The Commissioner of Income Tax, Ahmedabad v. Equinqx Solution Pvt Ltd.

. : . - - . . ' . . . . · Inde~ Paul Bansal, Vivek Bansal, Haresh Raichura, Ms. Saroj. Raichura, Advs. for the Respondents: . . .. , . . ·. Tlw Judginent of the Cow1 was delivered by . . . ' . . . A:BIIAYMANOHAR SAP RE, J. I. This appeal is filed by the . F Revenue(lncome TaxDepartinent) against the order dated 29.07.2003 .. passed l:Jy the High Court of Gujarat atAhmedabadin LT.A. No. 59 of ·. · 2003 whereby the High Court dismissed the Revenue;s appeal on the . ground that the appeal does not involve any substantial question of law under Se(;tion 260-A of the Income Tax Act; 1961 (hereinafter referred to as "the Act'l . · · 2. We herein setoutthe facts, hi brief; t~ ap~reciate the issues it\volved in this appeai. . . . ··• 3. The respondent-assessee was engaged· in. the business of . manufacturing sheet metal components out of CRPA & OP sheds at · H 96 o· ; , 1 SUPREME COURT REPORTS,. [2017) 4 S.C.R. , ( AhJll,adabad. The respondent decided to sell their entire running business in OJle go. With this airu in view, tbe r~sponden~ sold their entire-running business in one go with alf its assets and liabilities on 31.12.1990 to a Cq~nptinYc~Ued 'fAiriftexApplfai1ce~Ltd't{ or.Rs.58,53 ,682/-., , '. : · • . 1. A. The respondent filed. thei1:in\)ome tax.r.etuntfo1' theAs~essment Year 1991-1.99'2'.In'tlie returii, the respondent clain1ed deductioi1 under Section 48(2) qftJie Act as it sto6<l the1lby,'freaiingthe sale tc> be in the nature qf'.'sJ,m»p,sale;' oftl;te goi\1g c.o,ncern beiqg in th~ nature of long term capital'°gain in the hands of the' assessee. ' ' ' ' ' ' ' 5: The Assessi1ig'Officer by his order dated 04.03.1994 did 1iot' accept the contention of the assessee in claiming deduction. According to the Assessing Officer, tlfo case of the assessee was covered under Sectim1 ~O (2) of the Act ,because it was in the nature of short tem1 cajlital gain as ~p~pi.fiecf if!. Sec~ion 50.(2} of the Act and hence djd not fall under Section. 48 (2) .qf the Act as claimed by the assessee. The Assessing Officer accordingly reworked the claim of the deduction treating the same to befalling under Section 50 (2) of the Act and framed the assessment order. · 6. The assessee, felt aggrieved, filed appeal before the CIT (appeals). By order dated 06.10.1995, the Commissioner of Appeals allowed the assessee's appeal in so far as it related to the issue of deduction. He held that when it is an undisputed fact that the assessee has sold their entire running business in one go with its assets and liabilities at a slump price and, therefore, the provisions of Section 50 (2) of the , Act could not be applied to such sale. He held that it was not a case of sale of any individual or one block asset which may attract the provisions ofSection 50 (2) of the Act. He then examined the case of the assessee in the context of definition of"long term capital gain" and "short term capital asset" and held that since the undertaking itself is a capital asset owned by the assessee nearly for six years and being in the nature of long term capital asset a1id the same having been sold in one go as a running concern, i(cannot be termed a "short terms capital gain" so as to attract the provisions of Section 50 (2) of the Act as was held by the Assessing Officer. The CIT (appeals) accordingly allowed the assessee to claim the deduction as was claimed by them before the Assessing Officer. 7. The Revenue, felt aggrieved of the order of the CIT (appeal), filed appeal before the Income Tax Appellate Tribunal. By order dated THE COMMISSIONER OF INCOME TAX v. EQUINOX 97 SOLUTION PVT. LTD. [ABHAY MANOHAR SAPRE, J.] 27.06.2002, the Tribunal concurred' with the reas011ing and the conclusion A arrived at by the Commissioner of Appeal and accordingly dismissed the Revenue's appeal. 8. The Revenue, felt aggrieved of the order of the Tribunal, carried the matter to the High Court in further appeal under Section 260-A of the Act. By impugned order, the High Court dismissed the appeal holding· B. that the appeal does not involve any substantial question of law within the meaning of Section 260-A of the Act. It is against this order the Revenue felt aggrieved and carried the matter to th is Court in appeal by way of special leave. · . 9. Heard Mr. K. Radhakrishnan, learned senior counsel for the C appellant and Mr. Inder Paul ~ansal, lean~ed counsel for th,e resppndent-. .. . assessee. . ~ . . ' .. ' . . . 10. Having heard the learned Counsel for the parties and on perusal of the record of the case, no fault can be found in the reasoning and th.e . D · · conclusion arrivedat by the CIT(appeal) in his order which, in o,lirview,. was rightly, upheld by the Tribunal and then by the High Court calling no interference by this Court in this appeal. 11. In our considered opinion, the.case of the respondent (assessee) does not fall within the four corners of Section 50 (2) of the Act. Section 50 (2) applies to a case where any block of assets are transferred by the assessee but where the entire running business with assets and liabilities · is sold bythe assessee in one go, such sale, in our view, cannot be considered as "short-term capital assets". In other words, the provisions of Section 50 (2) of the Act would apply to a case where the assessee transfers one or more block Of assets, which he was using in running of his business. Such is not the case here because in this case, the assessee sold the entire business as a running concern. · 12. As rightly noticed by the CI'~ (appeal)thatthe entire running business w~th aH assets and liabilities having been sold in one go by the respondent-assess~e, it was a slump sale of a "long-term capital asset". It was, therefore, required· to be taxed accordingly. 1_3. Our view finds suppmt with the law laid down by this Court in Commissioner of Income Tax, Gujarat vs. Artcx Manufacturing Co. [1997(6}SCC 437 CIT]. E, 98 SUPREME COl]RT REPORTS •. (2017] 4 S.C.R. 14. In Premier Automobiles Ltd. vs. In~ori1e Tax Officer& Anr.; 264 ITR193 ·(Bombay) also, the Division Bench of the Bornbay High Court examined this question in detail on soriiewhat similar facts · · and has taken the same view. The Lean1ed Judge S.H Kapadia ~ (its His Lordship then was as Judge of the. Bombay High .Coutt and later became CJI) speakingfor.the Bench aptly explained the legal position to · . Which We concur as it correctly summarized .the fogal position applicable. · · to such facts. . . 15, Learned Counseifor the appeijitnt (Revenue) was notable to · . cite any decision taking a contraiy view ncir was he able to point out any ·err.or in the decisions cited at the Bar by the assesse's counsel referred supra. . 16. In the light of foregoing discussion,·we find no merit in the appeal.whiCh fails and is accordingly dismissed .. · Divya Pandey . Appeal dismi~sed. . ' . '·.•.