Under section 50B, special provisions are given to calculate capital gain or loss in case of slump sale. First of all let’s understand “What is the meaning of slump sale”?
Slump sale means sale of entire business as a going concern, with all assets & liabilities in one go. In simple words we can say, transfer of one or more undertakings for a lump sum consideration rather than assigning value for all individual assets.
| Sale of entire business | As going concern | For lump sum consideration |
|---|
Capital gain in case of slump sale u/s 50B shall be calculated as below :-
| Particular | Amount |
|---|---|
| Full value of lump sum consideration | XXX |
| Less :- Expenditure in relation to transfer | (XXX) |
| Less :- Net worth** of the undertaking being the cost of acquisition and improvement | (XXX) |
| Capital Gain/loss | XXX |
**Computation of Net Worth
| Particular | Amount |
|---|---|
| Aggregate value of total assets of the undertaking or division :
In case of depreciable assets In case of capital assets in respect of which whole expenditure claimed u/s 35AD In case of other assets |
WDV of block Nil Book value of assets |
| Less :- Value of liabilities of such undertaking or division | Book value |
| Net worth of the undertaking | XXX |
**If net worth comes negative, then cost of acquisition shall be NIL.
Taxability of capital gain depends upon the nature of capital assets which is
The key points of Section 50B includes
| Particular | Nature of capital asset |
| If undertaking held for more than 3 years | Long Term |
| If undertaking held for 3 years or less | Short Term |
Slump Sale refers to sale of business as a going concern without assigning the assets and liabilities any individual values. Whereas itemised sale means the sale of one or more business assets not essentially resulting in sale of business.
It was witnessed particularly in the case of loss making undertakings, transactions of slump sale was window dressed as itemised sale to stop the same various rulings came out.
The difference amongst slump sale and itemised sale can be summarised as under
| Slump Sale | Itemised Sale |
| No individual values are assigned to assets | Individual values are assigned to assets |
| Warrants sale of all assets and liabilities | One or more assets can be sold |
| Business is sold as a going concern | Business might not be transferred as a going concern |
| It results not just in sale of asset but mandatorily in sale of business | Itemised sale may refer to mere sale of asset(s) and not sale of business |
Some of us understand & interpret, that transfer of ALL assets is mandatory to qualify the transaction as a slump sale. However, it has been clarified by some judicial pronouncements that it is NOT essential to transfer all assets to qualify the transaction as a slump sale. Even if some assets are retained by the transferor due to any reason and transferee can start its operations without any difficulty with transferred assets then it will be a slump sale.
It was clarified that any transaction to be considered as slump sale if consideration is cash. Exchange of capital assets shall NOT qualify as slump sale.
Yes, in addition to the two scenarios explained in detail above i.e. exchange and itemised sale there are other cases in which sale cannot be termed as slump sale. These situations arise when
Ans. Form No. 3CEA is a report of CA which needs to be furnished in case of slump sale u/s 50B. This form is filed online for which DSC is mandatory. The form needs to be filed along with return of income and due date of filing form is same as applicable to assessee for income tax return specified u/s 139(1).
Ans. Revaluation of assets shall be ignored while calculating Net worth. Book value of assets shall be considered in this case.
Unlike demerger, amalgamation accumulated losses cannot be carried forward by the transferee.
