The Income Tax Appellate Tribunal (ITAT), Cochin bench has held that the sale of hotel premises would amount to a slump sale which is liable to the taxed under Section 50B of the Income Tax Act.
`Slump sale’ is a sale of an undertaking as a going concern.
The assessee, in the instant case, had sold land and building for a total consideration of Rs.20 crore. It was contended on behalf of the assessee that it is not a slump sale going by the definition of section 2(42C) of the Act for the reason that there is no liability transferred to the purchaser as on the date of sale.
Rejecting the claim of the assessee, the Tribunal bench noted that as per the sale deed, the assets of the assessee, including the license for boarding, lodging, bar etc. were also transferred to the purchaser along with land and building as a going concern.
“The entire business was sold for a total consideration of Rs.20 crore consisting of land and building which includes furniture, equipment, kitchen equipment, telephone instruments, television, computer, etc. The building and other amenities are valued as a whole, without assigning the value to any item of the assets. As mentioned earlier, consequent to the sale of the hotel premises, the business of assessee was closed down. Therefore, it is clear from the sale deed executed, the intention of the parties was to sell the hotel business as a going concern and the same is nothing but a slump sale,” the bench said.
Diving deeply into the facts of the case, the Tribunal held that “the business of the assessee of the running of the hotel has been sold as such by selling the hotel premises to a private limited company, who is also in the business of running of the hotel. Therefore, we have no hesitation to hold that the provisions of section 50B of the I.T. Act have application to the facts of the case.”
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