Point of Law: Principle of promissory estoppel is based on equity, it requires a valid promise based on which promisee had changed its position.

JUDGMENT :

DINESH KUMAR SINGH, J.

1. The petitioner is a partnership firm stated to have been set up on 9th June 1997. It is engaged in the business of wholesale dealerships in pharmaceutical products. The petitioner having PAN No. AADFP2868C is an assessee under the provisions of the Income Tax Act. The petitioner, vide business transfer agreement dated 20th December 2018 transferred the business of the firm without assigning any value to its assets and liabilities, under the ‘slump sale’ method on a ‘going concern basis’ for a lump sum consideration of Rs.10,04,15,000/- to M/s Getwell Medical Solution Private Limited, an alter ego of the petitioner.

2. The petitioner had computed capital gains as per Section 50B of the Income Tax Act, 1961 as the petitioner opted for ‘slump sale’. The petitioner has approached this Court for a writ, order or direction in the nature of mandamus commanding the first respondent i.e. the Union of India to notify ‘long term specified assets’ for availing capital gains exemption under Section 54EE of the Income Tax Act, 1961 with appropriate extension of time period under Section 54EE and Explanation-2 therein or any such appropriate manner known to law.

3. Section 54EE allows capital gains exemption upto a limit of Rs.50 lakhs provided the capital gain proceeds are invested by the assessee in the long term specified assets notified under Section 54EE for a minimum period of 3 years. For ready reference, Section 54EE is extracted hereunder:

Capital gain not to be charged on investment in units of a specified fund:

54EE - (1) Where the capital gain arises from the transfer of a long-term capital asset (herein in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, namely:

(a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45.

(b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45.

Provided that the investment made on or after the 1st day of April, 2016, in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees:

Provided further that the investment made by an assessee in the long-term specified asset, from capital gains arising from the transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees.

(2) Where the long-term specified asset is transferred by the assessee at any time within a period of three years from the date of its acquisition, the amount of capital gains arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such long-term specified asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1) shall be deemed to be the income chargeable under the head “Capital gains” relating to long-term capital asset of the previous year in which the long-term specified asset is transferred.

Explanation 1 - In a case where the original asset is transferred and the assessee invests the whole or any part of the capital gain received or accrued as a result of transfer of the original asset in any long-term specified asset and such assessee takes any loan or advance on the security of such specified asset, he shall be deemed to have transferred such specifie