Page 327 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning

Notes 5. Minimum 7 Shareholders (for Public Limited Co.) and 2 shareholders (for Private Limited
Co.).
6. Minimum 2 Directors (for Private Limited Co.) and 3 Directors (for Public Limited Co.)
7. The directors and shareholders can be same person.

8. DIN (Director Identification Number) for all the Directors.

9. DSC (Digital Signature Certificate) for one of the Directors.
Self Assessment

State whether the following statements are true or false:

5. All the assets and liabilities of the firm immediately after its succession should become the
assets and liabilities of the company.
6. The partners’ aggregate shareholding in the company is not more than 50% of the total
voting power in the company and their shareholding should continue to remain so for a
period of 5 years from the date of succession – Section 47(xiii).

7. No Capital Gains tax shall be charged on transfer of property from partnership fi rm to
company.

8. All movable and immovable properties of the firm automatically vest in the company.
14.3 Slump Sale

‘Slump sale’ means the 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 in such
sales. If value of an asset or liability is determined for the sole purpose of payment of stamp
duty, registration fees or other similar taxes or fees, that should not be regarded as assignment of
values to individual assets and liabilities.

The Income- tax Act, 1961 (‘IT Act’) defines Slump Sale as ‘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 in such sales’ .One question that arises in this context is whether in a situation
where an undertaking is transferred against the allotment of shares in the acquiring company,
the transaction would qualify as “slump sale” under the Income-tax Act, 1961. One view in this
regard is that the transfer must necessarily be affected against a monetary consideration and a
transfer against allotment of share is merely an “exchange” which will not qualify as a “sale”.
However, a more reasonable view seems to be that the allotment of shares is merely a manner
of discharge of consideration and the transaction would still qualify as a slump sale if other
conditions are satisfi ed.

14.3.1 Key Characteristic Features of Slump Sale

Slump Sale is one of the widely accepted ways of conducting business transfers. In general parlance,
Slump Sale is transferring of whole or part (capable of carrying out operations independently) of
a business undertaking as a going concern - lock, stock and barrel. It includes transfer of not only
tangible and intangible assets, but also debts, obligations and liabilities.

1. Sale of an undertaking: For any sale to constitute as Slump Sale there should be a ‘sale’ of
business. Transfer of an undertaking by any other mode (like exchange, relinquishment,
extinguishment, compulsory acquisition, etc) other than sale would not qualify as Slump
Sale transaction.

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