Income Tax Act

Official PDF pages 121–125

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which is chargeable to commodities transaction tax under Chapter VII of
the Finance Act, 2013 (17 of 2013) or in respect of trading in agricultural
commodity derivatives, if such transactions are—
( a )   is carried out—
( i )   through a stock broker or such other intermediary registered
under section 12 of the Securities and Exchange Board of India
Act, 1992 (15 of 1992) in accordance with the provisions of
the Securities Contracts (Regulation) Act, 1956 (42 of 1956)
or the Securities and Exchange Board of India Act, 1992
(15 of 1992) or the Depositories Act, 1996 (22 of 1996) and
the rules, regulations or bye-laws made or directions issued
under those Acts; or
( ii )   by banks or mutual funds,
electronically   on   screen-based   systems   of   a   recognised   stock
exchange; and
( b )   supported by a time stamped contract note issued by the interme -
diary to every client indicating in the contract note—
( i )   the unique client identity number allotted under any law in
force; and
( ii )   the Permanent Account Number allotted under this Act;
( 34 )   “State Government undertaking” includes—
( a )   a corporation established by or under any State Act;
( b )   a company in which more than 50% of the paid-up equity share
capital is held by the State Government;
( c )   a company in which more than 50% of the paid-up equity share
capital is held by the entity referred to in clause ( a ) or ( b ) (whether
singly or taken together);
( d )   a company or corporation in which the State Government has
the right to appoint the majority of the directors or to control the
management or policy decisions, directly or indirectly, including
by virtue of its shareholding or management rights or shareholders
agreements or voting agreements or in any other manner;
( e )   an authority, a board or an institution or a body established or
constituted by or under any State Act, or owned or controlled by
the State Government;
( 35 )   “State Industrial Investment Corporation” means a Government com -
pany within the meaning of section 2( 45 ) of the Companies Act, 2013
(18 of 2013), engaged in the business of providing long-term finance for
industrial projects;
( 36 )   “State Financial Corporation” means a Financial Corporation established
under section 3 or 3A or an institution notified under section 46 of the
State Financial Corporations Act, 1951 (63 of 1951);

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( 37 )   “successor entity” means—
( a )   the amalgamated Indian company, in the case of amalgamation;
( b )   the resulting Indian company, in the case of demerger;
( c )   a company, in case of a succession of a firm by a company as
referred to in section 70(1)( zd );
( d )   a limited liability partnership, in case of conversion of private com -
pany or unlisted public company to a limited liability partnership,
as referred to in section 70(1)( ze );
( 38 )   “taxable commodities transaction” shall have the meaning assigned to
it under Chapter VII of the Finance Act, 2013 (17 of 2013);
( 39 )   “taxable securities transaction” shall have the meaning assigned to it
under Chapter VII of the Finance Act, 2004 (13 of 2004);
( 40 )   “University” shall have the meaning assigned to it in section 70(2) (Table:
Sl. No. 7).
E.—Capital gains
Capital gains.
67 .   (1) Any profits or gains arising from the transfer of a capital asset effected
in a tax year shall, save as otherwise provided in sections 82, 83, 84, 85, 86,
87, 88 and 89, be chargeable to income-tax under the head “Capital gains” and shall
be deemed to be the income of the tax year in which the transfer took place.
(2) Irrespective of anything contained in sub-section (1), if a person receives during
any tax year any money or other assets under an insurance from an insurer on
account of damage to, or destruction of, any capital asset, as a result of circumstances
mentioned in sub-section (3), then,—
( a )   any profits or gains arising from receipt of such money or other assets
shall be chargeable to income-tax under the head “Capital gains” and
shall be deemed to be the income of such person of the tax year in which
such money or other asset was received; and
( b )   for the purposes of section 72, the value of any money or the fair market
value of other assets on the date of such receipt shall be deemed to be
the full value of the consideration received or accruing as a result of the
transfer of such capital asset.
(3) The following shall be the circumstances referred to in sub-section (2):—
( a )   flood, typhoon, hurricane, cyclone, earthquake or any other convulsion
of nature; or
( b )   riot or civil disturbance; or
( c )   accidental fire or explosion; or
( d )   action by an enemy or action taken in combating an enemy (whether
with or without a declaration of war).
(4) In sub-section (2), “insurer” shall have the same meaning as assigned to it in
section 2(9) of the Insurance Act, 1938 (4 of 1938).

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(5) Irrespective of anything contained in sub-section (1), if any profits or gains aris -
es to a person from receipt of any amount, including a bonus, under a unit linked
insurance policy to which the exemption specified at Schedule II (Table: Sl. No. 2)
does not apply, then,—
( a )   such profits and gains shall be chargeable to income-tax under the head
“Capital gains” and shall be deemed to be the income of such person in
the tax year in which such amount was received; and
( b )   the income taxable shall be calculated in such manner, as may be pre -
scribed.
(6) Irrespective of anything contained in sub-section (1), if the profits or gains arising
from the transfer by way of conversion of a capital asset into, or its treatment by
the owner as, stock-in-trade of a business carried on by him, then,—
( a )   such profits and gains shall be chargeable to income-tax as his income in
the tax year in which such stock-in-trade is sold or otherwise transferred
by him; and
( b )   for the purposes of section 72, the fair market value of the asset on the
date of such conversion or treatment shall be deemed to be the full value
of the consideration received or accruing as a result of the transfer of
such capital asset.
(7) If any person, at any time during the tax year, had any beneficial interest in any
securities and any profits or gains arise from transfer made by the depository or
participant of such beneficial interest in respect of securities, then,—
( a )   such profits and gains shall be chargeable to income-tax as the income
of the beneficial owner of the tax year in which such transfer took place;
( b )   such profits and gains shall not be regarded as income of the depository
who is deemed to be the registered owner of securities by virtue of section
10(1) of the Depositories Act, 1996 (22 of 1996); and
( c )   for the purposes of section 72 and section 2( 101 )( b ), the cost of
acquisition and the period of holding of any securities shall be determined
on the basis of the first-in-first-out method.
(8) In sub-section (7), “beneficial owner”, “depository”and “security” shall have the
same meanings as respectively assigned to them in section 2( 1 )( a ), ( e ) and ( l ) of the
Depositories Act, 1996 (22 of 1996).
(9) If any profits or gains arise from the transfer of a capital asset by a person, to a
firm or other association of persons or body of individuals (not being a company
or co-operative society) in which he is or becomes a partner or member, by way of
capital contribution or otherwise, then,—
( a )   such profits and gains shall be chargeable to tax as his income of the tax
year of such transfer; and
( b )   for the purposes of section 72 the amount recorded in the books of account
of the firm, association or body as the value of the capital asset shall be
deemed to be the full value of the consideration received or accruing as
a result of the transfer of such capital asset.

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(10) Irrespective of anything contained in sub-section (1), if a specified person
receives during the tax year, any money or capital asset, or both, from a specified
entity in connection with the reconstitution of such specified entity, then,—
( a )   any profits or gains arising from such receipt shall be deemed as income
of the specified entity of the tax year of such receipt by the specified
person and chargeable to income-tax under the head “Capital gains”; and
( b )   such profits or gains shall be determined irrespective of anything to the
contrary contained in this Act as follows:—
A = B + C – D,
where,
A = income chargeable to income-tax under this sub-section as
income of the specified entity under the head “Capital gains”;
B = value of any money received by the specified person from the
specified entity on the date of such receipt;
C = amount of fair market value of the capital asset received by
the specified person from the specified entity on the date of such
receipt; and
D = amount of balance in the capital account (represented in any
manner) of the specified person in the books of account of the
specified entity at the time of its reconstitution;
( c )   for the purposes of clause ( b ),—
( i )   if the value of “A” as computed is negative, such value shall be
deemed to be zero;
( ii )   the balance in the capital account of the specified person in the
books of account of the specified entity shall be calculated without
considering any increase in the capital account of the specified
person due to revaluation of any asset or due to self-generated
goodwill or any other self-generated asset; and
( d )   the provisions of this sub-section shall operate in addition to the pro -
visions of section 8 and the taxation under the said section shall be
worked out independently, when a capital asset is received by a specified
person from a specified entity in connection with the reconstitution of
such specified entity.
(11) In sub-section (10),—
( a )   “reconstitution of the specified entity”, “specified entity” and “specified
person” shall have the meanings respectively assigned to them in section
8;
( b )   “self-generated goodwill” and “self-generated asset” mean goodwill or
asset, as the case may be, which has been acquired without incurring
any cost for purchase or which has been generated during the course of
the business or profession.
(12) Irrespective of anything contained in sub-section (1), if the capital gain arises
from the transfer of a capital asset by way of compulsory acquisition under any

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law, or a transfer the consideration for which was determined or approved by the
Central Government or the Reserve Bank of India, and the compensation or the con -
sideration for such transfer is enhanced or further enhanced by any court, tribunal
or other authority, the capital gain shall be dealt with in the following manner:—
( a )   the capital gains computed with reference to the compensation awarded
in the first instance or as the case may be, consideration determined or
approved by the Central Government or the Reserve Bank of India in
the first instance, shall be chargeable as income under the head “Capital
gains” of the tax year in which such compensation or part thereof, or
such consideration or part thereof, was first received;
( b )   the amount by which the compensation or consideration is enhanced
or further enhanced by the court, tribunal or other authority shall be
deemed to be income chargeable under the head “Capital gains” of the
tax year in which such amount is received;
( c )   any compensation as referred to in clause ( b ) received in pursuance of
an interim order of a court, tribunal or other authority shall be deemed
as income chargeable under the head “Capital gains” of the tax year in
which the final order of such court, tribunal or other authority is made;
and
( d )   the capital gain assessed for any tax year under clause ( a ) or ( b ) shall
be recomputed where the compensation or consideration referred to in
clauses ( a ) to ( c ) is reduced by any court, tribunal or other authority, and
such reduced value shall be taken to be the full value of the consideration.
(13) In relation to the amount referred to in sub-section (12)( b ) and ( c ),—
( a )   the cost of acquisition and the cost of improvement shall be taken as   nil ;
and
( b )   in a case, where the enhanced compensation or consideration is received
by any other person due to the death of the person who made the trans -
fer, or for any other reason, such amount shall be deemed as the income
chargeable to tax under the head “Capital gains” in the hands of such
other person.
(14) Irrespective of anything contained in sub-section (1), if the capital gains arises
to a person (being an individual or a Hindu undivided family), from the transfer of
a capital asset, being land or building or both, under a specified agreement, then,—
( a )   such capital gains shall be chargeable to income-tax for the tax year in
which the certificate of completion for the whole or part of the project
is issued by the competent authority; and
( b )   for the purposes of section 72, the stamp duty value, on the date of
issue of the said certificate, of the share of such person, being land or
building or both, in the project, as increased by any consideration received
in cash or by a cheque or draft or by any other mode shall be deemed to
be the full value of the consideration received or accruing as a result of
the transfer of such capital asset.
(15) In sub-section (14),—