The term ‘slump sale’ has been defined u/s 2(42C) and it means “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.”
If values are assigned to some assets only for the purpose of stamp duty and registration, it shall not be regarded as assignment of values to each asset.
In simple words ‘slump sale’ means sale of running concern for a lump sum consideration.
For computing capital gains in case of ‘slump sale’ the term W.D.V. has been defined under section 43(1)(6)(c)(i)(C). The W.D.V. of any block of assets shall be decreased by the amount of actual cost as reduced by the amount of depreciation actually allowed.
Profit/Loss on ‘slump sale’ [Section 50B]
1. Any profits and gains arising from ‘slump sale’ effected in the previous year shall be chargeable to tax as capital gains and shall be deemed as income of the previous year in which transfer takes place. In case asset was held for a period not exceeding 36 months it shall be a short term capital asset and if held for a period exceeding 36 months it shall be long term capital asset.
2. “Net worth” shall be the aggregate value of total assets of the undertaking or division as reduced by the value of liabilities of such undertaking or division as appearing in its books of accounts but any change in the value of assets on account of revaluation of assets shall be ignored for the purposes of computing the net worth.
For computing the net worth, the aggregate value of total assets shall be :
(a) in the case of depreciable assets, the written down value of the block of assets determined in accordance with the provisions contained in sub-item (C) of item (1) sub-clause (c) of clause (6) of section 43
(b) in the case of capital assets in respect of which the whole. of the expenditure has been allowed or is allowable as a deduction u/s 35 AD—the value will be nil. [w.e.f. 1-4-20101; and
(c) in the case of other assets, the book value of such assets.
3. Every assessee having ‘slump sale’ shall furnish a report along with its return of income, from a Chartered Accountant certifying that the net worth has been correctly calculated.