COMMISSIONER OF INCOME TAX AND THE JOINT COMMISSIONER OF INCOME TAX (ASST), SPECIAL RANGE-3 Vs. AGROSYNTH CHEMICALS

JUDGEMENT

(1.) The Revenue has come up in this appeal, challenging the correctness of the order passed by the Commissioner of Income Tax (Appeals), which has been affirmed by the Income Tax Appellate Tribunal, Bangalore Bench, in ITA. No. 31/Bang/2001 dated 28th December 2004.

(2.) The assessee is in the status of a firm. For the assessment year 1995-96, the return was filed on 31st October 1995, declaring an income of Rs. 22,55,710/-. The return was processed under Section 143(1)(a) of the Act. During the course of assessment, it was noticed that a sum of Rs. 1,26,97,540/- had been accrued to the assessee towards the obligations performed which had been credited to the Partners' Current Account. Therefore, there was an order to re-open the assessment. Accordingly, notice was issued.

(3.) The Revenue found that the assessee had transferred its undertaking to M/s. Agrosynth Chemicals Private Limited for a sum Of Rs. 1,50,00,000 and the actual value of the assets sold was only Rs.23,02,460/-. Applying the provisions of Section 41(2) of the Act, the order of assessment was passed. Being aggrieved by the same, the assessee filed an appeal stating that the provisions of Section 41(2) do not apply to the facts of the case as the sale was an outright sale, as a going concern, with all the assets and liabilities. Therefore, it requested the Commissioner to allow the appeal. The Commissioner, after examining the agreement entered into between the assessee and M/s. Agrosynth Chemicals Private Limited, came to the conclusion that it is a slump sale. Accordingly, held that the capital gains are not attracted.