Sale of SEZ Unit

Originally posted by : Shreya Y. Rana
	Please let me know whether Sale of SEZ Unit should be considered as Slump Sale? M not going to individually identify or calculate loss or gain on sale of each component of the same. My view is it is slump sale. Is it going to affect my business income?

" not going to individually identify or calculate loss or gain on sale of each component of the same", may I understand what actually do you mean, please.    

Your clarification will enable to answer with clarity.

yes m sure i mean to say that is sale of sez unit considered as Slump sale or capital gain?

sorry i meant whether to consider sale of sez unit as slump sale (capital gain) or business income? Main business is manufacturing of lactose. Its having its unit in sez n nw wants to sell the same.. so what shud i treat such sale as my business income or capital gain?

Sale of unit ( an enterprise as a whole), if it generates any thing excess,  it is treated certainly as "CAPITAL GAIN". 

But i have been replied by my senior that the same is Business Income of that SEZ Unit.. another addition to the query is tht there is Business Loss in the Current year of the same assessee.. So senior even says that we can show this (Sale of SEZ Unit) as Business Income and set off the loss against another business income.. my arguement is we have to treat the sale of sez as capital gain.. I dnt kno what kind of tax planning he is trying to do in order to save tax.. by showing it as business income he is adjusting business loss (of another business) n trying to lower the tax burdern.. is it correct... inspite the same being capital gain?

Dear friend,

May I request you to go through following lines, which focuses different view of this specific economic transaction.

Let me assume that the SEZ Unit (in question) is

·         A company

·         It is a long-term capital asset

·         Such asset is equity shares of the said SEZ Unit

·         Such transaction takes place on or after October 1, 2004

·         At the time of transfer, the transaction is chargeable to securities transaction tax

If these conditions are satisfied and the transaction is recorded in a Stock Exchange in India., then the said ‘LONG TERM CAPITAL GAIN”  is exempt from tax from the assessment year

I do not think it is a short term , in case it is short term, by virtue of section 111A, it is taxable at the rate of 10% plus Educ.Cess and SHE Cess.

From:

Venkatewsara Rao Sapare

Dear Sir,

Slump sale can be extended to cover an undertaking in SEZ since it is nowhere excluded by the section.

The profits or gains arising from transaction (Slump Sale) in question are to be charged to tax as capital gains. In case, the assets are held for more than three years before the transfer of the sale, the gain arising therefrom is assessable as long term capital gain and in case the period of holding is less than 36 months, then the resultant gain has to be charged to tax as short term capital gains. It is not revenue income (in yours words 'Business income).   It is no way disputed.