Section 47 A - Withdrawal of Exemption (Holding-Subsidiary Transaction)

Section 47A - Withdrawal of Exemption (Holding-Subsidiary Transaction)

                          1.    The above Exemption is withdrawn. if before the expiry" of 8 years from the date of transfers of capital asset:

a)           the capital asset is converted into stock-in-trade by the transferee company; OR

b)           the holding company ceases to hold 100% share capital of the subsidiary company.

•               In the above two cases, the amount of capital gains exempt earlier shall be deemed to be the income of the transferor company chargeable u/h 'capital gains' of the years in which the original transfer took place.

2.            Any transfer of a capital asset by the amalgamating company to the amalgamated company in a scheme of amalgamation provided the amalgamated company is an Indian company;

3.            Any transfer of a capital asset by the demerged company to the resulting company in a scheme of demerger provided the resulting company is an Indian company;

4.            Allotment of shares of the amalgamated company to a shareholder of the amalgamating company in lieu of his shareholding in the amalgamating company provided the amalgamated company is an Indian company;

5.            Allotment of shares of the resulting company to a shareholder of the demerged company in lieu of his shareholding in the demerged company provided the resulting company is an Indian company;

6.            Conversion of bonds, debentures, deposit certificates, etc of a company into shares or debentures of that company;

7.            Conversion of preference shares of a company into equity shares of that company;

8.            Any transfer of any of the following capital assets to the Government, University, the National MuseuM, National Art Gallery, National Archives or any other public museum or institution notified by the CG:

Ø  work of art;

Ø  archaeological, scientific or art collection;

Ø  book;

Ø  manuscript;

Ø  drawing/painting/photograph; or

Ø  print.

11.            Any transfer of a capital asset in a transaction of reverse mortgage (meaning of reverse mortgage has been given later in this chapter);

12.            Transfer of sovereign gold bonds issued by RBI under Sovereign Gold Bonds Scheme, 2015 by an individual provided such transfer takes place by way of redemption (sale);

POINTS TO BE NOTED:

❑          Redemption of debentures, zero coupon bond as well as preference shares is treated as and capital gains shall be computed in the hands of the holder of the security in the

❑          Section 47 applies where any capital asset is gifted by a person to any other person. The gift has to be a pure gift (ie no consideration should be involved at all).

❑          Where a capital asset has been sold for a value less than its FA/SDV, capital gains shall be computed and Section 47 Shall not apply.

❑          In case of land or building or bath, Section 50C would apply where land or building or both have been transferred for a value less than their respective SDV. Further, section 50CA would apply where unlisted shares have been transferred for a value less than their FMV

❑          Where a person receives any ‘property’ from any non-related person without consideration (i.e pure gift) or for inadequate consideration, provision relating to taxation of gifts as given u/s 56(2)(x) would apply. Section 56(2)(x) has been introduced with effect from PY 2017-18. Till PY 2016-17. Taxation of gifts was governed by section 56(2)(vii) which was applicable only in case of individual/HUF.

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