**SLUMP SALE AGREEMENT**
Slump sale is one of the widely used ways of business acquisitions In simple words, ‘slump sale’ is nothing but
transfer of a whole or part of business concern as a going concern; lock, stock and barrel. The concept of ‘slump
sale’ was incorporated in the Income Tax Act, 1961 (“IT Act”) by the Finance Act, 1999 with the inclusion of
section 2(42C). The term ‘slump sale’ is defined as 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 and liabilities in such sales.
For looking at the meaning of word ‘undertaking’ resort has to be made to Explanation 1 to section 2(19AA).
Section 2(19AA) defines “demerger” in relation to companies. Explanation 1 to Section 2(19AA) defines
“undertaking” to be any part of an undertaking or a unit or division of an undertaking or a business activity taken
as a whole but does not include individual assets or liabilities. As per definition of ‘undertaking’ even any part/
division of an undertaking or business activity as a whole can be considered.
Explanation 2 to S. 2(42C) clarifies that the determination of value of an asset or liability for the payment of
stamp duty, registration fees, similar taxes, etc. shall not be regarded as assignment of values to individual
assets and liabilities. Thus, if value is assigned to land for stamp duty purposes, the transaction will not cease to
be a slump sale.
The basic condition to be satisfied to qualify as a slump sale is that the transaction relating to transfer of business
should be a transfer of undertaking and not transfer of individual assets and liabilities consisting of the business
activity. This has been expressly provided in the Explanation 1 to Section 2(19AA) stated above. In case of
transfer of individual assets and liabilities consisting of the business activity, the same would not imply transfer
of undertaking [Duchem Laboratories Ltd. v. ACIT, ITA No. 3332/Mum/2004 June 12, 2009].