CICB-Chemicon P. Ltd. vs Commissioner of Income Tax and Others

N. Kumar, J.—The Revenue has preferred these two appeals against the common order passed by the Tribunal affirming the findings recorded by the first appellate authority that the sale was a slump sale and, therefore, computation of capital gains should be on that basis. These two appeals are admitted for considering the following substantial question of law:

"Whether the appellate authorities were correct in holding that the consideration amount of Rs. 2.2 crores received by the assessee from M/s. Praxair Carbondioxide Pvt. Ltd., was a consideration received for a slump sale of a going concern for a slump price and cannot be brought to tax under section 50 of the Act as held by the Assessing Officer especially when the assessee continued to own some of company assets?"

The assessee is engaged in the business of manufacturing, sales and distribution of pure carbondioxide (CO2) liquid and storage systems. The assessee had transferred a part of business as a going concern to M/s. Praxair Carbondioxide Pvt. Ltd. and the consideration received was not offered to tax. Notice under section 148 was issued to the assessee on April 8, 2002, after recording the reasons for reopening. In response to the said notice, the assessee furnished the details as called for. Thereafter, the assessing authority found that the assessee has not sold all the assets. Some buildings, machinery, office equipment, computers and vehicles have not been sold by the assessee and some cylinders have also been retained by the assessee even after the transfer of CO2 business. Therefore, the assessing authority was of the view that the entire assets forming part of the business are not sold. The nomenclature used in the agreement with M/s. Praxair Carbondioxide Pvt. Ltd. does not make the sale, a slump sale. In the case of slump sale, all assets have to be transferred, which is not the case here in the assessee''s case. Therefore, the authorities proceeded to levy tax. Aggrieved by the said order, the assessee preferred an appeal to the Commissioner of Income-tax (Appeals-I), Bangalore.

The appellate authority, after referring to various judgments and also sale which took place in the case of sister concern and the orders passed in respect of the said assessment years, held that the facts in the present case are identical. But in the case of the sister concern, M/s. CICB Chemicon Pvt. Ltd., the Tribunal has issued a direction to consider the liability and the capital gains, on the basis of that, it is a case of slump sale and the assessing authority was directed to follow the directions contained in various judgments, as considered by the Tribunal. Therefore, following those judgments in this case also it was held that, it was a case of slump sale. Aggrieved by the said order, the Revenue has preferred an appeal before the Tribunal. The Tribunal, on re-appreciation of the entire materials on record, held that the instant case is covered by the decision of the Tribunal in the case of CICB and Mahalsa, in which case also all the assets and liabilities were not transferred. Still the Tribunal in its order in the case of Mahalsa Gases and Chemicals Pvt. Ltd., has held that the sale is a slump sale. Reliance was placed on the decisions of the apex court in the cases of Commissioner of Income Tax (Central), Calcutta Vs. Mugneeram Bangur and Co. (Land Department), and also the decision of the jurisdictional High Court in the case of Syndicate Bank Ltd. Vs. Additional Commissioner of Income Tax, . Therefore, it affirmed the findings of the first appellate court. It is against the said order of the Tribunal, the appeals are filed. From the aforesaid facts, it is clear that two appellate courts on consideration of the entire material on record have concurrently held that the sale is a slump sale and while coming to the said conclusion, they have relied on the orders passed by the Tribunal in connection with the sister concern of the assessee. They have also followed the judgment of the apex court as well as this court. Under these circumstances, we do not see any merit in these appeals. Accordingly, the substantial questions of law framed in these cases are also answered in favour of the assessee and against the Revenue. The assessee has also preferred cross-objections to the appeals. This court in the case of Smt Jyothi Kumari No. 568, 10th Cross. Buddha Marga, Siddartha Layout, II Stage, Mysore Vs. Asst. Commissioner of Income Tax (INV) - Circle-2 No. 55/1. Shilpashree Vidhyaranya Complex, Vishveshwaranagar, Mysore-570 008, has held that an appeal being a creature of a statute, a cross-objection in terms of rule 22 being barred with an appeal, until and unless there is express provision on settling the legal provisions one cannot hold that the implication or a right of cross-objection should be read into either the provisions of Order 42 read with sections 100 and 108 of the Code of Civil Procedure or under the provisions of sub-section (7) of section 260A of the Income-tax Act. Therefore, it is held that the cross-objection is not maintainable under section 260A of the Income-tax Act. Following the said judgment these cross objections are dismissed as not maintainable.

Hence, we pass the following order:

Both the appeals and cross-objections are dismissed. Consequently, all the pending applications are dismissed.