Amendment of section 47.
15. In section 47 of the Income-tax Act,──
(a) in clause (vica), after the words “successor co-operative bank”, the words “or to the converted banking company” shall be inserted;
(b) in clause (vicb),––
(i) after the words “successor co-operative bank”, the words “or to the converted banking company” shall be inserted;
(ii) in the Explanation, for the words ‘expressions “business reorganisation”, “predecessor co-operative bank” and’, the words ‘expressions “business reorganisation”, “converted banking company”, “predecessor co-operative bank” and’ shall be substituted;
(c) after clause (viiab), the following clauses shall be inserted with effect from the 1st day of April, 2022, namely:––
‘(viiac) any transfer, in a relocation, of a capital asset by the original fund to the resulting fund;
(viiad) any transfer by a shareholder or unit holder or interest holder, in a relocation, of a capital asset being a share or unit or interest held by him in the original fund in consideration for the share or unit or interest in the resultant fund;
Explanation.–– For the purposes of clauses (viiac) and (viiad),––
(a) “original fund” means a fund established or incorporated or registered outside India, which collects funds from its members for investing it for their benefit and fulfills the following conditions, namely:-
(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 sub-section (1) of section 90 or sub-section (1) of section 90A has been entered into; or is established or incorporated or registered in a country or a specified territory as may be notified by the Central Government in this behalf;
(iii) the fund and its activities are subject to applicable investor protection regulations in the country or specified territory where it is established or incorporated or is a resident; and
(iv) fulfils such other conditions as may be prescribed;
(b) “relocation” means transfer of assets of the original fund to a resultant fund on or before the 31st day of March, 2023, where consideration for such transfer is discharged in the form of share or unit or interest in the resulting fund to the 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 shareholder or unit holder or interest holder in such original fund;
(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––
(i) has been granted a certificate of registration as a Category I or Category II or Category III Alternative Investment Fund, and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012 made under the Securities and exchange Board of India Act, 1992 (15 of 1992); and.
(ii) is located in any International Financial Services Centre as referred to in sub-section (1A) of section 80LA;.’
Notes on Clauses:
Clause 15 of the Bill seeks to amend section 47 of the Income-tax Act relating to transactions not regarded as transfer.
The said section, inter alia, provides that any transfer of a capital asset by the predecessor co-operative bank to the successor co-operative bank in a case of business reorganisation shall not be regarded as transfer.
It is proposed to amend clause (vica) of the said section to expand the scope of the said clause so as to provide that any transfer of a capital asset by the primary co-operative bank which has been converted into a banking company as a result of conversion shall not be considered as transfer for the purposes of capital gains.
Further, it is also proposed to amend clause (vicb) of the said section so as to provide that the allotment of shares of the converted banking company to the shareholders of the predecessor co-operative bank as a result of this conversion shall not be treated as transfer for the purposes of capital gains.
It is also proposed to amend the Explanation to clause (vicb) of the said section so as to provide that the expression “converted banking company” shall have the meaning assigned to it in section 44DB.
These amendments will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-2022 and subsequent assessment years.
It is proposed to insert new clauses (viiac) and (viiad) in the said section so as to provide that any transfer, in relocation, of a capital asset by the original fund to the resultant fund shall not be considered as transfer for the purpose of Capital gains tax. It is further proposed that the allotment of shares of the resultant fund to the shareholders of the original fund as a result of this relocation shall not be treated as transfer for the purpose of capital gains.
It is also proposed to define the expressions “original Fund”, “relocation” and “resultant fund”.
These amendments will take effect from 1st April, 2022 and will, accordingly, apply in relation to the assessment year 2022-2023 and subsequent assessment years.
