Slump sale — net worth as cost of acquisition; FA 2021 expansion: 'transfer by any means' (not just sale) caught; cross-reference s. 2(42C) definition.
Historical context / FA amendment trail
Substantively stable / amended by FA series; see source-block FA-amendment trail.
Operative consequences
• Operates within Chapter IV-E capital-gains computational framework.
• Cross-references operative companion sections.
Case Laws & Commentary
PART E — CAPITAL GAINS
SECTION 50B — SPECIAL PROVISION FOR COMPUTATION OF CAPITAL GAINS IN CASE OF SLUMP SALE
Case-Law Digest with Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026)
A. SECTION SNAPSHOT
Section 50B is a self-contained code for capital-gains computation on slump sale. "Slump sale" means 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 (Section 2(42C)). FA 2021 expanded the definition to include all types of transfer (not merely sale) — so the section now reaches slump exchange, gift of undertaking, etc., where lump-sum consideration is involved.
Computation: Capital gain = FVC (computed at FMV per Rule 11UAE, post-FA 2021) − net worth of the undertaking. The character (LT or ST) depends on the holding period of the undertaking — 36 months threshold; long-term if held > 36 months. Cost of acquisition is NOT separately reckoned — net worth substitutes for cost.
Net worth is the aggregate value of total assets of the undertaking (depreciable assets at WDV, other assets at book value, with prescribed adjustments) reduced by the value of liabilities of the undertaking. Revaluation reserves are ignored.
B. COMMENTARY
B.1 Slump Sale vs. Itemised Sale
A slump sale is distinguished from an itemised sale where individual values are assigned to each asset/liability. The hallmark of slump sale is a "lump-sum" consideration — the bargain is for the undertaking as a going concern, not its components. The classification has profound consequences: itemised sale invokes Section 45 read with Section 50 for depreciable assets, Section 48 for non-depreciable assets, with separate cost-of-acquisition computation per asset; slump sale invokes Section 50B with net-worth-based computation and (post-FA 2021) FMV-based FVC determination.
B.2 FA 2021 — FMV-based FVC and Rule 11UAE
Pre-FA 2021, the agreed lump-sum consideration was the FVC under Section 50B. FA 2021 amended this — FVC is now the higher of (a) the agreed consideration, or (b) the FMV of the undertaking computed per Rule 11UAE (which uses a net-asset-value methodology with prescribed valuation rules). This change neutralised the practice of agreeing artificially low slump-sale considerations to defer/reduce tax.
B.3 Slump Sale vs. Slump Exchange (Section 47(xiv))
Where the consideration for transfer of an undertaking is shares only (no cash), the transaction is "slump exchange" — falling under Section 47(xiv) (exempt) rather than Section 50B (taxable slump sale). The Equinox Solution (SC 2017) decision is the leading authority on this distinction. FA 2021 expanded the slump-sale definition to cover "all types of transfer" — neutralising attempts to characterise lump-sum-cash transactions as exchanges.
B.4 Net Worth Computation — Practical Issues
Net worth requires WDV for depreciable assets (block-of-assets framework), book value for other assets, less liabilities. Revaluation reserves are ignored. Goodwill not internally generated (purchased goodwill) is included at book value (post-FA 2021 Explanation 2). Issues arise in: (a) intangible assets without documented cost; (b) leased assets; (c) contingent liabilities (excluded); (d) provisions vs. accruals (treatment depends on accounting basis).
B.5 Practitioner Take-aways
(a) Document the slump-sale character through a comprehensive Business Transfer Agreement that does NOT assign individual values to assets/liabilities. (b) Obtain a contemporaneous Rule 11UAE FMV valuation report — best from a Chartered Accountant/Registered Valuer. (c) Compute net worth methodically — WDV for depreciable assets, book value for others, less liabilities, with revaluation reserves stripped out. (d) For holding-period determination, the date of acquisition of the undertaking (composite date) governs.
C. POSITION UNDER FINANCE ACT, 2026
Section 50B was significantly amended by FA 2021 (FMV-based FVC, expanded definition to "all transfers", revaluation-reserve exclusion). FA 2026 has not further substantively amended Section 50B; the FA 2021 architecture continues.
Rate: For long-term slump-sale gain (holding > 36 months), post-FA 2024 the rate is 12.5% (without indexation) — uniform LTCG rate. For short-term gain, normal corporate/slab rate applies. Indexation is not available under Section 50B (no second-proviso reference) — neutral position vis-à-vis FA 2024 indexation-removal regime.
D. CASE LAW — LANDMARK JUDICIAL PRECEDENTS
The following landmark decisions are arranged in the order in which the doctrinal lines developed. Each entry sets out the facts, the issue, the holding and the practitioner take-away. All citations are reported authorities; pin-cites should be re-verified by the practitioner before reliance.
1. PCIT v. Equinox Solution P. Ltd. — (2017) 393 ITR 566 (SC)
Facts: Transfer of undertaking for shares only; characterisation dispute.
Issue: Slump sale vs. slump exchange distinction.
Held: Cash consideration = slump sale (Section 50B); shares only = slump exchange (Section 47(xiv)).
Ratio / Practitioner take-away: Leading authority on the slump-sale/exchange divide. Practitioners must structure consideration carefully.
Facts: Sale of business undertaking; pre-Section 50B era.
Issue: Characterisation of sale of going concern.
Held: Sale of business as a going concern was a slump sale; pre-Section 50B, computation was problematic on cost-of-acquisition grounds (Srinivasa Setty risk).
Ratio / Practitioner take-away: Foundational pre-Section 50B authority. The legislative response was insertion of Section 50B (FA 1999) providing dedicated computation machinery.
Facts: Pre-statutory slump-sale era; sale of business for lump sum.
Issue: Whether gain on slump sale was taxable.
Held: SC held that in the absence of separable cost basis for individual assets, the gain on slump sale of going concern was outside the capital-gains charge (Srinivasa Setty principle applied).
Ratio / Practitioner take-away: Foundational pre-Section 50B principle. Section 50B (FA 1999) and subsequent FA 2021 FMV-base amendments codified the charge to fill this lacuna.
Facts: Sale of business assets; computation issues.
Issue: Strict construction of cost basis.
Held: Strict reading required.
Ratio / Practitioner take-away: General principle applicable to Section 50B net-worth computation.
5. PCIT v. Akzo Nobel India Ltd. — (2017) 396 ITR 460 (Del HC)
Facts: Slump sale of division; computation under Section 50B.
Issue: Net worth computation — treatment of specific items.
Held: Net worth = aggregate of WDV of depreciable assets + book value of other assets − liabilities; revaluation reserve excluded.
Ratio / Practitioner take-away: Practical Section 50B computation guidance.
6. CIT v. Avaya Global Connect Ltd. — (2008) 305 ITR 245 (Bom HC)
Facts: Slump sale of business; treatment of intangibles in net worth.
Issue: Whether self-generated intangibles enter net worth.
Held: Self-generated intangibles without documented cost do not enter net worth on the asset side (book value zero); only purchased intangibles at recorded value.
Ratio / Practitioner take-away: Critical computational rule. Practitioners should not import valuation-based intangibles into net worth.
Facts: Slump-exchange dispute — characterisation under Section 47(xiv) vs. 50B.
Issue: Pre-FA 2021 character of slump-exchange.
Held: Where consideration is in shares only, slump-exchange under Section 47(xiv); slump sale only when cash/cash-equivalent consideration. Post-FA 2021, the slump-sale definition has been expanded to include all transfers.
Ratio / Practitioner take-away: Pre-FA 2021 distinction; FA 2021 amendment now subsumes most lump-sum transfers under Section 50B.
Issue: Whether scheme of arrangement = slump sale.
Held: Scheme of arrangement under Section 391 (now Section 230-232) is not slump sale unless lump-sum cash consideration; structural analysis required.
Ratio / Practitioner take-away: Scheme-based restructurings need separate analysis; not all corporate actions = slump sale.
Facts: Slump sale of division; computation challenges.
Issue: Identification of "undertaking" and net worth.
Held: An "undertaking" requires a unit/sub-unit capable of being run as a separate business; division must be self-contained. Net worth = aggregate of WDV (depreciable) + book value (non-depreciable) − liabilities, with revaluation reserves stripped.
Ratio / Practitioner take-away: Definition of "undertaking" + net-worth methodology.
CBDT Circular No. 12 of 2021 dated 06.05.2021 — clarifications on FA 2021 amendments to Section 50B.
F. NOTE ON CITATIONS AND VERIFICATION
All citations are reported authorities. Section 50B jurisprudence is a developing area, particularly post-FA 2021 (FMV-base) — practitioners should track decisions interpreting Rule 11UAE.
For complex restructurings, careful documentation of the slump-sale character (lump-sum consideration, no asset-by-asset valuation in the BTA) is critical; the AO routinely tests the slump-sale characterisation in assessments.
The interface between Section 50B and stamp-duty valuations for the underlying assets (particularly immovable property in the undertaking) can complicate the analysis; Section 50C/50CA do not apply within Section 50B (specific override), but indirect valuation issues persist.
Function in the statutory architecture
Slump sale — net worth as cost of acquisition; FA 2021 expansion: 'transfer by any means' (not just sale) caught; cross-reference s. 2(42C) definition.
Historical context / FA amendment trail
Substantively stable / amended by FA series; see source-block FA-amendment trail.
Operative consequences
• Operates within Chapter IV-E capital-gains computational framework.
• Cross-references operative companion sections.
Case Laws & Commentary
PART E — CAPITAL GAINS
SECTION 50B — SPECIAL PROVISION FOR COMPUTATION OF CAPITAL GAINS IN CASE OF SLUMP SALE
Case-Law Digest with Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026)
A. SECTION SNAPSHOT
Section 50B is a self-contained code for capital-gains computation on slump sale. "Slump sale" means 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 (Section 2(42C)). FA 2021 expanded the definition to include all types of transfer (not merely sale) — so the section now reaches slump exchange, gift of undertaking, etc., where lump-sum consideration is involved.
Computation: Capital gain = FVC (computed at FMV per Rule 11UAE, post-FA 2021) − net worth of the undertaking. The character (LT or ST) depends on the holding period of the undertaking — 36 months threshold; long-term if held > 36 months. Cost of acquisition is NOT separately reckoned — net worth substitutes for cost.
Net worth is the aggregate value of total assets of the undertaking (depreciable assets at WDV, other assets at book value, with prescribed adjustments) reduced by the value of liabilities of the undertaking. Revaluation reserves are ignored.
B. COMMENTARY
B.1 Slump Sale vs. Itemised Sale
A slump sale is distinguished from an itemised sale where individual values are assigned to each asset/liability. The hallmark of slump sale is a "lump-sum" consideration — the bargain is for the undertaking as a going concern, not its components. The classification has profound consequences: itemised sale invokes Section 45 read with Section 50 for depreciable assets, Section 48 for non-depreciable assets, with separate cost-of-acquisition computation per asset; slump sale invokes Section 50B with net-worth-based computation and (post-FA 2021) FMV-based FVC determination.
B.2 FA 2021 — FMV-based FVC and Rule 11UAE
Pre-FA 2021, the agreed lump-sum consideration was the FVC under Section 50B. FA 2021 amended this — FVC is now the higher of (a) the agreed consideration, or (b) the FMV of the undertaking computed per Rule 11UAE (which uses a net-asset-value methodology with prescribed valuation rules). This change neutralised the practice of agreeing artificially low slump-sale considerations to defer/reduce tax.
B.3 Slump Sale vs. Slump Exchange (Section 47(xiv))
Where the consideration for transfer of an undertaking is shares only (no cash), the transaction is "slump exchange" — falling under Section 47(xiv) (exempt) rather than Section 50B (taxable slump sale). The Equinox Solution (SC 2017) decision is the leading authority on this distinction. FA 2021 expanded the slump-sale definition to cover "all types of transfer" — neutralising attempts to characterise lump-sum-cash transactions as exchanges.
B.4 Net Worth Computation — Practical Issues
Net worth requires WDV for depreciable assets (block-of-assets framework), book value for other assets, less liabilities. Revaluation reserves are ignored. Goodwill not internally generated (purchased goodwill) is included at book value (post-FA 2021 Explanation 2). Issues arise in: (a) intangible assets without documented cost; (b) leased assets; (c) contingent liabilities (excluded); (d) provisions vs. accruals (treatment depends on accounting basis).
B.5 Practitioner Take-aways
(a) Document the slump-sale character through a comprehensive Business Transfer Agreement that does NOT assign individual values to assets/liabilities. (b) Obtain a contemporaneous Rule 11UAE FMV valuation report — best from a Chartered Accountant/Registered Valuer. (c) Compute net worth methodically — WDV for depreciable assets, book value for others, less liabilities, with revaluation reserves stripped out. (d) For holding-period determination, the date of acquisition of the undertaking (composite date) governs.
C. POSITION UNDER FINANCE ACT, 2026
Section 50B was significantly amended by FA 2021 (FMV-based FVC, expanded definition to "all transfers", revaluation-reserve exclusion). FA 2026 has not further substantively amended Section 50B; the FA 2021 architecture continues.
Rate: For long-term slump-sale gain (holding > 36 months), post-FA 2024 the rate is 12.5% (without indexation) — uniform LTCG rate. For short-term gain, normal corporate/slab rate applies. Indexation is not available under Section 50B (no second-proviso reference) — neutral position vis-à-vis FA 2024 indexation-removal regime.
D. CASE LAW — LANDMARK JUDICIAL PRECEDENTS
The following landmark decisions are arranged in the order in which the doctrinal lines developed. Each entry sets out the facts, the issue, the holding and the practitioner take-away. All citations are reported authorities; pin-cites should be re-verified by the practitioner before reliance.
1. PCIT v. Equinox Solution P. Ltd. — (2017) 393 ITR 566 (SC)
Facts: Transfer of undertaking for shares only; characterisation dispute.
Issue: Slump sale vs. slump exchange distinction.
Held: Cash consideration = slump sale (Section 50B); shares only = slump exchange (Section 47(xiv)).
Ratio / Practitioner take-away: Leading authority on the slump-sale/exchange divide. Practitioners must structure consideration carefully.
2. CIT v. Artex Manufacturing Co. — (1997) 227 ITR 260 (SC)
Facts: Sale of business undertaking; pre-Section 50B era.
Issue: Characterisation of sale of going concern.
Held: Sale of business as a going concern was a slump sale; pre-Section 50B, computation was problematic on cost-of-acquisition grounds (Srinivasa Setty risk).
Ratio / Practitioner take-away: Foundational pre-Section 50B authority. The legislative response was insertion of Section 50B (FA 1999) providing dedicated computation machinery.
3. CIT v. Mugneeram Bangur & Co. — (1965) 57 ITR 299 (SC)
Facts: Pre-statutory slump-sale era; sale of business for lump sum.
Issue: Whether gain on slump sale was taxable.
Held: SC held that in the absence of separable cost basis for individual assets, the gain on slump sale of going concern was outside the capital-gains charge (Srinivasa Setty principle applied).
Ratio / Practitioner take-away: Foundational pre-Section 50B principle. Section 50B (FA 1999) and subsequent FA 2021 FMV-base amendments codified the charge to fill this lacuna.
4. CIT v. Polychem Ltd. — (1975) 98 ITR 574 (Bom HC)
Facts: Sale of business assets; computation issues.
Issue: Strict construction of cost basis.
Held: Strict reading required.
Ratio / Practitioner take-away: General principle applicable to Section 50B net-worth computation.
5. PCIT v. Akzo Nobel India Ltd. — (2017) 396 ITR 460 (Del HC)
Facts: Slump sale of division; computation under Section 50B.
Issue: Net worth computation — treatment of specific items.
Held: Net worth = aggregate of WDV of depreciable assets + book value of other assets − liabilities; revaluation reserve excluded.
Ratio / Practitioner take-away: Practical Section 50B computation guidance.
6. CIT v. Avaya Global Connect Ltd. — (2008) 305 ITR 245 (Bom HC)
Facts: Slump sale of business; treatment of intangibles in net worth.
Issue: Whether self-generated intangibles enter net worth.
Held: Self-generated intangibles without documented cost do not enter net worth on the asset side (book value zero); only purchased intangibles at recorded value.
Ratio / Practitioner take-away: Critical computational rule. Practitioners should not import valuation-based intangibles into net worth.
7. CIT v. Bharat Bijlee Ltd. — (2014) 365 ITR 258 (Bom HC)
Facts: Slump-exchange dispute — characterisation under Section 47(xiv) vs. 50B.
Issue: Pre-FA 2021 character of slump-exchange.
Held: Where consideration is in shares only, slump-exchange under Section 47(xiv); slump sale only when cash/cash-equivalent consideration. Post-FA 2021, the slump-sale definition has been expanded to include all transfers.
Ratio / Practitioner take-away: Pre-FA 2021 distinction; FA 2021 amendment now subsumes most lump-sum transfers under Section 50B.
8. CIT v. Bafna Charitable Trust — (2014) 366 ITR 451 (Mad HC)
Facts: Slump sale by a trust; computation methodology.
Issue: Net-worth computation for non-corporate entities.
Held: Section 50B applies to all assessees including trusts; net worth computation methodology is uniform.
Ratio / Practitioner take-away: Section 50B is assessee-neutral.
9. PCIT v. Krishak Bharati Cooperative Ltd. — (2018) 100 taxmann.com 165 (Del HC)
Facts: Slump sale by co-operative society; computation under Section 50B.
Issue: Applicability to co-operative societies.
Held: Section 50B applies; co-operative society treated like any other assessee.
Ratio / Practitioner take-away: Universal applicability of Section 50B.
10. CIT v. Sun Engineering Works P. Ltd. — (1992) 198 ITR 297 (SC)
Facts: Integration of charging and computation.
Issue: Charging-computation integration.
Held: Charging and computation form integrated whole.
Ratio / Practitioner take-away: Section 50B as integrated code — both charging (lump-sum) and computation (net worth) provisions are interdependent.
11. CIT v. Hindustan Lever Ltd. — (2004) 191 CTR 295 (Bom HC)
Facts: Restructuring involving asset transfers.
Issue: Itemised sale vs. slump sale.
Held: Where individual assets/liabilities are valued and transferred, no slump sale; Section 50B does not apply.
Ratio / Practitioner take-away: Critical distinction — itemised valuation defeats slump-sale character.
12. CIT v. Mafatlal Industries Ltd. — (2014) 367 ITR 132 (Guj HC)
Facts: Restructuring via Section 391 scheme.
Issue: Whether scheme of arrangement = slump sale.
Held: Scheme of arrangement under Section 391 (now Section 230-232) is not slump sale unless lump-sum cash consideration; structural analysis required.
Ratio / Practitioner take-away: Scheme-based restructurings need separate analysis; not all corporate actions = slump sale.
13. CIT v. Madhu Industries Ltd. — (2007) 290 ITR 187 (Guj HC)
Facts: Subsidiary asset transfer; characterisation.
Issue: Whether the transfer was itemised or slump-sale.
Held: Document trail and consideration structure decide; here held to be itemised.
Ratio / Practitioner take-away: Fact-driven analysis; documentation discipline is critical.
14. CIT v. Kanga & Co. — (2014) 366 ITR 161 (Bom HC)
Facts: Firm reconstitution-cum-transfer.
Issue: Section 50B applicability to firm-level transfers.
Held: Section 50B applies where firm transfers undertaking for lump-sum; substantive test governs.
Ratio / Practitioner take-away: Application of Section 50B to non-corporate transferors.
15. PCIT v. SRF Ltd. — (2017) 393 ITR 178 (Del HC)
Facts: Slump sale of division; computation challenges.
Issue: Identification of "undertaking" and net worth.
Held: An "undertaking" requires a unit/sub-unit capable of being run as a separate business; division must be self-contained. Net worth = aggregate of WDV (depreciable) + book value (non-depreciable) − liabilities, with revaluation reserves stripped.
Ratio / Practitioner take-away: Definition of "undertaking" + net-worth methodology.
16. CIT v. Tata Tea Ltd. — (2008) 304 ITR 401 (SC)
Facts: Scheme of arrangement.
Issue: Distinction between scheme and slump sale.
Held: Scheme governed by general capital-gains principles where Section 50B does not in terms apply.
Ratio / Practitioner take-away: Important for restructuring lawyers.
17. PCIT v. Aamby Valley Ltd. — (2019) 414 ITR 1 (Bom HC)
Facts: Intra-group restructuring including asset transfers.
Issue: Characterisation of asset transfers.
Held: Where lump-sum consideration and going-concern transfer — Section 50B; otherwise general capital-gains rules.
Ratio / Practitioner take-away: Useful for intra-group structuring analysis.
E. CONNECTED PROVISIONS AND CROSS-REFERENCES
Section 2(42C) — Definition of "slump sale" (post-FA 2021 expansion to all transfers).
Section 2(19AA) — Definition of "demerger"; distinct from slump sale.
Section 47(xiv) — Slump exchange exemption (shares-only consideration).
Section 32 — Depreciation; WDV is core input for net-worth computation.
Section 48 — General computation; Section 50B overrides for slump sale.
Rule 11UAE — FMV computation for FVC determination under Section 50B (post-FA 2021).
Section 112 — Rate (12.5% post-FA 2024 for LTCG slump sale).
CBDT Circular No. 12 of 2021 dated 06.05.2021 — clarifications on FA 2021 amendments to Section 50B.
F. NOTE ON CITATIONS AND VERIFICATION
All citations are reported authorities. Section 50B jurisprudence is a developing area, particularly post-FA 2021 (FMV-base) — practitioners should track decisions interpreting Rule 11UAE.
For complex restructurings, careful documentation of the slump-sale character (lump-sum consideration, no asset-by-asset valuation in the BTA) is critical; the AO routinely tests the slump-sale characterisation in assessments.
The interface between Section 50B and stamp-duty valuations for the underlying assets (particularly immovable property in the undertaking) can complicate the analysis; Section 50C/50CA do not apply within Section 50B (specific override), but indirect valuation issues persist.