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explain slump sale agreement ?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Uma asked about 3 years ago

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3 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 narahari answered almost 3 years ago

As per S. 2(42C), of Finance Act, 1999, ‘slump sale’ means the 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.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 lochan answered about 3 years ago

**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]. Thanks

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Data?1494421738 samkit kothari answered about 3 years ago

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. As per S. 2(42C), introduced by the Finance Act, 1999, ‘slump sale’ means the 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. ‘Undertaking’ has the same meaning as in Explanation 1 to S. 2(19AA) defining ‘demerger’. 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.

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