For s. 50B “Slump Sale”, liabilities reflected in “negative net worth” cannot be treated as “consideration” but the resultant “negative net worth” has to be added to the “consideration”

DCIT vs. Summit Securities Ltd (ITAT Mumbai Special Bench)

Pursuant to a scheme of arrangement u/s 391 & 394 of the Companies Act, the assessee transferred its “Power Transmission Business” to KEC International Ltd for a total consideration of Rs. 143 crores. The assessee claimed this transaction to be a “slump sale” u/s 50B. The “net worth of the undertaking” was computed at a negative figure of Rs.157.19 crores, being the excess of liabilities over assets. The assessee treated the net worth as Nil and offered the entire sale consideration of Rs. 143 crore as LTCG. The AO held that as the purchaser had taken over liabilities of Rs. 157.19 crores, the same had to be added to the consideration of Rs. 143 crores to arrive at the “full value of consideration” of Rs. 300 crores. The CIT (A), relying on Zuari Industries 105 ITD 569 (Mum) & Paper Base Co 19 SOT 163 (Del), held that the “net worth’ in s. 50B could not be a negative figure and if it was so because of the liabilities exceeding the assets, the net worth had to taken at Nil. The Special Bench had to consider two issues (i) whether the excess of liabilities over assets could be treated as “consideration” in the hands of the assessee & (ii) whether the resultant “negative net worth” could be treated as Nil or had to be added to the “consideration”? HELD by the Special Bench:

S. 54F does not require construction to be complete within specified period

CIT vs. Sambandam Udaykumar (Karnataka High Court)

The assessee sold shares for Rs. 4.18 crores and, within12months,invested Rs. 2.16 crores  thereof to construct a house property and claimed exemption u/s 54F. However, as even after the expiry of 3 years of the date of transfer, the construction of the house was not complete and sale deed not executed, the AO & CIT (A) denied relief u/s 54F though the Tribunal granted it. On appeal by the department to the High Court, HELD dismissing the appeal:

S. 54F is a beneficial provision for promoting the construction of residential house & requires to be construed liberally for achieving that purpose. The intention of the Legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law. The words used in the section are ‘purchased’ or ‘constructed’. The condition precedent for claiming benefit u/s 54F is that the capital gain should be parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. Merely because the sale deed had not been executed or that construction is not complete and it is not in a fit condition to be occupied does not disentitle the assessee to claim s. 54F relief (Sardarmal Kothari 302 ITR 286 (Mad) followed)

Japan reports big deficits

 Japan has posted one of its largest ever trade deficits, with the January figure widening 246% on year to ¥1.382T ($17.0B). The country's current account deficit totaled ¥437.3B for the same month - larger than the ¥322.4B expected by economists - as nuclear-plant shutdowns drove up energy imports.

Yen Dips, Uncertainty Remains Over Greek Debt Swap

In an apparent knee-jerk reaction to data which showed Japan's current account swung to a record deficit in January, the Yen dropped against the Dollar earlier today. Risk currencies gained though, on hopes that Greece may finally secure a bond swap deal.
The Japanese Yen dipped against the US Dollar and the Euro after Japan posted its first current account deficit in three years.
The Euro edged upwards but most analysts believe it will struggle to hold on to these gains ahead of the Greek debt swap.
It would be best not to take any long term positions close to the outcome of Greek debt deal and Friday's U.S. jobs data.

Tata could rival Vodafone for C&W.

 Tata Communications (TCL) is reportedly considering a bid for Cable & Wireless Worldwide (CBWWY.PK), the same fiber-network operator that Vodafone (VOD) said it may try to acquire.

Could Greece's second bailout agony be finally over?

 EU leaders are meeting today and tomorrow to finalize Greece's second bailout package and discuss ways to boost long-term growth. The bloc has already reportedly approved a €5.8B aid payment for Ireland, and while officials said there will be no decision on increasing the size of the eurozone's rescue fund, Italian PM Mario Monti tells Bloomberg that he's confident it will be expanded by the end of the month

Eurozone hit by triple data blow

 Data released today shows how the eurozone economy continues to weaken, with unemployment hitting a euro-era record of 10.7% in January and highlighting the sharp divergence between north and south. February PMI improved to 49.0 in February from 48.8 in January, but the sector is still contracting, while inflation rose to +2.7% from +2.6%.