Page 1

Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION CIVIL APPEAL No.4399 OF 2007

The Commissioner of Income Tax, Ahmedabad             ….Appellant(s)

VERSUS

Equinox Solution Pvt. Ltd.     …Respondent(s)

J U D G M E N T

Abhay Manohar Sapre, J.

1) This  appeal  is  filed  by  the  Revenue  (Income

Tax  Department)  against  the  order  dated

29.07.2003 passed by the High Court of Gujarat at

Ahmedabad in I.T.A.  No.  59 of  2003 whereby the

High Court dismissed the Revenue’s appeal on the

ground  that  the  appeal  does  not  involve  any

substantial question of law under Section 260-A of

the Income Tax Act, 1961 (hereinafter referred to as

“the Act”).

1

Page 2

2) We  herein  set  out  the  facts,  in  brief,  to

appreciate the issues involved in this appeal.

3) The respondent-assessee  was engaged in the

business of manufacturing sheet metal components

out  of  CRPA  &  OP  sheds  at  Ahmadabad.  The

respondent  decided  to  sell  their  entire  running

business  in  one  go.  With  this  aim  in  view,  the

respondent  sold  their  entire  running  business  in

one  go  with  all  its  assets  and  liabilities  on

31.12.1990  to  a  Company  called  "Amtrex

Appliances Ltd" for Rs.58,53,682/-.

4) The respondent filed their  income tax return

for the Assessment Year 1991-1992. In the return,

the respondent claimed deduction under Section 48

(2) of the Act as it stood then by treating the sale to

be in the nature of "slump sale" of the going concern

being in the nature of long term capital gain in the

hands of the assessee.  

2

Page 3

(5) The  Assessing  Officer  by  his  order  dated

04.03.1994  did  not  accept  the  contention  of  the

assessee in claiming deduction.   According to the

Assessing  Officer,  the  case  of  the  assessee  was

covered under Section 50 (2) of the Act because it

was  in  the  nature  of  short  term  capital  gain  as

specified in Section 50 (2) of the Act and hence did

not fall under Section 48 (2) of the Act as claimed by

the  assessee.  The  Assessing  Officer  accordingly

reworked  the  claim  of  the  deduction  treating  the

same to be falling under Section 50 (2) of the Act

and framed the assessment order.

(6) The assessee, felt aggrieved, filed appeal before

the CIT (appeals).  By order dated 06.10.1995, the

Commissioner  of  Appeals  allowed  the  assessee’s

appeal  in  so  far  as  it  related  to  the  issue  of

deduction.  He held that when it is an undisputed

fact that the assessee has sold their entire running

business in one go with its assets and liabilities at a

3

Page 4

slump price and, therefore, the provisions of Section

50 (2) of the Act could not be applied to such sale.

He  held  that  it  was  not  a  case  of  sale  of  any

individual or one block asset which may attract the

provisions  of  Section  50  (2)  of  the  Act.  He  then

examined the case of the assessee in the context of

definition of "long term capital gain" and "short term

capital asset" and held that since the undertaking

itself is a capital asset owned by the assessee nearly

for six years and being in the nature of long term

capital asset and the same having been sold in one

go as a running concerned, it cannot be termed a

“short  terms  capital  gain”  so  as  to  attract  the

provisions of Section 50 (2) of the Act as was held by

the Assessing Officer.  The CIT (appeals) accordingly

allowed the assessee to claim the deduction as was

claimed by them before the Assessing Officer.

7) The Revenue, felt aggrieved of the order of the

CIT  (appeal),  filed  appeal  before  the  Income  Tax

4

Page 5

Appellate Tribunal. By order dated 27.06.2002, the

Tribunal  concurred  with  the  reasoning  and  the

conclusion  arrived  at  by  the  Commissioner  of

Appeal  and  accordingly  dismissed  the  Revenue's

appeal.

8) The Revenue, felt aggrieved of the order of the

Tribunal,  carried the matter  to the High Court in

further appeal under Section 260-A of the Act. By

impugned  order,  the  High  Court  dismissed  the

appeal holding that the appeal does not involve any

substantial  question of law within the meaning of

Section 260-A of the Act. It is against this order the

Revenue felt aggrieved and carried the matter to this

Court in appeal by way of special leave.

9) Heard Mr.  K.  Radhakrishnan,  learned  senior

counsel  for  the  appellant  and  Mr.  Inder  Paul

Bansal,  learned  counsel  for  the

respondent-assessee.

5

Page 6

10) Having  heard  the  learned  Counsel  for  the

parties and on perusal of the record of the case, no

fault  can  be  found  in  the  reasoning  and  the

conclusion  arrived  at  by  the  CIT  (appeal)  in  his

order which, in our view, was rightly upheld by the

Tribunal  and  then  by  the  High  Court  calling  no

interference by this Court in this appeal.

11) In  our  considered  opinion,  the  case  of  the

respondent (assessee) does not fall within the four

corners of Section 50 (2) of the Act. Section 50 (2)

applies  to  a  case  where  any  block  of  assets  are

transferred  by  the  assessee  but  where  the  entire

running business with assets and liabilities is sold

by the assessee in one go, such sale, in our view,

cannot be considered as “short-term capital assets”.

In other words, the provisions of Section 50 (2) of

the Act would apply to a case where the assessee

transfers one or more block of assets, which he was

using in running of his business.  Such is not the

6

Page 7

case here because in this case,  the assessee sold

the entire business as a running concern.  

12) As rightly noticed by the CIT (appeal) that the

entire  running  business  with  all  assets  and

liabilities  having  been  sold  in  one  go  by  the

respondent-assessee,  it  was  a  slump  sale  of  a

“long-term capital asset”.  It was, therefore, required

to be taxed accordingly.  

13) Our view finds support with the law laid down

by  this  Court  in  Commissioner  of  Income Tax,

Gujarat vs. Artex Manufacturing Co. [1997(6) SCC

437 CIT].  

14) In Premier Automobiles Ltd. vs. Income Tax

Officer  &  Anr., 264  ITR  193  (Bombay)  also,  the

Division Bench of the Bombay High Court examined

this  question  in  detail  on  somewhat  similar  facts

and has taken the same view. The Learned Judge

S.H Kapadia - (as His Lordship then was as Judge

of  the Bombay High Court  and later  became CJI)

7

Page 8

speaking  for  the  Bench  aptly  explained  the  legal

position  to  which  we  concur  as  it  correctly

summarized  the  legal  position  applicable  to  such

facts.  

15) Learned  Counsel  for  the  appellant  (Revenue)

was not able to cite any decision taking a contrary

view nor was he able to point out any error in the

decisions cited at the Bar by the assesse’s counsel

referred supra.  

16) In the light of foregoing discussion, we find no

merit in the appeal which fails and is accordingly

dismissed.  

               ………...................................J.

[R.K. AGRAWAL]             

                                                   …...……..................................J.

        [ABHAY MANOHAR SAPRE] New Delhi; April 18, 2017  

8