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CS Professional · Corporate Restructuring, Valuation and Insolvency · Taxation and Stamp Duty Aspects of Corporate Restructuring

Mehta Engineering Ltd sells an undertaking by slump sale for Rs 12 crore. In its books, the undertaking has depreciable assets whose block WDV is Rs 3 crore, other assets at book value Rs 4 crore, and self-generated goodwill carried at Rs 1 crore (not purchased). Liabilities are Rs 2 crore. Ignoring revaluation, what is the net worth for computing capital gains?

Net worth is Rs 5 crore. Depreciable assets count at block WDV of Rs 3 crore, other assets at book value of Rs 4 crore, and self-generated goodwill at nil, giving Rs 7 crore of assets. Deducting liabilities of Rs 2 crore leaves Rs 5 crore.

  1. ARs 5 croreCorrect
  2. BRs 6 crore
  3. CRs 8 crore
  4. DRs 4 crore

Explanation

Aggregate value of total assets = WDV of block 3 + other assets at book value 4 + self-generated goodwill nil = Rs 7 crore. Less liabilities of Rs 2 crore gives net worth of Rs 5 crore. Rs 6 crore wrongly counts the goodwill at book value (7+1-2). Capital gain would be 12 - 5 = Rs 7 crore.

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