Mr. Amit, the proprietor of Amit Enterprises, owns two business units. On 1st April 2024, he transferred Bawana unit by way of a slump sale for a…

CA Intermediate · Taxation · MTP · May 2025
Mr. Amit, the proprietor of Amit Enterprises, owns two business units. On 1st April 2024, he transferred Bawana unit by way of a slump sale for a total consideration of 75 lakhs. The fair market value of the capital assets of Bawana unit as on the date of transfer was 90 lakhs. Bawana unit was established in the financial year 2005-06. The expenses incurred for the transfer amounted to 28,000. His Balance Sheet as on 31.3.2024 is as under: Liabilities Total (₹) Assets Bawana unit (₹) Mayapuri unit (₹) Total (₹) Own Capital 45,00,000 Land 36,00,000 6,00,000 42,00,000 Revaluation Reserve (for land of Bawana unit) 9,00,000 Building 9,00,000 3,00,000 12,00,000 Bank loan (70% for Bawana unit) 6,00,000 Machinery 3,00,000 1,20,000 4,20,000 Trade creditors (25% for Mayapuri unit) 4,50,000 Other assets 4,50,000 1,80,000 6,30,000 Total 64,50,000 Total 52,50,000 12,00,000 64,50,000 Other Information - The transfer deed did not assign individual values to any specific assets. - The value of the building and machinery was taken as per the written-down value as per the Income-tax Act, 1961. Compute the Capital Gain for the assessment year 2025-26.

Suggested Answer and Working Notes:

Computation of capital gains on slump sale of Bawana Unit Particulars ₹ Full value of consideration [Higher of FMV of capital assets of Bawana unit on 1.4.2024 or FMV of monetary consideration received] 90,00,000 Less: Expenses for transfer 28,000 89,72,000 Less: Net worth (Refer Note below) 35,92,500 Long-term capital gain [Since the Unit is held for more than 36 months. Indexation benefit is not available in case of slump sale.] 53,79,500 Note: Computation of net worth of Bawana unit of Amit Enterprises Particulars ₹ Land (excluding 9lakhs on account of revaluation) 27,00,000 Building 9,00,000 Machinery 3,00,000 Other assets 4,50,000 Total assets 43,50,000 Less: Creditors (75% of 4,50,000) 3,37,500 Bank Loan (70% of 6,00,000) 4,20,000 7,57,500 Net worth 35,92,500

Topics: Paper 3A: Income Tax Laws, Paper 3B: Goods and Services Tax

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