Real estate giant DLF Ltd got relief from the Delhi High Court recently as the Court deleted the addition made by the department on ground of slum sale worth Rs. 1177.50 lacs.
While overruling the plea of the Revenue, Justices S Muralidhar and Prathiba M Singh found that the sale was carried out in the year 1995, i.e prior to introduction of provision imposing capital gains on the consideration received in slump sale.
Coming to the facts of the case, Assessee, DLF Ltd, has been carrying on business of manufacturing electric motors, fans and domestic pumps at its undertaking known as American Universal Division (‘AUD’). Assessee leased out the AUD to DLF Industries Ltd. Which is a 100% subsidiary of the Assessee company for a period of three years, i.e, till May 1995. On expiry of the specified period, AUD was reverted to the Assessee with all its assets and liabilities. In the same year, the assessee transferred AUD to a new Company as a going concern inclusive of all its assets and liabilities as they stood on 31st May 1995 (excluding the land and building) for a sum of Rs. 1177.50 lacs.
AO, while completing assessment, treated the above sum as taxable surplus under the head ‘business income’.
The bench noticed Apex Court decision in PNB Finance v. CIT wherein the Court observed that prior to 1st April, 2000 there were no computation provisions that could be brought to tax as capital gains the consideration received in slump sale.
A similar view was taken by the Delhi High Court in CIT v. Ece Industries also.
Following the above decisions, the bench dismissed the departmental appeal and concluded the matter in favour of the assessee.
Read the full text of the Order below.
