RULES FOR VALUATION OF ASSETS IN CASE OF SLUMP SALE NOTIFIED:
Earlier due to non prescribed rules for the purpose of section 50B, Net assets transferred were valued at the book value. Now CBDT notified Rule 11UAE computation of FMV of capital assets for the purpose of section 50B of the income tax act, 1961 vide notification no. 68/201-Income Tax, Dated 24th May, 2021. which states Fair Market Value of the net assets transferred should be the higher of the FMV1 or FMV2.
The formula for FMV1 and FMV2 has been given below:
- A means book value of all the assets (other than jewellery, artistic work shares securities and immovable property) as appearing in the BOA of the undertaking or the divisions transferred by way of slump sale.
- B is the price which the jewellery and artistic work would fetch if sold in the open market
- C means FMV of shares and securities
- D is 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 refers to the liabilities of the said undertaking.FMV2=E+F+G+H where,
- E means value of the monetary consideration received or accruing as a result of the transfer
- F means fair market value of non monetary consideration received or accruing as a result of the transfer represented by property
- G is the price which the non monetary consideration received or accruing as a result of the transfer represented by property other than immovable property
- H indicated 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.
Note: The fair market value of the capital assets 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 purpose of this rule, the expression “registered valuer” and “securities” shall have the same meanings as respectively assigned to them in rule 11U.