Transaction not considered as a Transfer

 EXCEPTIONS TO TRANSFER u/s 46 & 47 

SectionNature of transaction not considered as a Transfer
46(1)Distribution of a capital asset in specie on liquidation of a company by a liquidator to its shareholders Is not a transfer.
47(i)Any distribution of capital assets on the total or partial partition of a HUF.
47(iii)Any transfer of a capital asset under a gift or will or an irrevocable trust. Exception is also applicable In case of shares or securities received by employees from the company free of cost or at a concesslonal rate.
However, a provision has been added to provide that this clause shall not apply to transfer under a gift or an irrevocable trust of a capital asset being shares, debentures or warrants allotted by a company directly or Indirectly to its employees under ESOS or ESOP of the company offered to such emoloyees in accordance with the auldelines Issued by the Central Government in this behalf.
47(iv)Transfer of any capital asset by a holding company to Its 100% subsidiary company which is an Indian company.
47(v)When a transfer has been made by a 100% subsidiary to its Indian holding company.
Both the sections 47(iv) and (v) are subject to the restrictive conditions imposed u/s 47A(1), which is as follows:
(a) If within the course of 8 years from the date of transfer, holding company looses Its 100% stake on the subsidiary company.
(b) If the transferee comoanv transfers this caoital asset as their stock-In-trade within 8 Years. In both the above cases, the earlier exemption so granted shall be withdrawn and there would arise incidence of capital gains, in the original year of transfer, which would be initiated as per Sec.155 (7B) amendment proceedings.
47(vi)Transfer of a capital asset in a scheme of amalgamation where the amalgamated company is an Indian company. The conditions of Sec.2(1B) of the Act, must be fulfilled:
(a) All the property and liabilities of the amalgamating company or companies immediately before the amalgamation becomes the property of the amalgamated company by virtue of amalgamation.
(b) Shareholders holding not less than 75% in the value of shares in amalgamating company or companies (other than shares held therein immediately before the amalgamation or by a nominee for the amalgamated company or its subsidiary) become shareholders of the amalgamated company by virtue of amalgamation.Amalgamation as per income-tax includes merger and absorption, provided the conditions of sec.2(1B) are satisfied.
47(via)Transfer of shares of an Indian company by an amalgamated foreign company to a foreign amalgamated company, provided the following conditions are satisfied :
(a) The transfer of shares is under a scheme of amalgamation between two foreign companies;
(b) At least 25% of the shareholders of the amalgamating foreign company continue to remain shareholders of the amalgamated foreign company;
(c) No tax is levied on such capital gain In th country where foreign amalgamating company is Incorporated.
47(viaa)Transfer of capital asset by a banking company to a banking institution in a scheme of amalgamation sanctioned b the Central Government u/s 45(7) of the Bankin Act 1949.
47(vib)Transfer of a capital asset by the Demerged Company to the Resulting Indian company, subject to : the fulfillment of the following conditions :
(a) Transfer of capital asset should be from demerged company to a resulting company;
(b) Resulting company should be an Indian company;
(c) Transfer of capital asset should be made In a scheme of demerger.
47(vic)Transfer of shares of Indian company by a demerged foreign company in a demerger to a foreign company, shall not be treated as transfer provided the following conditions are fulfilled :
(a) The shareholders holding not less than 75% in value of shares of the demerged foreign company continue to remain shareholders of the resulting foreign company; and
(b) No tax Is levied on capital gain in the foreign country in which the demerged company is Incorporated.
The provisions of Sections 391 to 394 of the Companies Act,1956 shall not apply In case of demergers referred In this clause.
47(vica)Any transfer in a business reorganization, of a capital asset by the predecessor co-operative bank to the successor co-operative bank.
47(vicb)Any transfer by a shareholder, in business reorganization, of a capital asset being a share or shares held by him In the predecessor co”operative bank if the transfer is made In consideration of allotment to him of any share or shares in the successor co-operative bank.
47(vid)Transfer/allotment of shares by the resulting company to the  shareholders of the demerged company in a scheme of demerger. Only shares must be exchanged against shares.
47(vii)Allotment of shares in amalgamated company to the shareholders of amalgamating company, will not be considered as a transfer if :
(a) The transfer is made in consideration of allotment to him of any share or share in the amalgamated company; and
(b) The amalgamated company is an Indian company.
47(viia)Transfer of shares/bonds or Global Depository Receipts (GDRs) referred to in Section 115AC (1),i.e., those bonds, shares or GDRs of a public company (being an Indian company) Is purchased in foreign currency, outside India by a non-resident to another non-resident.
47(viii)Transfer of urban agricultural land in India effected before 1.3.1970
47(ix)Transfer of a capital asset being a work of art, archaeological, scientific or art collection, book, manuscript, drawing, painting, photograph or print to Government or University or National Museum or National Art Gallery, National Archives or any other public museum or institution, as may be notified by the Central Government in the Official Gazette to be of national Importance or to be of renown throughout any State or States.
47(x)Conversion of bonds or debentures, debentures-stock or deposit certificates in any form, of a company into shares or debentures of that company
47(xi)Transfer of membership of a recognized stock exchange in India by a person (not being a company) on or before 31st December 1998, toa company in exchange of shares allotted by that company,subject to the restrictions of Sec.47A(2)
47(xii)Transfer of capital asset being land of a sick industrial company made under a scheme prepared and sanctioned u/s 18 of the Sick Industrial Companies (Special Provisions) Act, 1985, where such sick industrial company is being managed by its worker’s co-operative.Transfer should be made during the. period commencing from the previous year in which the said company has become a sick industrial company u/s 17(1) of the Act and ending with the previous year during which the entire net worth of. such company become equal to or exceeds the accumulated losses.
47(xiii)Transfer of capital assets or intangible assets or any transfer of capital asset in the course of demutualizatlon or corporatisation of a recognized stock exchange in India, on succession of a firm concern by a company, provided the following conditions are fulfilled :
(a) All the assets and liabilities of the erstwhile firm or AOP/BOI, relating to the business immediately before succession becomes the assets and liabilities of the company;
(b) All the partners of the firm before the succession becomes the shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of succession;
(c) The partners are not in receipt of any other benefit, whether directly or Indirectly, in any form or manner, other than by way of allotment of shares In the company;
(d) The aggregate of the shareholdlng in the company of the partners of the firm is not less than 50% of the total voting power in the company;
(e) Their shareholding continues for a period of 5 years from the date of the succession;
(f) The demutualization or corporatisation of a recognized stock exchange in India Is carried out in accordance with a scheme of corporatisation which is approved by SEBI.
47(xiiia)Transfer of a capital asset being a membership right held by a member of a recognized stock exchange In India for acCiulsition of shares and trading or clearing rights acquired by such member in that recognized stock exchange in accordance with a scheme of demutualization or corporatisation which is approved by SEBI.
47(xiv)Transfer of capital asset or Intangible assets where a sole proprietary concern is succeeded by a company, provided the following conditions are fulfilled:
(a) All the assets and liabilities of the erstwhile sole proprietary concern, relating to the business immediately before succession becomes the assets and liabilities of the company;
(b) The sole proprietor is not in receipt of any other benefit, whether directly or indirectly, in any form or manner, other than by way of allotment of shares in the company;
(d) The shareholding of the sole proprietor in the company Is not less than 50% of the total voting power in the company;
(e) His shareholding continues for a period of 5 years from the date of the succession 
47(xv)Any transfer under the Securities Lending Scheme,1997 for lending of any securities under an agreement or arrangement, between the assessee and borrower of securities as per the guidelines issued by SEBI or RBI.
46(1)Distribution of a capital asset in specie on liquidation of a company by a liquidator to its shareholders Is not a transfer.
47(i)Any distribution of capital assets on the total or partial partition of a HUF.
47(iii)Any transfer of a capital asset under a gift or will or an irrevocable trust.
Exception is also applicable In case of shares or securities received by employees from the company free of cost or at a concesslonal rate.
However, a provision has been added to provide that this clause shall not apply to transfer under a gift or an irrevocable trust of a capital asset being shares, debentures or warrants allotted by a company directly or Indirectly to its employees under ESOS or ESOP of the company offered to
such emoloyees in accordance with the auldelines Issued by the Central Government in this behalf.
47(iv)Transfer of any capital asset by a holding company to Its 100% subsidiary company which is an Indian company.
47(v)When a transfer has been made by a 100% subsidiary to its Indian holding company.
Both the sections 47(iv) and (v) are subject to the restrictive conditions imposed u/s 47A(1), which is as follows:
(a) If within the course of 8 years from the date of transfer, holding company looses Its 100% stake on the subsidiary company.
(b) If the transferee comoanv transfers this caoital asset as their stock-In-trade within 8 Years. In both the above cases, the earlier exemption so granted shall be withdrawn and there would arise
incidence of capital gains, in the original year of transfer, which would be initiated as per Sec.155 (7B)
amendment proceedings.
47(vi)Transfer of a capital asset in a scheme of amalgamation where the amalgamated company is an Indian company. The conditions of Sec.2(1B) of the Act, must be fulfilled:
(a) All the property and liabilities of the amalgamating company or companies immediately before the amalgamation becomes the property of the amalgamated company by virtue of amalgamation.
(b) Shareholders holding not less than 75% in the value of shares in amalgamating company or companies (other than shares held therein immediately before the amalgamation or by a nominee for the amalgamated company or its subsidiary) become shareholders of the
amalgamated company by virtue of amalgamation.Amalgamation as per income-tax includes merger and absorption, provided the conditions of sec.2(1B) are satisfied.
 Transfer of shares of an Indian company by an amalgamated foreign company to a foreign amalgamated company, provided the following conditions are satisfied :
(a) The transfer of shares is under a scheme of amalgamation between two foreign companies;
(b) At least 25% of the shareholders of the amalgamating foreign company continue to remain shareholders of the amalgamated foreign company;
(c) No tax is levied on such capital gain In th country where foreign amalgamating company is Incorporated.
 Transfer of capital asset by a banking company to a banking institution in a scheme of amalgamation sanctioned b the Central Government u/s 45(7) of the Bankin Act 1949.
 Transfer of a capital asset by the Demerged Company to the Resulting Indian company, subject to : the fulfillment of the following conditions :
(a) Transfer of capital asset should be from demerged company to a resulting company;
(b) Resulting company should be an Indian company;
(c) Transfer of capital asset should be made In a scheme of demerger.
 Transfer of shares of Indian company by a demerged foreign company in a demerger to a foreign company, shall not be treated as transfer provided the following conditions are fulfilled :
(a) The shareholders holding not less than 75% in value of shares of the demerged foreign company continue to remain shareholders of the resulting foreign company; and
(b) No tax Is levied on capital gain in the foreign country in which the demerged company is Incorporated.
The provisions of Sections 391 to 394 of the Companies Act,1956 shall not apply In case of demergers referred In this clause.
 Any transfer in a business reorganization, of a capital asset by the predecessor co-operative bank to the successor co-operative bank.
 Any transfer by a shareholder, in business reorganization, of a capital asset being a share or shares held by him In the predecessor co”operative bank if the transfer is made In consideration of allotment to him of any share or shares in the successor co-operative bank.
 Transfer/allotment of shares by the resulting company to the  shareholders of the demerged company in a scheme of demerger. Only shares must be exchanged against shares.
 Allotment of shares in amalgamated company to the shareholders of amalgamating company, will
not be considered as a transfer if :
(a) The transfer is made in consideration of allotment to him of any share or share in the amalgamated company; and
(b) The amalgamated company is an Indian company.
 Transfer of shares/bonds or Global Depository Receipts (GDRs) referred to in Section 115AC (1),i.e., those bonds, shares or GDRs of a public company (being an Indian company) Is purchased in foreign currency, outside India by a non-resident to another non-resident.
 Transfer of urban agricultural land in India effected before 1.3.1970
 Transfer of a capital asset being a work of art, archaeological, scientific or art collection, book, manuscript, drawing, painting, photograph or print to Government or University or National Museum or National Art Gallery, National Archives or any other public museum or institution, as may be notified by the Central Government in the Official Gazette to be of national Importance or to be of renown throughout any State or States.
 Conversion of bonds or debentures, debentures-stock or deposit certificates in any form, of a company into shares or debentures of that company
 Transfer of membership of a recognized stock exchange in India by a person (not being a company) on or before 31st December 1998, toa company in exchange of shares allotted by that company,subject to the restrictions of Sec.47A(2)
 Transfer of capital asset being land of a sick industrial company made under a scheme prepared and sanctioned u/s 18 of the Sick Industrial Companies (Special Provisions) Act, 1985, where such sick industrial company is being managed by its worker’s co-operative.Transfer should be made during the. period commencing from the previous year in which the said company has become a sick industrial company u/s 17(1) of the Act and ending with the previous year during which the entire net worth of. such company become equal to or exceeds the accumulated losses.
 Transfer of capital assets or intangible assets or any transfer of capital asset in the course of demutualizatlon or corporatisation of a recognized stock exchange in India, on succession of a firm concern by a company, provided the following conditions are fulfilled :
(a) All the assets and liabilities of the erstwhile firm or AOP/BOI, relating to the business immediately before succession becomes the assets and liabilities of the company;
(b) All the partners of the firm before the succession becomes the shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of succession;
(c) The partners are not in receipt of any other benefit, whether directly or Indirectly, in any form or manner, other than by way of allotment of shares In the company;
(d) The aggregate of the shareholdlng in the company of the partners of the firm is not less than 50% of the total voting power in the company;
(e) Their shareholding continues for a period of 5 years from the date of the succession;
(f) The demutualization or corporatisation of a recognized stock exchange in India Is carried out in accordance with a scheme of corporatisation which is approved by SEBI.
 Transfer of a capital asset being a membership right held by a member of a recognized stock exchange In India for acCiulsition of shares and trading or clearing rights acquired by such member in that recognized stock exchange in accordance with a scheme of demutuallzation or corporatlsatlon which is approved by SEBI.
 Transfer of capital asset or Intangible assets where a sole proprietary concern is succeeded by a company, provided the following conditions are fulfilled:
(a) All the assets and liabilities of the erstwhile sole proprietary concern, relating to the business immediately before succession becomes the assets and liabilities of the company;
(b) The sole proprietor is not in receipt of any other benefit, whether directly or indirectly, in any form or manner, other than by way of allotment of shares in the company;
(d) The shareholdlng of the sole proprietor in the company Is not less than 50% of the total voting power in the company;
(e) His shareholding continues for a period of 5 years from the date of the succession 
 Any transfer under the Securities Lending Scheme,1997 for lending of any securities under an agreement or arrangement, between the assessee and borrower of securities as per the guidelines issued by SEBI or RBI.

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