COROMANDAL FERTILISERS LIMITED Vs. STATE OF ANDHRA PRADESH

JUDGEMENT

(1.) THIS Tax Revision Case and the Writ Petition are before us pursuant to the reference made to the Full Bench by a Division Bench consisting of M.N. Rao, J. (as he then was) and T.N.C. Rangarajan, J. before whom these cases came up for hearing initially. Seriously doubting the correctness of the Division Bench decision of this Court in Coramandal Lubricants v. Commissioner of Commercial Taxes, A.P., 102 STC 274 and expressing their prima facie view of the issue involved, the learned judges framed the following question for answer by the Full Bench:

(2.) THE learned Judges referred to the decision of the Supreme Court in Commissioner of Income Tax v. Mugneeram Bangur and Company : 57 ITR 299. The relevant facts leading to the filing TRC and the Writ Petition by the same assessee are as follows: The petitioner - Company which started its business of manufacturing and sale of fertilisers in 1966 also set up a cement manufacturing plant at a different place in the year 1982. Thus, at the material point of time, the petitioner was owning and managing a fertiliser division and a cement division. Having found that the cement division became economically unviable and that it would be in the best interests of the company to sell the cement division as a whole, issued tender notice on 2.4.1990 inviting offers for the purchase of the undertaking comprising cement division as a going concern on "as is and where is basis". Pursuant thereto, the India Cement Limited made an offer on 23.4.1990 for the purchase of the cement division undertaking as a going concern. It culminated into an agreement entered into between the petitioner and India Cement Ltd., on 9.6.1990. The preamble to the Agreement says that the vendor had agreed to sell and the purchaser had agreed to purchase "for the consideration and upon the terms and conditions hereinafter set out, the entire undertaking of the vendor comprising its cement division as a going concern on "as is and where is" basis. The Agreement defines the 'undertaking' as the operations and activities of the Cement Division of the vendor as a going concern including:

(3.) IT was agreed that all the employees would be taken into service by the purchaser from the transfer date. The consideration for sale and transfer is Rs. 105.30 crores excluding the sum equivalent to the value of the net current assets as determined in the manner set forth. The said consideration was payable in certain stages. Rs. 5.27 crores is the advance amount paid at the time of execution of the Agreement. Balance amount of Rs. 100.03 crores as reduced by the amount of secured loans outstanding as on the transfer date was payable by the specified date. It is the case of the petitioner that a total sum of Rs. 35 crores was received after deducting the amount due towards secured loans and no break -up price or value was fixed for the individual items, or for various items of movable properties. However, a deed of sale and transfer was executed on 29.11.1990 in respect of the immovable properties viz., lands and buildings and the consideration mentioned in the said deed is a sum of Rs. 27.07 crores. The said sale deed was got registered as it was necessary to convey the title.