Law:

Section:

Section 50B of the Income-tax Act, 1961 - Capital gains - Slump sale, cost of acquisition in case of - Assessment year 1994-95 - Under an agreement entered into between assessee-company and 'I' Ltd., assessee transferred its IMFL division together with assets and liabilities of said division as a running business/going concern on as is where is basis to 'I' Ltd. - Said transfer involved not only fixed assets such as land, building and machinery but other component elements such as benefit of existing contracts, licenses and approvals and intangibles including intellectual property and transfer of work force of undertaking or business - Tribunal held that it was case of slump sale and hence profit arising on transfer IMFL division would not be chargeable to capital gains tax - Whether since subject-matter of transfer was business undertaking of IMFL Unit as a whole and business of said undertaking consisted not only of tangible items but other intangibles such as rights in intellectual property, licenses and manpower, in such a situation itemized earmarking would not be possible - Held, yes - Whether transaction involved a slump sale - Held, yes - Whether, therefore, Tribunal's order was justified - Held, yes [In favour of assessee] FACTS The assessee-company was inter alia engaged in the business of manufacture and sale of liquor. An agreement was entered into by the assessee with 'I' Ltd. by which the assessee agreed to sell to 'I' Ltd. its IMFL division together with assets and liabilities of said division as a running business/going concern on as is where is basis. The Assessing Officer noted that the assessee having transferred its IMFL division as a going concern/running business, it was stated in the notes forming part of the computation of income that the written down value of the assets transferred was shown as a deduction for the purpose of computing depreciation from the block of assets. The assessee stated that the excess of the cost of IMFL business amounting to Rs. 6.90 crores was not taxable and was not deducted from the respective block of assets. The assessee was called upon to justify this claim in response to which the assessee stated that it…

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