Slump sale capital gains: Section 50C does not apply where an undertaking is transferred for lump sum consideration.

A slump sale of an industrial undertaking for a lump sum consideration was computed under Section 50B on net worth supported by Form 3CEA, and Section 50C was held inapplicable because no individual asset or liability values were assigned. Explanation 2 to Section 2(42C) prevents stamp duty valuation from being treated as allocation of values to assets and liabilities, so the deeming fiction in Section 50C could not be used to enhance the transfer value. The later insertion of Section 11UAE was prospective and did not apply to the assessment year concerned. Reliance on Artex Manufacturing Co. was found misplaced because it arose in a different statutory setting.

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Issues: Whether the addition made by applying Section 50C to the transfer of an industrial undertaking sold as a slump sale was sustainable, and whether the assessee's computation under Section 50B was liable to be rejected.

Analysis: The undertaking was transferred for a lump sum consideration without assigning values to individual assets and liabilities, and the capital gain was computed on the basis of net worth supported by a chartered accountant's report in Form 3CEA. Explanation 2 to Section 2(42C) excludes valuation made solely for stamp duty, registration fees or similar charges from being treated as assignment of values to individual assets or liabilities. The deeming fiction in Section 50C therefore did not apply to the slump sale in question. The later amendment introducing Section 11UAE was prospective and had no application to the assessment year involved. The reliance placed on Artex Manufacturing Co. was held to be inapposite because that decision arose in a different statutory context and prior to the insertion of the special regime under Sections 2(42C) and 50B.

Conclusion: The addition was rightly deleted and the assessee's computation of capital gain on slump sale was sustained.

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