Page 81 - DHC Budget Book 2021-22 Final
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7.2 Widening of the scope of the term ‘slump sale’ [Sec. 2(42C)] [w.r.e.f AY 2021-22]
Existing provisions of Sec. 50B provides for special mechanism for computation of capital gains in case of slump sale. For the purposes of Sec. 50B, slump sale u/s defined in Sec. 2(42C) as transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities.
It is proposed to amend Sec. 2(42C) to widen the scope of the term ‘slump sale’ to include transfer of undertaking by any means in place of transfer as a result of sale.
Further, a new Explanation 3 is proposed to be inserted to provide that the word ‘transfer’ shall have the same meaning as assigned to it in Sec. 2(47).
Comments
The proposed amendment seeks to nullify the decision of the Hon’ble Bombay High Court in CIT –vs.- Bharat Bijlee Ltd [2014] 46 taxmann.
Considering the number of litigations arising in the past, a need has arisen to reform the system of assessment or reassessment of income escaping assessment and the assessment of search related cases.
Finance Bill proposes to introduce a completely new procedure for assessment of such cases which shall be based on information available with the department u/s 285BA of the Act (statement of financial transaction or reportable account) and various information available from other law enforcement agencies.
Hitherto, Provisions of Sec 147(1) provided that AO must have a ‘reason to belief’ before initiating any re-assessment proceedings. Further, in case if assessment proceedings u/s 143(3) has been completed in any case, then re-assessment proceedings cannot be initiated beyond four years unless such escapement is on account
of failure on the part of the assessee. However, the aforesaid conditions under the proposed substituted section has been dispensed with.
com 257 (Bom) and of the Hon’ble Madras
High Court in the case of Areva T & D India Ltd. –vs.- CIT [2020] 428 ITR 1 (Mad) wherein the High Courts have taken a view that transfer of business in lieu of issuance of shares by the transferee company as consideration would amount to ‘exchange’ and not to a ‘sale’ and accordingly, cannot be considered a ‘slump sale’ under the Act. Now, in view of the proposed amendment, even transfer of an undertaking
for a consideration other than monetary consideration would be covered within the ambit of slump sale.
Since, the scope of the term ‘transfer’ as defined in Sec. 2(47) is very wide and inclusive in
nature, implications u/s 50B may arise in cases, among others, where there is an exchange, relinquishment or extinguishment of rights in
an undertaking for a lump sum consideration in addition to sale transactions already covered by the existing provisions.
As per the newly substituted provisions of Sec. 147, notice u/s 148 can be issued by AO with the prior approval of specified authority only if there is any information available with him/her, which suggests that income has escaped assessment for the relevant assessment year.
Explanation 1 & 2 to newly inserted Sec. 148A lays down the information that can be the basis of initiating reassessment proceedings :
any information flagged in case of an assessee as per risk management strategy formulated by the Board
any final objection raised by the Comptroller & Auditor General of India.
In case of search u/s 132 or u/s 132A, survey u/s 133A or requisition cases initiated or conducted, on or after 1st April, 2021 after prior approval of PCIT, it shall be deemed that the AO has information which suggests that the income chargeable to tax has escaped assessment for the immediately three assessment years.
7.3
Amendment for Income escaping assessment and Search assessment [Sec. 147, Sec 148, Sec 148A, Sec 149, Sec 151, Sec 153A & Sec 153C] [w.e.f. 01-04-2021]
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Others Direct Tax 79
