INCOME TAX ACT, 1961

Section 50B

Capital gains - Applicability of section 50B - Sale of three windmills claimed as separate undertaking - No maintenance of separate books of account and sale consdieration determined separately on account of sales made to different entitled

Assessee has sold three windmills and declared this transaction as slump sale of 3 windmills and offered long-term capital gains on slump sale as per section 50B. In doing so, assessee treated these 3 windmills as a single unit and as a separate 'undertaking'. On verification of sale agreements, AO noticed that 2 were sold to M/s L, for a sale consideration of Rs. 18,50,87,332. Subsequently, another sale agreement was signed in respect of third wind mill which was sold to M/s C for a sale consideration of Rs. 5,58,85,576. AO considered the meaning of undertaking and slump sale as per statute and found that as per section 2(42C), the slump sale is transfer of one or more undertakings as a result of sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales. AO also considered section 180 of Companies Act, 2013 for the purpose of meaning of undertaking and viewed that assessee-company could not explain as to why assets, i.e., windmills should not be treated as assets of the company, instead of separate undertaking as required under provisions of slump sale. AO further noticed that it had not furnished any balance sheet, profit and loss account for the wind mill business activity. Therefore, AO denied the claim of assessee treating gains of the windmill as long term capital gains under section 50B and treated the same as STCG gains on depreciable assets under section 50.Held: Windmill had been a unit of business of assessee. The assessee had been enjoying deduction under section 80IA from assessment year 2009-10. AO had not made any adverse remarks on claiming of profits under section 80IA being a separate unit of business of assessee. There was no doubt that subjective windmill had been shown as part of fixed assets in the block of assets of assessee for claiming depreciation. However, asset being part of block of assets and depreciation claims were not independent factors to deny benefit under slump sale. The depreciation any way was allowable to such assets: be it they are part of block of assets of assessee company or part of assets of undertaking. Regarding separate books of accounts for the unit, assessee had demonstrated with separate ledger account belonging to the windmill operation. There was no requirement of separate books for claiming relief under section 80IA. The real test for considering any sale of asset as non slump sale would be any independent asset or liability not forming part of business operations. In assessee case AO had not demonstrated that wind mill was an independent asset. Whereas assessee had been considering asset as one of its business unit. Further consideration received for all the 3 windmills was not assigned to any individual assets be it land, windmill or shed. In the absence of such finding, it was not fair to treat the transaction under section. Further, there is no requirement under the Act that assets intended to be sold in slump sale should be together. AO's observation that assets were located in different places had no bearing on the nature of transaction being slump sale. As much each windmill was a unit of undertaking covered under the definition of slump sale. In view of this AO was directed to treat sale of windmill as a 'slump-sale' and to compute capital gains under section 50B(2).

REFERRED : Ajanta Private Limited v. DCIT (2017) 77 taxmann.com 227 (Gujarat-HC) : 2017 TaxPub(DT) 0281 (Guj-HC); CIT v. Abirami Cotton Mills (Private) Limited [1996] 87 taxmann 152 (Andhra Pradesh-HC) : 1996 TaxPub(DT) 0354 (AP-HC); CIT v. Sargam Retails Pvt. Ltd. 2018 TaxPub(DT) 0617 (Pune-Trib)

FAVOUR : In assessee's favour.

A.Y. : 2013-14

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