s.50B — Slump sale
The special computation for the transfer of an undertaking as a whole for a lump sum: net worth as the deemed cost, fair market value as the deemed price.
Income-tax Act, 1961
s.50B
Income-tax Act, 2025
s.77
In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.
In short
Section 50B of the Income-tax Act, 1961, and section 77 of the Income-tax Act, 2025, charge the profits arising from a slump sale as long-term capital gains, or as short-term capital gains where the undertaking was owned and held for thirty six months or less. Net worth is deemed to be both the cost of acquisition and the cost of improvement, and it is computed as the aggregate value of the undertaking's total assets less the liabilities appearing in its books, ignoring revaluation, with depreciable assets taken at the written down value of the block, self-generated goodwill at nil, and assets whose whole cost has already been allowed as capital expenditure of a specified business at nil. Since the Finance Act 2021 the fair market value computed under rule 11UAE, now rule 53 of the Income-tax Rules, 2026, is deemed to be the full value of consideration. An accountant's report is required, in Form 3CEA under the 1962 Rules and Form No. 28 under rule 54 of the 2026 Rules. "Slump sale" itself is defined in section 2(42C) of the 1961 Act and section 2(103) of the 2025 Act as the transfer of one or more undertaking, by any means, for a lump sum consideration without values being assigned to the individual assets and liabilities.
What the provision does
Supplies a self-contained computation for the transfer of a business as a going concern, so that the parties do not have to attribute the price to individual assets and the Assessing Officer cannot require them to. It displaces the cost of acquisition and the cost of improvement with a single statutory figure, net worth; it fixes the character of the gain by reference to the holding period of the undertaking rather than of its components; and, since 2021, it displaces the agreed price with a prescribed fair market value. It does not carry accumulated losses or unabsorbed depreciation to the buyer, and it does not displace the general provisions on succession to a business or on transfers void against the Revenue.
Threshold questions
- Is what was transferred an undertaking, meaning a business activity taken as a whole, rather than a combination of assets
- Was the consideration a single lump sum, with no values assigned to the individual assets and liabilities
- Were any values assigned outside the agreement, in a valuation report, a schedule or the assessment record, which on Artex can amount to assignment
- Was the undertaking owned and held for more than thirty six months immediately before the transfer
- Is net worth positive, and has the written down value been struck after notional depreciation
- Does the fair market value computed under the rule exceed the price, and by how much
In practice
The recurring disputes.
Slump sale or itemised sale
The Department argues whichever characterisation produces more tax, and it runs both ways. On CIT v. Artex Manufacturing Co. (1997) 227 ITR 260 (SC) values can be treated as assigned by evidence outside the agreement, including the assessee's own disclosures in assessment. On CIT v. Electric Control Gear Mfg. Co. (1997) 227 ITR 278 (SC) the Department must point to something more than the existence of depreciable assets.
Negative net worth
Because net worth is subtracted, a negative figure is added, so a loss making undertaking sold cheaply can produce a gain far larger than the price. DCIT v. Summit Securities Ltd (Special Bench, 7 March 2012) so held, declining to follow Zuari Industries and Paper Base. No High Court has decided the point on the merits; it stands admitted in the Bombay High Court.
The prescribed fair market value
Rule 11UAE, now rule 53, adds back reserves and surplus, unascertained provisions and contingent liabilities, and takes immovable property at stamp duty value, so the computed figure routinely exceeds the negotiated price. Unlike the stamp duty value provisions, it carries no reference to a Valuation Officer. It has not been judicially tested.
Is a slump sale a succession
It decides both the buyer's depreciation in the year of transfer and the buyer's exposure to the seller's tax. Archroma India (ITAT Mumbai, 15 June 2020) held that it is. Glaxosmithkline Consumer (Chandigarh, 16 October 2025) and Edgeverve Systems (Bangalore, 30 January 2026) have since held that it is not, where the transferor continues to exist and carry on its own business.