A.Y. : 2005-06. Dated : 12-5-2009
During the relevant assessment year, the assessee sold its
rubber estate situated in a rural area and outside the purview of any
municipal limit, along with standing trees and other equipment as a going
concern. While computing its book profit for the purpose of S. 115JB, the
Assessing Officer had added the profit arising to the assessee on the sale of
the said rubber estate as forming part of the book profit. The CIT(A) upheld
the order of the Assessing Officer. The CIT(A) also enhanced the assessment by
holding that the surplus arising to the assessee on sale of its rubber estate
was taxable as capital gain u/s.50B, as the rubber estate owned by the
assessee was sold as a going concern, which showed that the sale was a slump
sale of an undertaking in its entirety.
The Tribunal held in favour of the assessee on both
matters.
In the matter of S. 115JB :
(1) Since the rubber estate was in a rural area and it
was outside the purview of any municipal limit and following the judgment of
the Supreme Court in the case of CIT v. All India Tea & Trading Co. Ltd.,
(1996) 219 ITR 544/85 Taxman 391 and of the Kerala High Court in the case of
CIT v. Alanickal Co. Ltd., (1986) 158 ITR 630/28 Taxman 504, it would
have to be held that the profit arising to the assessee on transfer of the
said rubber estate amounted to agricultural income as provided u/s.2(1A).
(2) It is a settled law that the profits arising on
transfer of agricultural land partake the character of agriculture income
and agricultural income is not to be included in the total income as
provided in S. 10(1). S. 115JB provides that any income listed u/s.10, other
than listed in clause (38), shall be reduced from the book profit, meaning
that agricultural income shall not form part of book profit for the purpose
of S. 115JB.
In the matter of S. 50B :
(1) The assessee-company was engaged in different types
of businesses.
(2) In its agricultural division, the assessee was having
a number of estates growing tea, rubber, cocoa, cardamom, etc. In the case
of rubber itself, the assessee was having about 12 different estates. During
the relevant previous year, the assessee had sold one of its rubber estates.
The estate had been sold on the basis of a detailed agreement executed
between the vendor and the vendee. The total consideration stipulated for
the transfer of the estate had been split over different assets, both
movable and immovable, enumerated in different Schedules and Annexures.
(3) The items sold did not include liabilities. The sale
agreement did not include investments and deposits. All the investments,
deposits, receivables, stock and such other current assets in the form of
financial and other assets remained with the assessee-company along with the
liabilities. Only those assets which were enumerated in the Schedules and
Annexures were sold to the vendee. Therefore, the instant case was one of
split sale and not a case of slump sale.
(4) The assets sold by the assessee had been listed out
in different Schedules and Annexures. The consideration had been
specifically assigned to the sale of immovable property by way of rubber
estate. Separate consideration had been assigned to the sale of movable
properties, including vehicles and other properties. Therefore, it was not a
case of slump sale for a lump sum amount of consideration.
(5) The profit arising on sale of agricultural land was
agricultural income in nature and, therefore, the surplus did not come
within the meaning of capital assets and by the nature of the income, it
would not come under the provisions of S. 50B. Therefore, the CIT(A) had
erred in directing the Assessing Officer to levy long-term capital gains
u/s.50B on the surplus arising to the assessee on sale of its estate.
