The slump price of an undertaking sold as a going concern cannot be subjected to tax under the head "Income from business" under Section 41(2) of the Income-tax Act, 1961, unless there are materials to determine the value of the depreciable and non-depreciable assets.

D.K. Seth, J.

1. THE undertaking of the assessee was acquired by the West Bengal State Electricity Board. THE cost of such acquisition was to be valued under Section 7A of the Indian Electricity Act. THE said Section 7A of the Indian Electricity Act provides that if there is an agreement between the parties the undertaking would be treated to have been valued at the fair market price, in default, the matter has to be referred to an arbitrator and then the award would be treated to be the fair market value of the undertaking. There was no agreement between the parties. THE matter was referred to the arbitrator. An award was passed. This award was subjected to litigation that went up to the apex court. Ultimately, the apex court appointed an arbitrator. THE arbitrator awarded a sum of Rs.1,02,82,000. This was subjected to assessment, which went up to the Tribunal. THE Tribunal assessed the said amount both to capital gains and to income from business, having regard to Section 41(2) of the Income-tax Act, 1961. THE undertaking was valued at Rs.88 lakhs by an order of the learned Tribunal passed on May 15, 2000. Subsequently, the assessee filed an application under Section 254(2) of the Income-tax Act, 1961. Relying on CIT v. West Coast Chemicals and Industries Ltd. [1962] 46 ITR 135 (SC) and CIT v. Mugneeram Bangur and Co. (Land Department), the assessee contended that the undertaking having been sold at a slump price and no amount being attributable to depreciable and non-depreciable assets, distinctly, the decision of the learned Tribunal was a mistake apparent from the record that required to be corrected. This application under Section 254(2) having been dismissed, the present appeal has been filed under Section 260A of the Income-tax Act. This appeal has since been admitted.

2. NOW we are called upon to answer the question as to whether this slump price would be subjected to tax under the head "Income from business" having regard to Section 41(2) of the Income-tax Act, 1961. Mr. S. Bagchi, learned counsel for the appellant, had contended that in view of the decisions in CIT v. Mugneeram Bangur and Co. (Land Department) ; CIT v. West Coast Chemicals and Industries Ltd. [1962] 46 ITR 135 (SC) and CIT v. Electric Control Gear Manufacturing Co., the moneys payable on account of transfer of the undertaking at a slump price cannot be subjected to tax under the head "Income from business" with the aid of Section 41, Sub-section (2). According to him, there is nothing to indicate as to what amount was attributable to non-depreciable assets to exclude the same from the total price for arriving at a figure attributable to depreciable assets. The balance-sheet does not indicate the amount payable on transfer or acquisition. It might be the book value or other value but is not indicative of the amount payable on any one of the heads. Therefore, the order of learned Tribunal rejecting the application under Section 254(2) should be set aside.

3. HOWEVER, he has not disputed the finding with regard to the chargeability of the receipt under the head "Capital gains".

4. MR. P. K. Mallick, learned counsel for the Revenue, on the other hand, had pointed out that the amount, payable on acquisition is ascertainable from the provisions contained in Section 7A of the Indian Electricity Act, which prescribes the mode of valuation of the undertaking acquired. The market value has to be determined on the basis of the components provided therein as factors to be taken into account for arriving at the market price. He then contends that the price of the land can be ascertained from the balance-sheet as at page 48 of the paper book an amount is admitted by the assessee itself. Having admitted the valuation, the assessee is estopped from contending that the valuation is different from what has been shown in the balance-sheet. According to him, the value of the land has been indicated therein. Therefore, if that amount is deducted from the price rec