Taxability in case of Slump Sale price is equivalent to net worth of firm

No capital gain arose on slump sale as consideration for transfer was equivalent to net worth to transferor-firms

Income-tax Officer-20 (2) (1), Mumbai

v.

P.V. Leela Amma

SANJAY ARORA, ACCOUNTANT MEMBER
AND AMIT SHUKLA, JUDICIAL MEMBER

IT APPEAL NO. 1277 (MUM.) OF 2010
[ASSESSMENT YEAR 2006-07]

NOVEMBER  21, 2014 

Section 50B, read with section 45, of the Income-tax Act, 1961 - Capital gains - Slump sale, cost of acquisition in case of (Capital gains) - Assessment year 2006-07 - Assessee sold three proprietary concerns BF, DC and AI on a going concern basis - Agreements read that 'consideration for purchase of business would amount to Rs. 10,000 subject to adjustment that (a) if final net assets would exceed consideration, consideration would be increased to an amount equal to final net assets and (b) if it is less than consideration, consideration would be reduced to an amount equal to final net assets - Net worth of three firms was an aggregate of Rs. 73 lacs being (+) Rs. 205.29 lakh for BF, (-) Rs. 99.78 lakh for DC and (-) Rs. 32.51 lakh for AI - Whether in instant case assessee had transferred its business carried on through three undertakings in slump sale and provisions of section 50B would apply, there being no finding of any asset or liability of said business as having not been transferred - Held, yes - Whether sale consideration was a single sum of Rs. 78.45 lakh, i.e., combined net worth of all three firms received by assessee in cash being Rs. 73 lakhs along with aggregate cash and bank balance/s of Rs. 5.45 lakh which was not subject to transfer - Held, yes - Whether as this net worth was also deemed as cost of acquisition and/or improvement under section 50B(2), no capital gain would stand to arise - Held, yes [Para 5] [In favour of assessee/Matter remanded]