| The Tax Publishers2020 TaxPub(DT) 3281 (Mum-Trib) INCOME TAX ACT, 1961
Sections 170 & 32(1), 5th proviso
Assessee by way of business transfer agreement having purchased an undertaking under slump sale succeeded transferee-company. Accordinlgy, provisions of section 170 were clearly applicable and, therefore, 5th proviso to section 32 was also applicable for computation of depreciation on assets taken over from transferor-company.
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Depreciation - Applicability of 5th proviso to section 32(1) - Assets acquired under slump sale - Assessee pleading no succession to have taken place within meaning of section 170
Assessee-company entered into an Agreement for Transfer of a Business (BTA) on 28-9-2013 with Clariant Chemicals (India) (P) Ltd. for purchase of an undertaking under slump sale scheme for consideration of Rs. 2,09,15,00,000. As a result as per BTA, assessee acquired various assets, goodwill, etc., from the transferor company. The assets so acquired were shown as addition in block of assets of the company. Consequent to acquisition of business, assessee got aggregate of fair value of the assets belonging to each block ascertained. Such aggregate of fair value of assets belonging to each block was taken as cost of acquisition of those assets and was accordingly added to W.D.V. of that block of assets. AO held that purchases amounted to succession and section 170(1) was applicable. Accordingly, AO applied fifth proviso to section 32(1). Assesee submitted that it was not a case of succession within meaning of section 170(1). Held: Assessee by way of business transfer agreement had purchased an undertaking under slump sale and thus, it succeeded transferee company. Accordinlgy, provisions of section 170 were clearly applicable. Therefore, 5th proviso to section 32 was also applicable for computation of depreciation on assets taken over from transferor-company. However, balancing figure between value of slump sale and value of WDV of assets taken over would qualify as goodwill, eligible for consequent depreciation.
REFERRED : CIT v. K.H. Chambers (1965) 55 ITR 674 (SC) : 1965 TaxPub(DT) 221 (SC), Triune Energy Services (P) Ltd. v. Dy.CIT (2016) 65 Taxmann.com 288 (Del) : 2016 TaxPub(DT) 628 (Del-HC) and Areva T & D India Ltd. v. Dy. CIT and The CIT--II v. Jai Parabolic Spring Ltd. 2012 TaxPub(DT) 2033 (Del-HC).
FAVOUR : Partly in assessee's favour.
A.Y. : 2014-15
IN THE ITAT, MUMBAI BENCH
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