Budget 2022 has further amended the definition of the expression ‘slump sale’ to substitute the conclusive word ‘sale’, which was inadvertently retained, from its existing definition with the word ‘transfer’ and thus cover all types of transfer as stipulated in section 2(47) of the Income-tax Act, 1961 (‘Act’) within the umbrella of ‘slump sale’.
Readers are aware that Finance Act, 2021 had amended the definition of ‘Slump Sale’ to cover all types of transfer as listed in clause (47) of section 2.
Prior to the amendment effected by the Finance Act, 2021, only the transfers for monetary consideration were covered in the slump sale. The definition was modified in 2021 to cover all types of transfer so as to include exchange within the ambit of ‘slump sale’.
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However, due to a drafting error in the amended wordings, the reading of the definition still gives the impression that only the transfer in the form of ‘sale’ is included or covered in the ‘slump sale’. The amended definition of slump sale as per section 2(42C) after the 2021 amendment reads as follows-
"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.
Because of the endmost word ‘sales’ appearing at the end of the definition, it appears that only those transfer as a result of ‘sale’ is covered whereas the intention of the legislature was to amend the definition to cover all types of transfer and not limited to transfer in the nature of ‘sale’ only.
This, as per the Explanatory Memorandum, was an inadvertent error which is corrected now to substitute the word ‘sale’ with the word ‘transfer’ retrospectively from 1.4.21 (AY 2021-22).
Slump sale is defined in clause (42C) of section 2 of the Act, as the transfer of one or more undertaking, by any means, for a lump sum consideration without values being assigned to individual assets and liabilities in such sales. Vide the Finance Act, 2021, the definition of “slump sale” was amended to expand its scope to cover all forms of transfer under slump sale. However, inadvertently, in the last sentence there is reference to the word “sales” instead of “transfer”.
Therefore, it is proposed to carry out consequential amendment by amending the provision of clause (42C) of section 2 of the Act, to substitute the word “sales” with the word “transfer”.
For this purpose, Clause 3 of the Finance Bill, 2022 amends section 2(42C) as follows-
Amendment of section 2.
3. In section 2 of the Income-tax Act,–
(a) in clause (42C), for the word “sales” occurring at the end and before Explanation 1, the word “transfer” shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 2021;
Explaining the amended provisions of section 2(42C)
Clause 3 seeks to amend section 2 of the Act relating to definitions.
Clause (42C) of the said section defines the expression “slump sale” as 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.
It is proposed to amend the said clause to substitute the word “sales”, with the word “transfer”.
This amendment will take effect retrospectively from 1st April, 2021 and, will, accordingly, apply in relation to the assessment year 2021-2022 and subsequent assessment years.
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