Income Tax Act

Official PDF pages 131–135

SOURCE PDF PAGE 131
( y )   of a capital asset, being conversion of gold into Electronic Gold Receipt
issued by a Vault Manager, or conversion of Electronic Gold Receipt into
gold;
( z )   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;
( za )   by way of conversion of bonds referred to in section 209(1) (Table: Sl.
No. 1) into shares or debentures of any company;
( zb )   by way of conversion of preference shares of a company into equity
shares of that company;
( zc )   of a capital asset, being any work of art, archaeological, scientific or art
collection, book, manuscript, drawing, painting, photograph or print,
to—
( i )   the Government; or
( ii )   a University; or
( iii )   the National Museum, National Art Gallery or National Archives;
or
( iv )   such other public museum or institution as may be notified by the
Central Government to be of national importance or of renown
throughout any State;
( zd )   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, if—
( i )   all the assets and liabilities of the firm relating to the business
immediately before the succession become the assets and liabilities
of the company;
( ii )   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;
( iii )   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
( iv )   the aggregate of the shareholding of the partners in the company
is not less than 50% of the total voting power and such sharehold -
ing continues to not less than 50% for five years from the date of
succession;
( ze )   of a capital asset or intangible asset by a private company or unlisted
public company (herein referred to as the company) to a limited liability
partnership or transfer of a share or shares held in the company by a
shareholder as a result of conversion of the company into a limited lia -
bility partnership under the provisions of section 56 or 57 of the Limited
Liability Partnership Act, 2008 (6 of 2009), if—

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( i )   all the assets and liabilities of the company, immediately before the
conversion, become the assets and liabilities of the limited liability
partnership;
( ii )   all the shareholders of the company, immediately before the con -
version, 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;
( iii )   the shareholders of the company do not receive any consideration
or benefit, directly or indirectly, other than by way of share in profit
and capital contribution in the limited liability partnership;
( iv )   the aggregate of the profit sharing ratio of the shareholders of the
company in the limited liability partnership shall not be less than
50% at any time during five years from the date of conversion;
( v )   the total sales, turnover or gross receipts in the business of the
company in any of the three tax years preceding the tax year in
which the conversion takes place does not exceed sixty lakh rupees;
( vi )   the total value of the assets, as appearing in the books of account of
the company in any of the three tax years preceding the tax year in
which the conversion takes place does not exceed five crore rupees;
and
( vii )   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 three years from the date
of conversion;
( zf )   of a capital asset or intangible asset (by way of sale or otherwise) by a
sole proprietorship concern to a company in case of succession of the
sole proprietorship concern by the company in the business carried on
by it, if—
( i )   all the assets and liabilities related to the business of the sole pro -
prietary concern, immediately before the succession, become the
assets and liabilities of the company;
( ii )   the shareholding of the sole proprietor in the company is not less
than 50% of the total voting power and such shareholding continues
to be not less than 50% for five years from the date of the succession;
and
( iii )   the sole proprietor does not receive any consideration or benefit,
directly or indirectly, except through allotment of shares in the
company;
( zg )   in a scheme for lending of any securities under an agreement or arrange -
ment, entered into by the assessee with the borrower of such securities
and which is subject to the guidelines issued by the Securities and
Exchange Board of India or the Reserve Bank of India;
( zh )   of a capital asset in a transaction of reverse mortgage under a scheme
notified by the Central Government;

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( zi )   of a capital asset, being share or shares of a special purpose vehicle to a
business trust in exchange of units allotted by that trust to the transferor;
( zj )   of a capital asset by a unit holder, being a unit or units, held by him
in the consolidating scheme of a mutual fund, in consideration of the
allotment to the unit holder of a capital asset, being a unit or units, in
the consolidated scheme of the mutual fund subject to the condition that
the consolidation is of two or more schemes—
( i )   of an equity-oriented fund; or
( ii )   of a fund other than equity-oriented fund;
( zk )   of a capital asset by a unit holder, being a unit or units, held by him in
the consolidating plan of a mutual fund scheme, in consideration of the
allotment to the unit holder of a capital asset, being a unit or units, in
the consolidated plan of that scheme of the mutual fund;
( zl )   of a capital asset, being an interest in a joint venture, held by a public
sector company, in exchange for shares of a company incorporated out -
side India by the government of a foreign State, as per the laws of that
foreign State.
(2) In sub-section (1), the definitions mentioned in column C of the Table below
shall apply to the corresponding clauses of the said sub-section mentioned in col -
umn B of the said Table:
TABLE
Sl.
No.
Clause   Definitions
A   B   C
1.   ( i )   The expressions,—
( a )   “banking company” shall have the same meaning as assigned
to it in section 5( c ) of the Banking Regulation Act, 1949 (10
of 1949);
( b )   “banking institution” shall have the same meaning as
assigned to it in section 45(15) of the Banking Regulation
Act, 1949 (10 of 1949).
2.   ( n )
and
( o )
“business   reorganisation”,   “converted   banking   company”,
“predecessor co-operative bank” and “successor co-operative
bank” shall have the meanings respectively assigned to them in
section 65.
3.   ( r )   ( a )   “derivative” shall have the same meaning as assigned to it
in section 2( ac ) of the Securities Contracts (Regulation)
Act, 1956 (42 of 1956);
( b )   “securities” shall have the same meaning as assigned to it
in section 2( h ) of the Securities Contracts (Regulation) Act,
1956 (42 of 1956).

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Sl.
No.
Clause   Definitions
A   B   C
4.   ( s )   “Government Security” shall have the same meaning as assigned
to it in section 2( b ) of the Securities Contracts (Regulation) Act,
1956 (42 of 1956).
5.   ( t ) and
( u )
( a )   “original fund” means—
( A )   a fund established or incorporated or registered out -
side India, which collects funds from its members for
investing it for their benefit and fulfils the following
conditions:—
( i )   the fund is not a person resident in India;
( ii )   the fund is a resident of a country or a specified
territory with which an agreement referred to
in section 159(1) or (2)   has been en -
tered into; or is established or incorporated or
registered in a country or a specified territory
as may be notified by the Central Government;
( iii )   the fund and its activities are subject to appli-
cable investor protection regulations in the
country or specified territory where it is estab -
lished or incorporated or is a resident; and
( iv )   fulfils other conditions as may be prescribed;
( B )   an investment vehicle, in which Abu Dhabi Investment
Authority is the direct or indirect sole shareholder or
unit holder or beneficiary or interest holder and such
investment vehicle is wholly owned and controlled,
directly or indirectly, by the Abu Dhabi Investment
Authority or the Government of Abu Dhabi; or
( C )   a fund notified by the Central Government subject to
conditions as specified;
( b )   “relocation” means transfer of assets of the original fund, or
of its wholly owned special purpose vehicle, to a resultant
fund on or before the 31st March, 2030, where consideration
for such transfer is discharged in the form of share or unit
or interest in the resulting fund to—
( i )   a shareholder or unit holder or interest holder of the
original fund, in the same proportion in which the
share or unit or interest was held by such sharehold -
er or unit holder or interest holder in such original
fund,   in lieu   of their shares or units or interests in the
original fund; or

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Sl.
No.
Clause   Definitions
A   B   C
( ii )   the original fund, in the same proportion as referred
to in sub-clause ( i ), in respect of which the share or
unit or interest is not issued by resultant fund to its
shareholder or unit holder or interest holder;
( c )   “resultant fund” means a fund established or incorporated
in India in the form of a trust or a company or a limited
liability partnership, which is located in an International
Financial Services Centre as referred to in section 147 and
has been granted—
( i )   a certificate of registration as a Category I or Category
II or Category III Alternative Investment Fund; or
( ii )   a certificate as a retail scheme or an Exchange Traded
Fund as per Schedule VI (Note 1) and which fulfils
the conditions specified in Schedule VI (Table: Sl. No.
1),
and is regulated under the Securities and Exchange Board of
India (Alternative Investment Funds) Regulations, 2012 made
under the Securities and Exchange Board of India Act, 1992
(15 of 1992) or regulated under the International Financial
Services Centres Authority (Fund Management) Regulations,
2022 made under the International Financial Services Centres
Authority Act, 2019 (50 of 2019).
6.   ( y )   “Electronic Gold Receipt”and “Vault Manager” shall have the
same meanings as respectively assigned to them in regulation
2(1)( h ) and ( l ) of the Securities and Exchange Board of India
(Vault Managers) Regulations, 2021 made under the Securities
and Exchange Board of India Act, 1992 (15 of 1992).
7.   ( zc )   “University” means a University established or incorporated by
or under a Central Act or State Act 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.
8.   ( ze )   “private company” and “unlisted public company” shall have the
same meanings as respectively assigned to them in the Limited
Liability Partnership Act, 2008 (6 of 2009).
9.   ( zi )   “special purpose vehicle” shall have the meaning assigned to it
in Schedule V (Note 2).
10.   ( zj )   ( a )   “consolidated scheme” means the scheme with which the
consolidating scheme merges or which is formed as a result
of such merger;