Mr. Shivam is the proprietor of Star Stores having 2 units. On 1.4.2025, he transferred Unit 2, which he started in 2014-15, by way of slump sale…

CA Intermediate · Taxation · MTP · May 2026
Mr. Shivam is the proprietor of Star Stores having 2 units. On 1.4.2025, he transferred Unit 2, which he started in 2014-15, by way of slump sale for a total consideration of 18 lakhs. The professional fees & brokerage paid for this transfer are - 78,000. His Balance Sheet as on 31-03-2025 is as under: Liabilities ₹ Assets Unit 1 ₹ Unit 2 ₹ Total ₹ Own Capital 20,50,000 Land 12,75,000 7,50,000 20,25,000 Revaluation reserve 2,50,000 Furniture 2,00,000 5,00,000 7,00,000 Bank Loan (70% for Unit 1) 8,50,000 Debtors 2,00,000 3,50,000 5,50,000 Trade Creditors (20% for Unit 2) 4,50,000 Patents - 7,25,000 7,25,000 Unsecured Loan (30% for Unit 2) 4,00,000 40,00,000 16,75,000 23,25,000 40,00,000 Other Information: 1. Land of Unit 2 was purchased at 5,00,000 in the year 2014 and revalued at 7,50,000 as on 31.3.2025. 2. No individual value of any asset is considered in the transfer deed. 3. Patents were acquired on 01.12.2023 on which no depreciation has been provided. 4. Furniture of Unit 2 of 5,00,000 were purchased on 01.12.2024 on which no depreciation has been provided. 5. Fair market value of capital asset transferred by way of slump sale of Unit 2 is 18,10,000. Compute the capital gain for A.Y. 2026-27.

Suggested Answer and Working Notes:

As per section 50B, any profits and gains arising from the slump sale effected in the previous year shall be chargeable to income-tax as capital gains arising from the transfer of capital assets and shall be deemed to be the income of the previous year in which the transfer took place. If the assessee owned and held the undertaking transferred under slump sale for more than 36 months before slump sale, the capital gain shall be deemed to be long-term capital gain. Indexation benefit is not available. Computation of capital gain on slump sale of Unit 2 Particulars ₹ Full value of consideration for slump sale of Unit 2 [Fair market value of capital asset transferred by way of slump sale (i.e.,18,10,000) or fair market value of the consideration received (value of the monetary consideration received i.e.,18,00,000) whichever is higher] 18,10,000 Less: Expenses on sale [professional fees & brokerage] 78,000 Net full value of consideration 17,32,000 Less: Cost of acquisition, being the net worth of Unit 2 (Note 1) 13,35,781 Long term capital gains arising on slump sale 3,96,219 (The capital gains is long-term as the Unit 2 is held for more than 36 months) Notes 1. Computation of net worth of Unit 2 Particulars ₹ (1) Book value of non-depreciable assets (i) Land (Revaluation not to be considered) 5,00,000 (ii) Debtors 3,50,000 (2) Written down value of depreciable assets under section 43(6) (i) Furniture (See Note 2) 4,75,000 (ii) Patents (See Note 3) 4,75,781 Aggregate value of total assets 18,00,781 Less: Current liabilities of Unit 2 Bank Loan [₹ 8,50,000 x 30%] 2,55,000 Trade Creditors [₹ 4,50,000 x 20%] 90,000 Unsecured Loan [₹ 4,00,000 x 30%] 1,20,000 4,65,000 Net worth of unit 2 13,35,781 2. Written down value of furniture as on 1.4.2025 Value of patents ₹ Cost as on 1.12.2024 5,00,000 Less: Depreciation @ 10% x 50% for Financial Year 2024-25 25,000 WDV as on 1.4.2025 4,75,000 3. Written down value of patents as on 1.4.2025 Value of patents ₹ Cost as on 1.12.2023 7,25,000 Less: Depreciation @ 25% x 50% for F.Y. 2023-24 90,625 WDV as on 1.4.2024 6,34,375 Less: Depreciation@25% for F.Y. 2024-25 1,58,594 WDV as on 1.4.2025 4,75,781

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

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