE LTD. [2014] 46 257 (Bombay)