Meaning of slump sale
As per section 2(42C) of Income -tax Act 1961, ‘slump
sale’ means the transfer of one or more undertakings as a result of the sale
for a lump sum consideration without values being assigned to the individual
assets and liabilities in such sales.
A sale in order to constitute a slump sale must
satisfy the following quick test:
1.
Business is sold
off as a whole and as a going concern
2.
Sale for a lump
sum consideration
3.
Materials
available on record do not indicate item-wise value of the assets transferred
Taxability of gains arising on slump sale
Section 50B of the Income-tax Act, 1961 provides the
mechanism for computation of capital gains arising on slump sale.
Some basic points which arise are:
“Net
Worth”
Net worth is defined in Explanation 1 to
section 50B as the difference between ‘the aggregate value of total assets of
the undertaking or division’ and ‘the value of its liabilities as appearing in
books of account’. This amendment has made it clear that the slump sale
provisions apply to a non-corporate entity also.
The ‘aggregate value of total assets of
the undertaking or division’ is the sum total of:
1.
WDV as determined
u/s. 43(6)(c)(i)(C) in case of depreciable assets.
2.
The book value in
case of other assets.
Capital Gain in respect of Slump Sale
[Sec. 50B]
|
Term |
Meaning |
|
Undertaking |
It
include any part of an undertaking. Or a unit/division of an undertaking/a
business activity takes as a whole, but does not include individual assets or
any combination thereof not consulting a business activity. |
|
Transfer |
It would
include sale, exchange, relinquishment of capital asset, extinguishment of
any right therein, compulsory acquisition under any law etc. |
Capital Gains on Slump Sale of an Undertaking [Sec.
50B]
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