MEANING OF SLUMP
SALE
Under Indian
Income Tax Act, 1961 slump sale means the transfer of one or more undertakings
as a result of sale for a lump sum consideration without values being assigned
to Individual Assets and Liabilities in such sales.
TAXABILITY OF
CAPITAL GAINS
Capital Gains
shall be taxable in the Previous Year in which the slump sale is effected.
Whether there will be short term capital gain or long term capital gain it will
depend on the Period of Holding of Undertaking transferred by way of slump
sale. If the undertaking is held for not more than 36 months immediately
preceding the date of transfer there will be short term capital gain.
COMPUTATION OF
CAPITAL GAINS
CAPITAL GAIN= Slump Sale Consideration - Net Worth of
undertaking or division
Where
- Net Worth is
Aggregate value of total assets of undertaking or division
transferred
Less: Value of liabilities of the undertaking as appearing in the
books
- Aggregate Value of Total Assets in case of
· Depreciable Assets is WDV of
Block of Assets.
· Capital assets of which the
whole of expenditure has been allowed or is allowable as deduction u/s.35AD is
NIL.
· Other Assets is Book value of
assets.
IMPORTANT POINTS
TO REMEMBER
- No benefit of indexation is available.
- No profits under the head Profits and gains of Business & profession (PGBP) even if the stock is transferred.
- No Revaluation of assets to be considered while computing the Net Worth.
- No values shall be assigned to Individual Assets & liabilities except for the purpose of payment of stamp duty, registration fees etc.
- Contingent Liabilities do not appear in the books and therefore not to be deducted while computing the Net Worth.
This Article has been Shared by Student of ICAI Palak Aggarwal. She Can be reached at aggarwal.palak2809@gmail.com
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