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[2017]4 S.C.R. 94 .

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THE coMMISSIONER OF INCOME TAX, AHMEDABAD .· ·.

 . EQUINQX SOLUTJQN PVT LTD ..

(Civil Appeal No. 4399 of2007)

APRIL rs,2017

. [R. K. AGRAWAL AND ABHAYMANOHAR SAPRE, JJ.]

li1com~ •Tax Act, ]961 '- ss. 50(2), • 48(2) -Applicability of-· .

Sale of entire runnbig btisiness 1vith assets ai1d liabilities in one go if amounts toshimp sale ofa ''long ter/11 capita/asset".- Responcfent C · as$essee sold its e1itire .run11ing businesS in one go aiidclaimed

deduction ulsA8(2) t1; eating such sale as .slump sale in the 11alure of a long term capita/gain~ Asessing Officer.rejected the exe11iptio11 clainied holding that the case of the assessee wils covered uls. 50(2) as it was in the nature of short term capital. gain Appeal by

respondei1t before. CIT (Appeal),· allowed holding. that. the undertaking itself was a capital asset, owned by respondent for six years, being in the nature of long .term capital asset and the same having been so/din one go as a running concern cannot be tent1ed . as short tern1 capital gain~ Appeals byRevimue, dis1i1issed by !TAT ·

and High Court - On appeal, held: The case of the respondent does not fall within the four corners of s.50 (2) - Provisions of s, 50 {2) would apply to a case wheie the asfossee tranfers one or more block of assets, which he was Using in running ofhis business

- However, when the. entire running b11iness with all assets and liabilities are sold in. one go,. as .d0i1e by theresponcfent;. i(is a. slump sale of lJ "longterm capital asset" and not of. "short term capital asset" ..- It was, therefore, required to be taxed accordiilgly

- No fault found in the reasoning and.the cimclusion arrived atby ·

CIT (Appeal) whjch was rightly upheld by the Tribuiial a114 High Couh .. . . . . .·

• Dismissing the appeal, the Court•

HELD: L The case of the respondnt (assessee) does not fall within the four comers of Section 50 (2) of the Income ACt. Section 50 (2) applies to a case where any block of assets are. transferred .by the assessee but lVhere th~ entire. runqing business with assets arid .liabilities is. sol~.· by the assessee. in one,

.· .. THECOM~ISSIONEROF INCOME TAX, AHMED ABAD v .•.• ··· .•..

EQUINOX SOLUTION PVT. LTD.· . . . . . ' . . - :- . . ··. . . . . : . . -·. ,. . . -. go, such sale, cannot be considered as• "shotMerlit w1pitai assets". ·.in other words, the. provisions. of Section SO (2) of the Act would apply to a case where the asessee transfers oue or 1.nore block of assets, whlch he was using in running of his bsiness. Such is not the case here because in this case; the assessee sold the entire business as a running concern, [Para lll(97~E~FJ . . .

Commissioner of Income Tax,· Gujarat v. Artex ·'Manufacturing Co. 1997 (6)SCC 437 CIT : [1997] 1 Suppl. SCR 608 - relied on. .

P,.emierAutomobilesLt{l. V. lnqome Tax Officer & A1ir.

)64 ITR 193 (Bombay) approved; c ·

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• .. [1997l lSllppl.'SCR 608

264 I1'R 193 (Bombay) . approved

. Pa1•a 13

Para 14.

.··. CiVIL APPELLATE JURISDICTION: Civil AppeaINo. 4399 D Qf2007.

FromJhe Judgment and Order dated 29.07.2003 of the High Cotirt of Gujarat at Ahmedabad in Income TaxAppeal No. 59 of2003.

. . . . . . . . K. Radhakrislma, Sr. Adv., Rupesh Kumar, Ms~ Sln¥eta Garg{fbr · .. Mrs; Anil Katiyar), Advs. for the Appellant. . : .

- - . . ' . . . . Inde~ Paul Bansal, Vivek Bansal, Haresh Raichura, Ms. Saroj.

Raichura, Advs. for the Respondents: . .

.. , . . ·. Tlw Judginent of the Cow1 was delivered by .

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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~ apreciate the issues it\volved in this appeai. . .

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3. The respondent-assessee was engaged in. the business of .

manufacturing sheet metal components out of CRPA & OP sheds at H

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 rsponden~ sold their entire-running business in one go with alf its assets and liabilities on 31.12.1990 to a

CqnptinYc~Ued 'fAiriftexApplfai1ce~Ltd't{ or.Rs.58,53 ,682/-., , '.

: • . 1. A. The respondent filed. thei1:in\)ome tax.r.etuntfo1' theAsessment 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 ppi.fiecf if!. Secion 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, leaned counsel for th, e resppndent- . .. . assessee. . . . ' ..

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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 wth aH assets and liabilities having been sold in one go by the

respondent-assesse, 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].

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14. In Premier Automobiles Ltd. vs. Inori1e 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 dismised.

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