Taxontips
No Result
View All Result
Monday, September 25, 2023
Login/ Register
  • Home
  • Income Tax
    • Income Tax Return
    • Tax Notice/ Personal consultation
    • Compliance Notice
    • Faceless Assessment
  • GST
    • GST Registration
    • GST Consultation
  • News
    • Income Tax News
    • GST news
    • Budget News
    • Business & Other News
  • Q & A
  • About us
  • Contact us
Talk to an Expert
  • Home
  • Income Tax
    • Income Tax Return
    • Tax Notice/ Personal consultation
    • Compliance Notice
    • Faceless Assessment
  • GST
    • GST Registration
    • GST Consultation
  • News
    • Income Tax News
    • GST news
    • Budget News
    • Business & Other News
  • Q & A
  • About us
  • Contact us
No Result
View All Result
Taxontips
No Result
View All Result

Rules for determining Fair Market Value (FMV) of assets under section 50B prescribed by CBDT

Income tax Expert by Income tax Expert
May 25, 2021
in Income Tax News
0
Rules for determining Fair Market Value (FMV) of assets under section 50B prescribed by CBDT
113
SHARES
1.4k
VIEWS
image_pdfPDFimage_printPrint

Section 50B of the Income tax act is special provision of capital gain wherein capital gain is calculated in case of Slump sale transaction.

Now let’s under what is slump sale?

As per section 2(42C) of the Income tax act slump sale means (Before Finance Act, 2021):

““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.”

As per section 2(42C) slump sale means (After Finance Act, 2021):

“”slump sale” means 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 in such sales.”

Thus now after the above amendment the scope of slump sale has widened and now slump sale transaction which is not in the nature of sale will also be considered as slump sale which might be in nature of exchange, barter etc.

The second amendment which has been made to sub section (2) of section 50B that used to deal with calculation of cost in relation to slump sale and is as under (Before Amendment):

“(2) In relation to capital assets being an undertaking or division transferred by way of such sale, the “net worth” of the undertaking or the division, as the case may be, shall be deemed to be the cost of acquisition and the cost of improvement for the purposes of sections 48 and 49 and no regard shall be given to the provisions contained in the second proviso to section 48”

Earlier consideration received for such transaction used to be actual sale consideration received as only sale transaction would be considered as slump sale and net worth of the unit would be considered as cost of acquisition.

Now after amendment to section 50B by Finance Act 2021 same is as under:

“(2) In relation to capital assets being an undertaking or division transferred by way of such slump sale,—

(i) the “net worth” of the undertaking or the division, as the case may be, shall be deemed to be the cost of acquisition and the cost of improvement for the purposes of sections 48 and 49 and no regard shall be given to the provisions contained in the second proviso to section 48;

(ii) Fair market value of the capital assets as on the date of transfer, calculated in the prescribed manner, shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of such capital asset.”

Thus, now sub section 2 deals with cost and well as full value of consideration in case of slump sale.

Accordingly still net worth of the unit is considered as cost of the unit and fair market value of the assets will be deemed to be the full value of consideration. Thus, a deeming fiction has been created as regard to full value of consideration as we see in section 50C.

But in the above provision it has been mentioned that FMV shall be calculated in the prescribed manner and same has been now prescribed under Income tax rules as Rule 11UAE vide notification dt. 24.05.2021 which is as under:

“11UAE.Computation of Fair Market Value of Capital Assets for the purposes of section 50B of the Income-tax Act.

(1) For the purpose of clause (ii) of sub-section (2) of section 50B, the fair market value of the capital assets shall be the FMV1 determined under sub-rule (2) or FMV2 determined under sub-rule (3), whichever is higher.

(2) The FMV1 shall be the fair market value of the capital assets transferred by way of slump sale determined in accordance with the formula –

A+B+C+D – L, where,

A= book value of all the assets (other than jewellery, artistic work, shares, securities and immovable property) as appearing in the books of accounts of the undertaking or the division transferred by way of slump sale as reduced by the following amount which relate to such undertaking or the division, —
(i) any amount of income-tax paid, if any, less the amount of income-tax refund claimed, if any; and
(ii) any amount shown as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset;

B = the price which the jewellery and artistic work would fetch if sold in the open market on the basis of the valuation report obtained from a registered valuer;

C = fair market value of shares and securities as determined in the manner provided in sub-rule (1) of rule 11UA;

D = the value adopted or assessed or assessable by any authority of the Government for the purpose of payment of stamp duty in respect of the immovable property;

L= book value of liabilities as appearing in the books of accounts of the undertaking or the division transferred by way of slump sale, but not including the following amounts which relates to such undertaking or division, namely: —
(i) the paid-up capital in respect of equity shares;
(ii) the amount set apart for payment of dividends on preference shares and equity shares where such dividends have not been declared before the date of transfer at a general body meeting of the company;
(iii) reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation;
(iv) any amount representing provision for taxation, other than amount of income-tax paid, if any, less the amount of income-tax claimed as refund, if any, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto;
(v) any amount representing provisions made for meeting liabilities, other than ascertained liabilities;
(vi) any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares.

 

(3) FMV2 shall be the fair market value of the consideration received or accruing as a result of transfer by way of slump sale determined in accordance with the formula-

E+F+G+H, where,

E = value of the monetary consideration received or accruing as a result of the transfer;

F = fair market value of non-monetary consideration received or accruing as a result of the transfer represented by property referred to in sub-rule (1) of rule 11UA determined in the manner provided in sub-rule (1) of rule 11UA for the property covered in that sub-rule;

G = the price which the non-monetary consideration received or accruing as a result of the transfer represented by property, other than immovable property, which is not referred to in sub-rule (1) of rule 11UA would fetch if sold in the open market on the basis of the valuation report obtained from a registered valuer, in respect of property;

H = the value adopted or assessed or assessable by any authority of the Government for the purpose of payment of stamp duty in respect of the immovable property in case the non-monetary consideration received or accruing as a result of the transfer is represented by the immovable property.

(4) The fair market value of the capital assets under sub-rule (2) and sub-rule (3) shall be determined on the date of slump sale and for this purpose valuation date referred to in rule 11UA shall also mean the date of slump sale.

Explanation. -For the purposes of this rule, the expression “registered valuer” and “securities” shall have the
same meanings as respectively assigned to them in rule 11U.”

If we look at the above rule it can be said that such deeming FMV is a combination of actual consideration and fair market value and high of both will be considered as final sale consideration for the purpose of slump sale.

Also, in the second FMV formula i.e. FMV2 under sub rule 3 there is no reduction of liabilities since actual consideration received is considered but in a case where non-monetary consideration is received there also no reduction of liabilities is done even though in non monetary consideration only FMV of assets will be considered under sub rule 3 which can increase the capital gain sale consideration.

Thus, above are the new rules prescribed for the purpose of calculation of sale consideration in case of slump sale.

 

Disclaimer: The views presented in the above article are personal views of the author and has no legal binding. For any legal opinion consult a tax professional.

If you wish to book any consultation with tax expert CLICK HERE.

image_pdfPDFimage_printPrint
Previous Post

Income tax compliance due date extended for AY 2021-22 but no extension in time limit for payment of tax

Next Post

ICAI issues circular for annual membership fees for 2021-22 | No reduction in fees in spite of Covid | How to pay membership fees

Related Posts

Tax audit u/s 44AB to be scrapped?
Income Tax News

Extension of time limit for Tax audit of trust and file Form 10B and Form 10BB and ITR 7

September 18, 2023
Tax audit u/s 44AB to be scrapped?
Income Tax News

Turnover limit for Tax audit is Rs. 1 crore or Rs. 10 crore under section 44AB of the Act

September 18, 2023
Guidelines for manual selection of returns for Complete Scrutiny during the financial-year 2019-20-
Income Tax News

Digital Signature Certificate (DSC) related issues and solutions on Income tax E-filing portal

September 16, 2023
How to calculate turnover in case of intra day and future and option trading for Income Tax purpose?
Income Tax News

Definition of turnover in relation to F&O and intraday as per Revised guidance note of ICAI on Tax audit for 2023

September 13, 2023
No TDS on interest income upto Rs. 40,000 from bank – Section 194A Limit revised
Income Tax News

Claim TDS credit deducted in next assessment year for income offered in earlier year [Read section]

September 9, 2023
Received mail from GSTN “Aggregate turnover being more than Rs. 5 Cr during FY 2019-20” What does this mean?
Income Tax News

Salaried employee receiving notices for claiming deduction under Chapter VI-A

September 7, 2023
Next Post
How to pay Membership and COP fees of ICAI for 2020-21 |

ICAI issues circular for annual membership fees for 2021-22 | No reduction in fees in spite of Covid | How to pay membership fees

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Google Custom search

Recent Posts

  • Advisory: Geocoding Functionality for the Additional Place of Business – GST website
  • Multipurpose Empanelment Form (MEF) – 2023-24 | Now Open
  • Extension of time limit for Tax audit of trust and file Form 10B and Form 10BB and ITR 7
  • Turnover limit for Tax audit is Rs. 1 crore or Rs. 10 crore under section 44AB of the Act
  • Digital Signature Certificate (DSC) related issues and solutions on Income tax E-filing portal

Recent Comments

  • Srinivasan Venkatasubramanian Venkatasubramanian on GST turnover limit for services increased to Rs. 40 lakh by CBIC?
  • Notification under PMLA by Ministry of Finance which could affect CA, CS and CMA - Taxontips on CA, CS and CMA now under PMLA. KYC of clients required
  • ITR 4 is now available on e-filing website for FY 2022-23 i.e. AY 2023-24 | File ITR with experts on Taxontips – Taxontips on Businessman with turnover below 1 crore and having profit below 8% need to compulsorily get books of accounts audited: Let’s find out
  • Can a person earning income from speculative business transaction file return u/s 44AD of Income tax act - Taxontips on How to calculate turnover in case of intra day and future and option trading for Income Tax purpose?
  • Extension of last date for updation of Member’s Profile with GSTIN at Self Service Portal – Till 23rd April, 2023 - Taxontips on Updation of Member’s Profile at Self Service Portal with GSTIN to get GST credit till 15.04.2023

Categories

  • Budget News
  • Business & Other News
  • Case Laws
  • GST news
  • Income Tax News
  • News

Browse Topics by Date

September 2023
M T W T F S S
 123
45678910
11121314151617
18192021222324
252627282930  
« Aug    
  • GSTR 9/ 9C extended : AGAIN

    GSTR 9/ 9C due date to be extended to 31.10.2020 | E-invoicing will be voluntary in the beginning

    6457 shares
    Share 2583 Tweet 1614
  • How to pay Membership and COP fees of ICAI for 2020-21 |

    6351 shares
    Share 2540 Tweet 1588
  • Code/ Nature of payment 6CR updated by NSDL in challan 281 for paying TCS on sale of goods

    5732 shares
    Share 2293 Tweet 1433
  • Are all the due dates of tax audit and Income tax return for FY 2019-20 extended to 31.03.2021 by the bill presented in Lok sabha Dt. 18.09.2020

    4772 shares
    Share 1909 Tweet 1193
  • SFT transaction mentioned in Form 26AS | What does it mean? | Who reports it? | SFT codes transaction type

    3999 shares
    Share 1600 Tweet 1000

Recent Notification

Data of GST website under comparison of liability declared and ITC claimed tab not available

Advisory: Geocoding Functionality for the Additional Place of Business – GST website

September 21, 2023
ICAI has announced a new MBA programme for Diploma in Management and Business Finance

Multipurpose Empanelment Form (MEF) – 2023-24 | Now Open

September 20, 2023

RSS Taxontips

  • Advisory: Geocoding Functionality for the Additional Place of Business – GST website
  • Multipurpose Empanelment Form (MEF) – 2023-24 | Now Open
  • Extension of time limit for Tax audit of trust and file Form 10B and Form 10BB and ITR 7
  • Turnover limit for Tax audit is Rs. 1 crore or Rs. 10 crore under section 44AB of the Act
  • Digital Signature Certificate (DSC) related issues and solutions on Income tax E-filing portal
  • How to calculate Value of supply in case of online gaming including online money gaming [Read notification]
  • Introducing Electronic Credit Reversal and Re-claimed statement on GSTN
  • Definition of turnover in relation to F&O and intraday as per Revised guidance note of ICAI on Tax audit for 2023
  • Claim TDS credit deducted in next assessment year for income offered in earlier year [Read section]
  • Salaried employee receiving notices for claiming deduction under Chapter VI-A

Categories

  • Budget News
  • Business & Other News
  • Case Laws
  • GST news
  • Income Tax News
  • News

Site menu

  • Home
  • Income Tax
    • Income Tax Return
    • Tax Notice/ Personal consultation
    • Compliance Notice
    • Faceless Assessment
  • GST
    • GST Registration
    • GST Consultation
  • News
    • Income Tax News
    • GST news
    • Budget News
    • Business & Other News
  • Q & A
  • About us
  • Contact us
Taxontips

TaxOnTips provides you all tax related solutions in easy way and update you with its regular updates & notifications Visit us for details.
We are based in Jaipur, India

© 2019-2023 Taxontips.com - Tax assistance at your Fingertips

No Result
View All Result
  • Login/Signup
  • Income Tax
    • Income Tax Return
    • Tax Notice/ Personal consultation
    • Compliance Notice
    • Faceless Assessment
  • GST
    • GST registration
    • GST Consultation
  • News
    • Income Tax News
    • GST news
    • Budget News
    • Business & Other News
  • About us
  • Contact us
  • Ask an expert/ Talk to an expert
  • Q & A
  • Privacy Policy
  • Terms of use

© 2019-2023 Taxontips.com - Tax assistance at your Fingertips

Book Phone consultation with expert

Sitting home or at your office and don't have time to visit CA's office or don't know where to consult CA. Book your consultation with an expert practicing Chartered Accountant and get your query solved.

Book a phone consultation for 30 minutes with our expert at a very basic cost.

Book consultation

No thanks, I'm not interested!