Calculating capital gains in the event of slump sales

Any profits or earnings from the slump sale that was carried out in the prior year are subject to income tax as capital gains resulting from the transport of long-term capital assets and are considered part of the income of the prior year in which the transfer was carried out.

With the caveat that any profits or gains resulting from the transfer of any capital asset that is one or more undertakings that an assessee owned and held for not more than 36 months immediately preceding the date of its transfer under the slump sale shall be deemed to be the capital gains resulting from the transfer of short-term capital assets. There is beneficial information to know about 80g.

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For the purposes of sections 48 and 49, the cost of acquirement and the cost of improvement for capital assets that are an endeavour or division transferred by way of such sale shall be deemed to be the undertaking's or division's "net worth," as applicable, and the provisions in the second proviso to section 48 shall not be taken into consideration.

A report from an accountant, as defined in the Description below sub-section (2) of section 288 of the Internal Revenue Code, along with the return of income is required from every assessee in the case of a slump sale. This report must show how the net worth of the undertaking or division, as applicable, was calculated and certify that it was correctly determined in accordance with the provisions of this section.

According to this section, "net worth" shall mean the sum of the entire assets of the undertaking or division less the total liabilities of such undertaking or division as shown in its books of accounts. An NGO can be registered under section 80c.

Any revaluation-related change in asset value will not be taken into account when calculating net worth.

The overall asset value, calculated as the sum of all assets, should be:-

(a) in the case of depreciable assets, the block's written-down value, as assessed in accordance with the guidelines in sub-item (C) of the item (i) of sub-clause (c) of paragraph (6) of section 43;

(b) zero in the case of capital assets for which the whole cost has been permitted or is permitted as a deduction under section 35AD; and

(c) the book value of any additional assets, if any.

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