Section 50B - CAPITAL GAINS IN CASE OF SLUMP SALE
Meaning of Slump Sale
Slump sale refers to sale of entire business of an undertaking as a whole
for a lumpsum consideration. In case of slump
sale, the purchase consideration should
be arrived at without assigning
individual values to individual assets
and individual liabilities.
Note: If the values of assets and liabilities have been determined individually only for the purpose of payment of stamp duty, registration fees or other similar taxes, such transaction would still be covered under the scope of 'slump sale'.
Computation
of Capital Gains
•
Capital gains shall be taxable in the year in which
the undertaking has been sold.
The amount of capital gains
shall be computed as follows:
|
Particulars |
Amount Rs. |
|
Price
at which Undertaking has been sold Less: Expenses in
connection with sale
of Undertaking Less: Net-Worth of the Undertaking |
XXXX (XXXX) (XXXX) |
|
Capital Gains (ST/LT) |
XXXX |
• Short-term capital gains would arise if the undertaking was owned by the assessee for a period of 36 months or less.
• Long-term capital gains would arise if the undertaking was owned by the assessee for a period exceeding 36 months. Benefit of indexation would not be available in such cases.
How to
Calculate Net-Worth of the Undertaking
Net Worth = Total Assets
(-) Total Liabilities
• In case of depreciable assets, their WDV shall be taken into consideration whereas for other non-depreciable assets, their book values shall be taken into consideration.
•
Revaluation of assets shall
be completely ignored.
• Where the full cost of an asset
has been allowed
as deduction u/s 35AD, its value shall
be taken as NIL at the time
of computation of net worth.
• All the liabilities payable shall
be taken into
consideration.
General Meaning
Full Value of Consideration (FVC) refers to the whole amount received/receivable by the transferor in connection with the transfer of a capital asset. In its general sense, FVC does not have any reference to the market value of the capital asset.
Full Value of Consideration in Special
Cases
|
Relevant Section |
Mode of
Transfer |
Deemed
Full Value of Consideration |
|
45(1A) |
Money/asset received from an insurance company on damage, destruction, etc of a capital asset |
Money/FMV of asset
received as on the date of
receipt |
|
45(2) |
Conversion
of capital asset into stock-in-trade |
FMV of
the capital asset as on the date of conversion |
|
45(3) |
Capital contribution in _kind by a partner or member into Firm/A0P/BOI |
Amount recorded in the books
of accounts of Firm/AOP/BOI to give effect to such capital contribution |
|
45(4) |
Distribution of capital asset to partner or member on dissolution of
Firm/A0P/BOI |
FMV of the capital asset as on the date of dissolution |
|
46(2) |
Money/asset
received by the shareholders of a company in the event of
liquidation of the company |
[(Money
+ FMV of asset as on the date of distribution) - (Amount deemed
as dividend u/s 2(22)(c)}] |
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#CAPITALGAINSINCASEOFSLUMPSALE
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