I sold my whole business for one lump sum. Can the AO tax it as short-term gain?
No. Where an undertaking is sold as a running business on a going-concern basis, with all assets and liabilities, for a single slump price, no part of the consideration can be attributed to any particular depreciable asset, so s.50(2) has no application. The undertaking itself is the capital asset, and having been held for more than the prescribed period the gain is long-term.
Decided by the Supreme Court (Supreme Court of India — R.K. Agrawal and Abhay Manohar Sapre, JJ.) on 2017-04-18, reported as [2017] 80 taxmann.com 277 (SC); (2017) 393 ITR 566 (SC); 247 Taxman 89; 294 CTR 1; AIR 2017 SC 1912; 2017 (13) SCC 742; Civil Appeal No. 4399 of 2007. It bears on section 50(2), section 48(2) of the Income Tax Act 1961, in Capital Gains matters.
This kills the Assessing Officer's standard move of converting a business sale into short-term capital gain simply because the business happened to own depreciable assets forming part of a block. The Supreme Court's point is a machinery one: s.50(2) presupposes that consideration is referable to identifiable assets within a block, and where the price is a single indivisible sum that exercise is impossible. Note the limit — it is authority on how the transaction is characterised, not on how much is taxed.
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The assessee manufactured sheet metal components at Ahmedabad. It sold its entire running business in one go, with all its assets and liabilities, on 31 December 1990 to Amtrex Appliances Ltd for Rs 58,53,682. In its return for assessment year 1991-92 it treated the sale as a slump sale of a going concern giving rise to long-term capital gain and claimed the deduction then available under section 48(2). By order dated 4 March 1994 the Assessing Officer held the case fell under section 50(2), treated the gain as short-term and reworked the deduction. The Commissioner (Appeals), by order dated 6 October 1995, held that section 50(2) could not apply to the sale of an entire running business at a slump price, and that the undertaking was itself a capital asset which the assessee had owned for nearly six years, so the gain was long-term. The Tribunal concurred on 27 June 2002, and the Gujarat High Court dismissed the Revenue's appeal on 29 July 2003 on the ground that no substantial question of law arose under section 260A. The Revenue appealed by special leave.
The Supreme Court dismissed the Revenue's appeal. Section 50(2) applies where the assessee transfers one or more blocks of assets used in running his business; it does not apply where the entire running business, with assets and liabilities, is sold in one go, and such a sale cannot be treated as a sale of short-term capital assets (para 11). The sale of the entire running business with all assets and liabilities in one go was a slump sale of a long-term capital asset and had to be taxed accordingly (para 12). The Court found no fault in the reasoning of the Commissioner (Appeals), upheld by the Tribunal and the High Court, and saw no ground for interference (paras 10 and 16).
The Court decided the appeal on the ground that the case did not fall within the four corners of section 50(2). That provision is directed at the transfer of one or more blocks of assets which the assessee was using in running his business; here the assessee had sold the entire business as a running concern, which is a different thing (para 11). Since the undertaking itself was the capital asset sold, and the Commissioner (Appeals) had found it had been owned for nearly six years, the transaction was a slump sale of a long-term capital asset (paras 6 and 12). The Court recorded that its view found support in CIT v. Artex Manufacturing Co. [1997] 6 SCC 437 (para 13), and concurred with the Bombay High Court's explanation of the legal position in Premier Automobiles Ltd. v. ITO [2003] 264 ITR 193/129 Taxman 289, delivered by Kapadia J as he then was (para 14). It also noted that counsel for the Revenue was unable to cite any decision taking a contrary view or to point out any error in the decisions relied on for the assessee (para 15).
Section 50 (2) applies to a case where any block of assets are transferred by the assessee but where the entire running business with assets and liabilities is sold by the assessee in one go, such sale, in our view, cannot be considered as "short-term capital assets".
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Handle my notice → Ask a CA on WhatsAppNo. Where an undertaking is sold as a running business on a going-concern basis, with all assets and liabilities, for a single slump price, no part of the consideration can be attributed to any particular depreciable asset, so s.50(2) has no application. The undertaking itself is the capital asset, and having been held for more than the prescribed period the gain is long-term. This was decided by the Supreme Court (Supreme Court of India — R.K. Agrawal and Abhay Manohar Sapre, JJ.) and bears on section 50(2), section 48(2) of the Income Tax Act 1961. It is reported as [2017] 80 taxmann.com 277 (SC); (2017) 393 ITR 566 (SC); 247 Taxman 89; 294 CTR 1; AIR 2017 SC 1912; 2017 (13) SCC 742; Civil Appeal No. 4399 of 2007. This kills the Assessing Officer's standard move of converting a business sale into short-term capital gain simply because the business happened to own depreciable assets forming part of a block. The Supreme Court's point is a machinery one: s.50(2) presupposes that consideration is referable to identifiable assets within a block, and where the price is a single indivisible sum that exercise is impossible. Note the limit — it is authority on how the transaction is characterised, not on how much is taxed. If it applies to you, the first step is this: Pin the assessment year and the date of transfer before you cite this: it was decided on AY 1991-92, before s.50B existed at all, and today the consideration for a slump sale is not the contract price but the higher of FMV1 and FMV2 under Rule 11UAE, so the case decides characterisation only.
The assessee manufactured sheet metal components at Ahmedabad. It sold its entire running business in one go, with all its assets and liabilities, on 31 December 1990 to Amtrex Appliances Ltd for Rs 58,53,682. In its return for assessment year 1991-92 it treated the sale as a slump sale of a going concern giving rise to long-term capital gain and claimed the deduction then available under section 48(2). By order dated 4 March 1994 the Assessing Officer held the case fell under section 50(2), treated the gain as short-term and reworked the deduction. The Commissioner (Appeals), by order dated 6 October 1995, held that section 50(2) could not apply to the sale of an entire running business at a slump price, and that the undertaking was itself a capital asset which the assessee had owned for nearly six years, so the gain was long-term. The Tribunal concurred on 27 June 2002, and the Gujarat High Court dismissed the Revenue's appeal on 29 July 2003 on the ground that no substantial question of law arose under section 260A. The Revenue appealed by special leave. The matter was decided on 2017-04-18 by the Supreme Court (Supreme Court of India — R.K. Agrawal and Abhay Manohar Sapre, JJ.). On those facts the Supreme Court held as follows. The Supreme Court dismissed the Revenue's appeal. Section 50(2) applies where the assessee transfers one or more blocks of assets used in running his business; it does not apply where the entire running business, with assets and liabilities, is sold in one go, and such a sale cannot be treated as a sale of short-term capital assets (para 11). The sale of the entire running business with all assets and liabilities in one go was a slump sale of a long-term capital asset and had to be taxed accordingly (para 12). The Court found no fault in the reasoning of the Commissioner (Appeals), upheld by the Tribunal and the High Court, and saw no ground for interference (paras 10 and 16).
The Court decided the appeal on the ground that the case did not fall within the four corners of section 50(2). That provision is directed at the transfer of one or more blocks of assets which the assessee was using in running his business; here the assessee had sold the entire business as a running concern, which is a different thing (para 11). Since the undertaking itself was the capital asset sold, and the Commissioner (Appeals) had found it had been owned for nearly six years, the transaction was a slump sale of a long-term capital asset (paras 6 and 12). The Court recorded that its view found support in CIT v. Artex Manufacturing Co. [1997] 6 SCC 437 (para 13), and concurred with the Bombay High Court's explanation of the legal position in Premier Automobiles Ltd. v. ITO [2003] 264 ITR 193/129 Taxman 289, delivered by Kapadia J as he then was (para 14). It also noted that counsel for the Revenue was unable to cite any decision taking a contrary view or to point out any error in the decisions relied on for the assessee (para 15). In the words reproduced by the source cited on this page: "Section 50 (2) applies to a case where any block of assets are transferred by the assessee but where the entire running business with assets and liabilities is sold by the assessee in one go, such sale, in our view, cannot be considered as "short-term capital assets"." The decision followed or applied CIT v. Artex Manufacturing Co. [1997] 6 SCC 437; Premier Automobiles Ltd. v. ITO [2003] 264 ITR 193/129 Taxman 289 (Bom.).
It was decided by the Supreme Court on 2017-04-18 and is reported as [2017] 80 taxmann.com 277 (SC); (2017) 393 ITR 566 (SC); 247 Taxman 89; 294 CTR 1; AIR 2017 SC 1912; 2017 (13) SCC 742; Civil Appeal No. 4399 of 2007. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 50(2), section 48(2), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The Supreme Court dismissed the Revenue's appeal. Section 50(2) applies where the assessee transfers one or more blocks of assets used in running his business; it does not apply where the entire running business, with assets and liabilities, is sold in one go, and such a sale cannot be treated as a sale of short-term capital assets (para 11). The sale of the entire running business with all assets and liabilities in one go was a slump sale of a long-term capital asset and had to be taxed accordingly (para 12). The Court found no fault in the reasoning of the Commissioner (Appeals), upheld by the Tribunal and the High Court, and saw no ground for interference (paras 10 and 16). It arises in Capital Gains matters, on section 50(2), section 48(2) of the Income Tax Act 1961, and was decided by Supreme Court of India — R.K. Agrawal and Abhay Manohar Sapre, JJ.. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Put the sale agreement on record to show a single indivisible consideration for the business as a whole, with all assets and liabilities passing in one transaction, and that the undertaking was carried on as a going concern. Establish the period for which the undertaking was held, since that is what makes the capital asset long-term. Do not engage with any allocation of the lump sum across individual depreciable assets — the reply should record why allocation is impossible, which is the whole basis on which s.50(2) is displaced.
Still good law. Later treatment: the decision was cited to the Rajasthan High Court in CIT v. Shri Ganga Nagar Bottling Co. [2024] 161 taxmann.com 425 (para 14), which upheld the Tribunal's finding that the sale of a bottling business was a slump sale and not an itemised sale, and the Revenue's special leave petition against that judgment was dismissed ([2024] 161 taxmann.com 426 (SC), 30 January 2024). Nothing doubting or distinguishing Equinox Solution was found. The statutory frame has however moved: the Finance Act 2021 substituted the words 'as a result of the sale' in s.2(42C) with 'by any means', and inserted a fair-market-value computation into s.50B(2) with Rule 11UAE (notified 24 May 2021). That finding was checked against a published source, which is linked on this page, on 2026-08-25. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The date of judgment is 18 April 2017 and the report line carries [2017] 393 ITR 566 (SC), 247 Taxman 89 and 294 CTR 1 alongside Civil Appeal No. 4399 of 2007. The judgment construes section 50(2) as it applied to assessment year 1991-92; section 50B and the definition of slump sale in section 2(42C) came later and are not mentioned in it, so the case decides characterisation under the pre-50B law and cannot be read as authority on the section 50B machinery. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Supreme Court dismissed the Revenue's appeal. Section 50(2) applies where the assessee transfers one or more blocks of assets used in running his business; it does not apply where the entire running business, with assets and liabilities, is sold in one go, and such a sale cannot be treated as a sale of short-term capital assets (para 11). The sale of the entire running business with all assets and liabilities in one go was a slump sale of a long-term capital asset and had to be taxed accordingly (para 12). The Court found no fault in the reasoning of the Commissioner (Appeals), upheld by the Tribunal and the High Court, and saw no ground for interference (paras 10 and 16).
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