Section - 47, Income-tax Act, 1961-2016
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Transactions not regarded as transfer.
47. Nothing contained in section 45 shall apply to the
following trans- fers :—
( i) any distribution of capital assets on the total or
partial partition of a Hindu undivided family;
( ii) [***]
( iii) any transfer of a capital asset under a gift or will or
an irrevocable trust :
Provided 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
any Employees' Stock Option Plan or Scheme of the
company offered to such employees in accordance
with the guidelines issued by the Central Government
in this behalf;
( iv) any transfer of a capital asset by a company to its
subsidiary company, if—
( a) the parent company or its nominees hold the
whole of the share capital of the subsidiary
company, and
( b) the subsidiary company is an Indian company;
( v) any transfer of a capital asset by a subsidiary
company to the holding company, if—
( a) the whole of the share capital of the subsidiary
company is held by the holding company, and
( b) the holding company is an Indian company :
Provided that nothing contained in clause (iv) or
clause (v) shall apply to the transfer of a capital asset
made after the 29th day of February, 1988, as stock-in-
trade;
( vi) any transfer, in a scheme of amalgamation, of a
capital asset by the amalgamating company to the
amalgamated company if the amalgamated company
is an Indian company;
( via) any transfer, in a scheme of amalgamation, of a
capital asset being a share or shares held in an Indian
company, by the amalgamating foreign company to
the amalgamated foreign company, if—
( a) at least twenty-five per cent of the shareholders
of the amalgamating foreign company continue to
remain shareholders of the amalgamated foreign
company, and
( b) such transfer does not attract tax on capital gains
in the country, in which the amalgamating
company is incorporated;
( viaa) any transfer, in a scheme of amalgamation of a
banking company with a banking institution
sanctioned and brought into force by the Central
Government under sub-section (7) of section 45 of the
Banking Regulation Act, 1949 (10 of 1949), of a capital
asset by the banking company to the banking
institution.
Explanation.—For the purposes of this clause,—
( i) "banking company" shall have the same meaning
assigned to it in clause (c) of section 5 of the
Banking Regulation Act, 1949 (10 of 1949);
( ii) "banking institution" shall have the same
meaning assigned to it in sub-section (15) of
section 45 of the Banking Regulation Act, 1949 (10
of 1949);
24[ (viab ) any transfer, in a scheme of amalgamation, of a
capital asset, being a share of a foreign company,
referred to in the Explanation 5 to clause (i) of sub-
section (1) of section 9, which derives, directly or
indirectly, its value substantially from the share or
shares of an Indian company, held by the
amalgamating foreign company to the amalgamated
foreign company, if—
(A ) at least twenty-five per cent of the shareholders of
the amalgamating foreign company continue to
remain shareholders of the amalgamated foreign
company; and
(B ) such transfer does not attract tax on capital gains
in the country in which the amalgamating company
is incorporated;]
( vib) any transfer, in a demerger, of a capital asset by the
demerged company to the resulting company, if the
resulting company is an Indian company;
( vic) any transfer in a demerger, of a capital asset, being
a share or shares held in an Indian company, by the
demerged foreign company to the resulting foreign
company, if—
( a) the shareholders holding not less than three-
fourths in value of the shares of the demerged
foreign company continue to remain shareholders
of the resulting foreign company; and
( b) such transfer does not attract tax on capital gains
in the country, in which the demerged foreign
company is incorporated :
Provided that the provisions of sections 391 to 394 of
the Companies Act, 1956 (1 of 1956) shall not apply in
case of demergers referred to in this clause;
( vica) any transfer in a business reorganisation, of a
capital asset by the predecessor co-operative bank to
the successor co-operative bank;
( vicb) any transfer by a shareholder, in a business
reorganisation, 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 the
allotment to him of any share or shares in the
successor co-operative bank.
Explanation.—For the purposes of clauses (vica) and
(vicb), the expressions "business reorganisation",
"predecessor co-operative bank" and "successor co-
operative bank" shall have the meanings respectively
assigned to them in section 44DB;
25[ (vicc) any transfer in a demerger, of a capital asset,
being a share of a foreign company, referred to in the
Explanation 5 to clause (i) of sub-section (1) of section
9, which derives, directly or indirectly, its value
substantially from the share or shares of an Indian
company, held by the demerged foreign company to the
resulting foreign company, if—
(a ) the shareholders, holding not less than three-
fourths in value of the shares of the demerged
foreign company, continue to remain shareholders
of the resulting foreign company; and
(b ) such transfer does not attract tax on capital gains
in the country in which the demerged foreign
company is incorporated:
Provided that the provisions of sections 391 to 394 of
the Companies Act, 1956 (1 of 1956) shall not apply in
case of demergers referred to in this clause;]
( vid) any transfer or issue of shares by the resulting
company, in a scheme of demerger to the
shareholders of the demerged company if the transfer
or issue is made in consideration of demerger of the
undertaking;
( vii) any transfer by a shareholder, in a scheme of
amalgamation, of a capital asset being a share or
shares held by him in the amalgamating company, if
—
( a) the transfer is made in consideration of the
allotment to him of any share or shares in the
amalgamated company except where the
shareholder itself is the amalgamated company,
and
( b) the amalgamated company is an Indian
company;
( viia) any transfer of a capital asset, being bonds or
Global Depository Receipts referred to in sub-section
(1) of section 115AC, made outside India by a non-
resident to another non-resident;
26[( viib) any transfer of a capital asset, being a
Government Security carrying a periodic payment of
interest, made outside India through an intermediary
dealing in settlement of securities, by a non-resident
to another non-resident.
Explanation.—For the purposes of this clause,
"Government Security" shall have the meaning
assigned to it in clause (b) of section 2 of the Securities
Contracts (Regulation) Act, 1956 (42 of 1956);]
Following clause (viic) shall be inserted after
clause (viib) of section 47 by the Finance Act, 2016,
w.e.f. 1-4-2017:
(viic ) any transfer of Sovereign Gold Bond issued by the
Reserve Bank of India under the Sovereign Gold Bond
Scheme, 2015, by way of redemption, by an assessee
being an individual;
( viii) any transfer of agricultural land in India effected
before the 1st day of March, 1970;
( ix) any transfer of a capital asset, being any work of
art, archaeological, scientific or art collection, book,
manuscript, drawing, painting, photograph or print,
to the Government or a University or the National
Museum, National Art Gallery, National Archives or
any such 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.
Explanation.—For the purposes of this clause,
"University" means a University established or
incorporated by or under a Central, State or
Provincial Act and includes an institution declared
under section 3 of the University Grants Commission
Act, 1956 (3 of 1956), to be a University for the
purposes of that Act;
( x) any transfer by way of conversion of bonds or
debentures, debenture-stock or deposit certificates in
any form, of a company into shares or debentures of
that company;
( xa) any transfer by way of conversion of bonds
referred to in clause (a) of sub-section (1) of section
115AC into shares or debentures of any company;
( xi) any transfer made on or before the 31st day of
December, 1998 by a person (not being a company) of
a capital asset being membership of a recognised
stock exchange to a company in exchange of shares
allotted by that company to the transferor.
Explanation.—For the purposes of this clause, the
expression "membership of a recognised stock
exchange" means the membership of a stock
exchange in India which is recognised under the
provisions of the Securities Contracts (Regulation) Act,
1956 (42 of 1956);
( xii) any transfer of a capital asset, being land of a sick
industrial company, made under a scheme prepared
and sanctioned under section 18 of the Sick Industrial
Companies (Special Provisions) Act, 1985 (1 of 1986)
where such sick industrial company is being managed
by its workers' co-operative :
Provided that such transfer is made during the
period commencing from the previous year in which
the said company has become a sick industrial
company under sub-section (1) of section 17 of that
Act and ending with the previous year during which
the entire net worth of such company becomes equal
to or exceeds the accumulated losses.
Explanation.—For the purposes of this clause, "net
worth" shall have the meaning assigned to it in clause
(ga) of sub-section (1) of section 3 of the Sick
Industrial Companies (Special Provisions) Act, 1985 (1
of 1986);
( xiii) any transfer of a capital asset or intangible asset by
a firm to a company as a result of succession of the
firm by a company in the business carried on by the
firm, or any transfer of a capital asset to a company in
the course of demutualisation or corporatisation of a
recognised stock exchange in India as a result of
which an association of persons or body of
individuals is succeeded by such company :
Provided that—
( a) all the assets and liabilities of the firm or of the
association of persons or body of individuals
relating to the business immediately before the
succession become the assets and liabilities of the
company;
( b) all the partners of the firm immediately before
the succession become 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 the succession;
( c) the partners of the firm do not receive any
consideration or benefit, directly or indirectly, in
any form or manner, other than by way of
allotment of shares in the company; and
( d) the aggregate of the shareholding in the company
of the partners of the firm is not less than fifty per
cent of the total voting power in the company and
their shareholding continues to be as such for a
period of five years from the date of the
succession;
( e) the demutualisation or corporatisation of a
recognised stock exchange in India is carried out
in accordance with a scheme for demutualisation
or corporatisation which is approved by the
Securities and Exchange Board of India
established under section 3 of the Securities and
Exchange Board of India Act, 1992 (15 of 1992);
( xiiia) any transfer of a capital asset being a membership
right held by a member of a recognised stock
exchange in India for acquisition of shares and
trading or clearing rights acquired by such member
in that recognised stock exchange in accordance with
a scheme for demutualisation or corporatisation
which is approved by the Securities and Exchange
Board of India established under section 3 of the
Securities and Exchange Board of India Act, 1992 (15
of 1992);
( xiiib) any transfer of a capital asset or intangible asset by
a private company or unlisted public company
(hereafter in this clause referred to as the company)
to a limited liability partnership or any transfer of a
share or shares held in the company by a shareholder
as a result of conversion of the company into a
limited liability partnership in accordance with the
provisions of section 56 or section 57 of the Limited
Liability Partnership Act, 2008 (6 of 2009):
Provided that—
( a) all the assets and liabilities of the company
immediately before the conversion become the
assets and liabilities of the limited liability
partnership;
( b) all the shareholders of the company immediately
before the conversion become the partners of the
limited liability partnership and their capital
contribution and profit sharing ratio in the limited
liability partnership are in the same proportion as
their shareholding in the company on the date of
conversion;
( c) the shareholders of the company do not receive
any consideration or benefit, directly or indirectly,
in any form or manner, other than by way of
share in profit and capital contribution in the
limited liability partnership;
( d) the aggregate of the profit sharing ratio of the
shareholders of the company in the limited
liability partnership shall not be less than fifty per
cent at any time during the period of five years
from the date of conversion;
( e) the total sales, turnover or gross receipts in the
business of the company in any of the three
previous years preceding the previous year in
which the conversion takes place does not exceed
sixty lakh rupees; 27[and]
Following clause (ea) shall be inserted after
clause (e) of the proviso to clause (xiiib) of
section 47 by the Finance Act, 2016, w.e.f. 1-4-
2017:
(ea ) the total value of the assets as appearing in the
books of account of the company in any of the three
previous years preceding the previous year in which
the conversion takes place does not exceed five
crore rupees; and
( f) no amount is paid, either directly or indirectly, to
any partner out of balance of accumulated profit
standing in the accounts of the company on the
date of conversion for a period of three years from
the date of conversion.
Explanation.—For the purposes of this clause, the
expressions "private company" and "unlisted public
company" shall have the meanings respectively
assigned to them in the Limited Liability Partnership
Act, 2008 (6 of 2009);
( xiv) where a sole proprietary concern is succeeded by a
company in the business carried on by it as a result of
which the sole proprietary concern sells or otherwise
transfers any capital asset or intangible asset to the
company :
Provided that—
( a) all the assets and liabilities of the sole proprietary
concern relating to the business immediately
before the succession become the assets and
liabilities of the company;
( b) the shareholding of the sole proprietor in the
company is not less than fifty per cent of the total
voting power in the company and his
shareholding continues to remain as such for a
period of five years from the date of the
succession; and
( c) the sole proprietor does not receive any
consideration or benefit, directly or indirectly, in
any form or manner, other than by way of
allotment of shares in the company;
( xv) any transfer in a scheme for lending of any
securities under an agreement or arrangement,
which the assessee has entered into with the
borrower of such securities and which is subject to
the guidelines issued by the Securities and Exchange
Board of India, established under section 3 of the
Securities and Exchange Board of India Act, 1992 (15
of 1992) or the Reserve Bank of India constituted
under sub-section (1) of section 3 of the Reserve Bank
of India Act, 1934 (2 of 1934), in this regard;
( xvi) any transfer of a capital asset in a transaction of
reverse mortgage under a scheme made and notified
by the Central Government;
28[( xvii)any transfer of a capital asset, being share of a
special purpose vehicle to a business trust in
exchange of units allotted by that trust to the
transferor.
Explanation.—For the purposes of this clause, the
expression "special purpose vehicle" shall have the
meaning assigned to it in the Explanation to clause
(23FC) of section 10;]
29[ (xviii) any transfer by a unit holder of a capital asset,
being a unit or units, held by him in the consolidating
scheme of a mutual fund, made in consideration of the
allotment to him of a capital asset, being a unit or
units, in the consolidated scheme of the mutual fund:
Provided that the consolidation is of two or more
schemes of equity oriented fund or of two or more
schemes of a fund other than equity oriented fund.
Explanation. — For the purposes of this clause,—
(a ) "consolidated scheme" means the scheme with
which the consolidating scheme merges or which is
formed as a result of such merger;
(b ) "consolidating scheme" means the scheme of a
mutual fund which merges under the process of
consolidation of the schemes of mutual fund in
accordance with the Securities and Exchange Board
of India (Mutual Funds) Regulations, 1996 made
under the Securities and Exchange Board of India
Act, 1992 (15 of 1992);
(c ) "equity oriented fund" shall have the meaning
assigned to it in clause (38 ) of section 10;
(d ) "mutual fund" means a mutual fund specified
under clause (23D ) of section 10.
Following clause (xix) shall be inserted after
clause (xviii) of section 47 by the Finance Act, 2016,
w.e.f. 1-4-2017:
(xix ) any transfer by a unit holder of a capital asset,
being a unit or units, held by him in the consolidating
plan of a mutual fund scheme, made in consideration of
the allotment to him of a capital asset, being a unit or
units, in the consolidated plan of that scheme of the
mutual fund.
Explanation .—For the purposes of this clause,—
(a ) "consolidating plan" means the plan within a
scheme of a mutual fund which merges under the
process of consolidation of the plans within a
scheme of mutual fund in accordance with the
Securities and Exchange Board of India (Mutual
Funds) Regulations, 1996 made under the Securities
and Exchange Board of India Act, 1992 (15 of 1992);
(b ) "consolidated plan" means the plan with which the
consolidating plan merges or which is formed as a
result of such merger;
(c ) "mutual fund" means a mutual fund specified
under clause (23D ) of section 10.
