Facts of the case

  • The assessee filed its return of income, declaring Nil income.
  • Subsequently, action was initiated under section 147 of the Act by issuing a notice under section 148 calling upon the assessee to submit a return of income.
  • The AO, during the course of the proceedings noticed that the assessee had transferred its manufacturing division to M/s. Novapan Industries Limited under a scheme of amalgamation approved by the Hon’ble High Court of A.P. w.e.f. 01.04.2006.
  • As per the scheme of amalgamation both the assets and the liabilities were transferred by the assessee company to M/s. Novapan Industries Limited.
  • As a consideration for the transfer of the division, the amalgamated company M/s. Novapan Industries Limited allotted 38 shares for every 100 shares of the amalgamated company plus also transferred certain investments held by it amounting to Rs.25,24,05,000/- to the assessee company.
  • The AO considered the above transaction as slump sale under Section 2(42C) and accordingly determined the Capital Gains amounting to Rs 24.71 Crores (COA Rs 6.81 Crores and Sale Consideration being Shares Rs 6.28 Crores+ Rs 25.24 Crores= Rs 31.52 Crores)
  • The assessee being aggrieved of the assessment order, preferred appeal before the CIT(A). the CIT(A) ruled in the favour of Assessee.
  • Being aggrieved by the decision of CIT(A), the AO has filed an appeal before the Income Tax Appellate Tribunal.

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