Balancing charge under section 41(2) applies where itemised depreciable assets are sold, not a true slump sale.

Sale of a cinema hall, machinery, furniture and lease rights for a lump sum was treated as a transfer of depreciable assets, not as a slump sale of the entire undertaking. Because the transaction did not amount to sale of the business as a going concern, section 41(2) of the Income-tax Act, 1961 was held applicable in principle. The available valuation material allowed itemised attribution to depreciable assets, but the price attributable to the unexpired leasehold right was not on record. The matter therefore required limited remand only to ascertain and exclude that amount before computing the balancing charge.

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Issues: Whether the sale of the cinema hall, machinery, furniture and lease rights for a lump sum attracted balancing charge under section 41(2) of the Income-tax Act, 1961, or whether it was a slump sale outside the scope of that provision.

Analysis: The sale deed was held to transfer only depreciable assets together with the unexpired lease rights, and not the assessee's entire business as a going concern. The Court distinguished authorities dealing with slump sales and held that, on the facts, the transaction was not a sale of the whole undertaking. The valuation report obtained shortly before the sale showed itemised values for the depreciable assets, making it possible to ascertain the consideration attributable to those assets. Since the sale price attributable to the unexpired leasehold right was not available on the record, the matter required limited remand for that figure to be ascertained and excluded before computing the balancing charge.

Conclusion: Section 41(2) was held applicable in principle, and the assessee's contention that no balancing charge could arise on the basis of a slump sale was rejected. The matter was remanded only for quantification of the price attributable to the depreciable assets and consequent computation of the balancing charge.

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