What is Slump Sale?
As per section 50B of the Indian Income Tax Act, Slump sale means transfer of one or more undertakings, by any means, for a lump sum consideration without values being assigned to the individual assets and liabilities in such transfer.
Capital gains – Whether long-term or short-term? [Section 50B(1)]
Any profits or gains arising from the slump sale of one or more undertakings held for more than 36 months, shall be chargeable to income-tax as capital gains arising from the transfer of long-term capital assets and shall be deemed to be the income of the previous year in which the transfer took place.
Any profits and gains arising from such transfer of one or more undertakings held by the assessee for not more than 36 months shall be deemed to be short-term capital gains.
Deemed cost of acquisition and cost of improvement [Section 50B(2)(i)]
The net worth of the undertaking or the division, as the case may be, shall be deemed to be the cost of acquisition and the cost of improvement for the purposes of sections 48 and 49 in relation to capital assets of such undertaking or division transferred.
In Slump Sale, No indexation benefit would be available even if it is results in a long-term capital gain, irrespective of the date of transfer of the undertaking i.e., whether before or on or after 23.7.2024.
Deemed full value of consideration [Section 50B(2)(ii)]
Fair market value of the capital assets as on the date of transfer under Slump Sale, calculated in the prescribed manner, shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of such capital asset.
Accordingly, the CBDT has prescribed that, for the purpose of section 50B(2)(ii), the fair market value (FMV) of capital assets would be the higher of –
- (i) FMV 1, being the fair market value of capital assets transferred by way of slump sale (determined on the date of slump sale); and
- (ii) FMV 2, being the fair market value of the consideration (monetary and non-monetary) received or accruing as a result of transfer by way of slump sale