Section 50B read with sections 2(19), 2(42C) and 50 – Windmills of an assessee, engaged in the business of aqua culture, export of frozen shrimp, sale of hatchery seed and wind-power generation, along with all the assets and liabilities, constitute an ‘undertaking’ for the purpose of slump sale

20. [117
taxmann.com 440 (Vish.)(Trib.)] ACIT vs. Devi Sea
Foods Ltd. ITA No.
497/Vish./2019 A.Y.: 2013-2014 Date of order: 19^th
June, 2020

Section 50B read
with sections 2(19), 2(42C) and 50 – Windmills of an assessee, engaged in the
business of aqua culture, export of frozen shrimp, sale of hatchery seed and
wind-power generation, along with all the assets and liabilities, constitute an
‘undertaking’ for the purpose of slump sale

FACTS

The assessee sold
three windmills, declared the gains arising on such sale as a slump sale and
computed the long-term capital gains as per section 50B. The assessee had not
furnished separate financial statements for the windmill business activity;
however, it was claiming deduction u/s 80-IA on the income from the windmill as
a separate business which was allowed by the A.O. from A.Y. 2009-10 onwards.
But at the time of the sale, the A.O. denied the applicability of the
provisions related to slump sale by stating that the windmills did not
constitute an ‘undertaking’ and charged the income as short-term capital gains.

Aggrieved, the
assessee preferred an appeal to the CIT(A) who held that each windmill is a
unit of the undertaking and is covered by the definition of slump sale. He also
noted that though the assessee had shown windmills as part of the block of
assets, depreciation claim could not be a factor to deny benefit of slump sale.
He directed the A.O. to compute long-term capital gains u/s 50B.

Aggrieved, the
Revenue filed an appeal to the Tribunal.

HELD

The Tribunal observed that the windmills were part of the assessee’s
business, for which the assessee was claiming deduction since A.Y. 2009-10. The
A.O. had not made any adverse remarks in respect of deduction claimed u/s
80-IA. Though separate books of accounts had not been maintained, the assessee
had demonstrated separate ledger account belonging to the windmill operation,
and income from such activity was independently ascertainable. Further, there
is no requirement in the Act that all assets sold under slump sale should be
together. The Tribunal held that the real test for considering any sale of an asset
as non-slump sale would be any independent asset or liability not forming part
of the business operations. It held that the windmills satisfied all conditions
for being considered as an ‘undertaking’ and the provisions of slump sale would
be applicable.