S. 50B – Amount of liabilities being reflected in the negative net worth cannot be added to sale consideration for determining the capital gains on account of slump sale

DCIT Vs. Summit Securities Ltd (ITAT Mumbai Special Bench)

It was held by special bench that negative figure of net worth of the undertaking should not be ignored for working out capital gains in case of a slump sale under Section 50B of the Income-tax Act, 1961. This is a very important ruling by the Special Bench, which has reversed the law laid down by the Mumbai Tribunal in case of Zuari Industries Ltd. [2007] 105 ITD 569 (MUM), wherein it was held that if the net worth of the undertaking is negative, the same should be considered as zero, for the purposes of computing capital gains under Section 50B of the Act.

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