“Price received on sale of an undertaking as a Going Concern is a Capital Receipt”. Comment on the statement with judicial pronouncements, supporting the statement.

Any sale of an undertaking as a going concern for a lump sum consideration is a slump sale in which values are not assigned to individual assets and liabilities that are sold. Normally, any sale of a capital asset is considered as capital receipts and subjected to capital gain tax and stock in trade is subjected to tax as revenue profit or loss. Supreme Court held in CIT v. West Coast Chemicals and Industries Ltd. 46 ITR 135 and CIT v. Mugneeram Bangur & Co 57 ITR 299 , where a slump price is paid, and no portion is attributable to the stock-in-trade, since it may not be possible to say that there is a profit other than what is resulted as the appreciation of capital. Gujarat and Bombay High Courts have also held that there will be a capital gain only when a sale of business as a whole occurs. Undertaking of a business is a capital asset as its disposal at slump price is capital receipt which can attract capital gain tax alone.