Page 201 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Personal Financial Planning

Notes Any transaction (whether by way of becoming a member of, or acquiring shares in, a
co-operative society, company or other association of persons or by way of any agreement
or any arrangement or in any other manner whatsoever) which has the effect of transferring,
or enabling the enjoyment of, any immovable property.

Explanation - For the purposes of sub-clauses (v) and (vi), ‘’immovable property’’ shall
have the same meaning as in clause (d) of section 269UA]
Transactions which are not deemed to be transfer for the purposes of capital gains
The Income Tax Act also exempts certain transactions from being covered under the definition
of transfer. These are more specifically contained in section 46 & 47 of the Income Tax Act. In
brief the transactions not regarded as transfer are as under:

a. Where the assets of a company are distributed to its share holders upon its liquidation, the
distribution is not regarded as transfer. However where a share holder receives any
money or other assets on the date of distribution which exceeds the amount of dividend
within the meaning of section 2(22)(c), the excess is chargeable under the head capital
gains.
b. Any distribution of capital assets on the total or partial partition of a HUF is not regarded
as transfer.

c. Where a capital asset is transferred under the gift or will or an irrevocable trust, the
transaction is not of the nature of transfer as per the Income Tax Act.
d. The transfer of a capital asset to an Indian subsidiary company by a parent company or its
nominees who hold the entire share capital of the Indian subsidiary company is not
regarded as transfer.

e. Any transfer of a capital asset by a wholly owned subsidiary company to its Indian holding
company is also not regarded as transfer for the purposes of capital gains. However in
respect of (d) & (e) above the transfer of a capital asset as stock in trade is covered by the
provisions of capital gains.
f. Any transfer in a scheme of amalgamation of a capital asset by the amalgamating company
to an Indian amalgamated company is also not a transfer for the purposes of capital gains.
g. In the case where the amalgamating and the amalgamated companies are both foreign
companies, the transfer of shares held in the Indian company by the foreign amalgamating
company to the foreign amalgamated company is not regarded as a transfer for the purposes
of capital gains if at least 25% of the share holders of the amalgamating foreign company
continue to remain share holders of the amalgamated foreign company and if such transfer
does not attract tax on capital gains in the country in which the amalgamating company is
incorporated.
h. Any transfer by a share holder, in a scheme of amalgamation, of share or shares held by
him in the amalgamating company in consideration of the allotment of any share or
shares in the amalgamated Indian company is not regarded as a transfer for the purposes
of capital gains.
i. Where a non resident transfers any bond or shares of an Indian company which were
issued in accordance with any scheme notified by the Central Government for the purposes
of section 115AC or where the non resident transfer any bonds or shares of a public sector
company sold by the government and purchased by the non resident in foreign currency
is not regarded as a transfer for the purposes of capital gains. However this is so only
when the transfer of the capital asset is made outside India by the non resident to another
non resident.

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