Slump sale

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derastsw (Querist)
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09 February 2012 If a company had made slump sale to its 100% subsidiary on 31st March by virtue of Sec 47 & 47A of the Income Tax Act 1961 and the assets are transferred to the subsidiary at book value. Can the holding claim depreciation from 01st April to 30th March and the subsidiary for single day i.e. for 31st when the assets were transferred? Please reply with any case law, if any.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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10 February 2012 Slump Sale by virtue of Sec 47 & 47A is an absurd or controversial statement.
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Slump Sale is treated as transfer whereas cases referred to in Section 47 are not regarded as transfer.

derastsw

derastsw (Querist)
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14 February 2012 Thanks a lot sir. I agree with you. Though it is a transfer by a holding company to its wholly owned subsidiary which is not regarded as transfer U/s 47(iv) of the I.T.Act. But who will claim the depreciation and for how many days. In case the assets are transferred to wholly owned subsidiary on 31 March, is it that the holding company can claim depreciation for 364 days and the subsidiary be claiming depreciation for 1 day.

Aashok Kumar Sharma online

Aashok Kumar Sharma online

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25 July 2025 Great question! Here's how depreciation works in the context of a **slump sale** (transfer of assets by a holding company to its wholly-owned subsidiary) under **Sections 47(iv) and 47A** of the Income Tax Act, 1961.

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### Key points:

* **Section 47(iv)** says that transfer of capital assets from holding company to wholly owned subsidiary (and vice versa) is **not considered a transfer** for capital gains tax purposes.
* **Section 47A** provides carry-forward of accumulated depreciation and block of assets to the subsidiary.

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### Depreciation claim in the year of transfer:

* The **holding company** owns the assets until **31st March**, so it can claim depreciation for the **entire financial year** up to 31st March (i.e., full year).
* The **wholly owned subsidiary** receives the assets on 31st March, so it effectively owns the assets for **only 1 day** in that financial year.
* The subsidiary can claim depreciation for **1 day** (or on a proportionate basis) for that year.

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### Why?

* Since it’s **not a transfer** under Section 47(iv), the holding company continues to claim depreciation as if it owns the asset the entire year.
* The subsidiary begins claiming depreciation from the date of acquisition — here, 31st March — even if it’s just for a day.
* The **block of assets and written down value (WDV)** is carried over to the subsidiary under Section 47A.

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### Case Law / Authority:

* The **CBDT Circular No. 16/2011** dated 23rd September 2011 clarifies that such transfer of assets between holding and wholly owned subsidiary is not treated as transfer and depreciation rules apply as above.
* The holding company claims depreciation for the full year.
* The subsidiary claims depreciation from the date of transfer (even if it’s 1 day).

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### Summary:

| Entity | Depreciation Claim |
| --------------- | ----------------------------------------------------------------------- |
| Holding Company | Full financial year (e.g., 1st April to 31st March) |
| Subsidiary | From date of transfer (e.g., 31st March) — proportionate, usually 1 day |

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If you want, I can help you draft the relevant note or prepare computations for depreciation in such a scenario.

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