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A slump sale is the transfer of a business undertaking as a going concern for a lump-sum consideration, without assigning individual values to assets and liabilities. Governed under Section 2(42C) of the Income Tax Act, 1961, slump sales are widely used in mergers, acquisitions, and restructuring transactions.
Defined under Section 2(42C) of the Income Tax Act, 1961
Supported by judicial precedent including Rohan Software and Max India
Must transfer an entire business unit, not selective assets
Capital gains taxed under Section 50B
Net worth calculation is critical and follows a defined formula
Deemed FMV rules (Rule 11UAE) apply to prevent undervaluation
Mandatory Form 3CEA (CA certified)
No asset-wise revaluation permitted
Special considerations for assets under Section 35AD
Courts allow exclusion of non-core assets if undertaking remains functional
Substance-over-form principle emphasized
Self-generated goodwill and liabilities carry nuanced implications
Corporate decision-makers, advisory firms, PE funds, lawyers, and CAs involved in:
M&A and business restructuring
Strategic spin-offs and divestments
Cross-border acquisitions involving Indian units
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The contributors to the Article are Sumit Mahajan, AccuWiz Consulting LLP along with inputs from Sonakshi Sood.
Disclaimer: The content/information is only for general information of the user and shall not be construed as legal advice. The facts stated are based on information available in public domain. Views expressed above are personal.