54E. Capital gain
on transfer of capital assets not to be charged in certain
cases.- (1) Where the capital gain arises from the
transfer of a long-term capital asset before the 1st day of
April, 1992, (the capital asset so transferred being hereafter
in this section referred to as the original asset) and the
assessee has, within a period of six months after the date
of such transfer, invested or deposited the whole or any part
of the net consideration in any specified asset (such specified
asset being hereafter in this section referred to as the new
asset), the capital gain shall be dealt with in accordance
with the following provisions of this section, that is to
say,—
(a) if the cost of the new asset is not less than the net
consideration in respect of the original asset, the whole
of such capital gain shall not be charged under section 45;
(b) if the cost of the new asset is less than the net consideration
in respect of the original asset, so much of the capital gain
as bears to the whole of the capital gain the same proportion
as the cost of acquisition of the new asset bears to the net
consideration shall not be charged under section 45:
Provided that in a case where the original asset is transferred
after the 28th day of February, 1983, the provisions of this
sub-section shall not apply unless the assessee has invested
or deposited the whole or, as the case may be, any part of
the net consideration in the new asset by initially subscribing
to such new asset:
Provided further that in a case where the transfer of the
original asset is by way of compulsory acquisition under any
law and the full amount of compensation awarded for such acquisition
is not received by the assessee on the date of such transfer,
the period of six months referred to in this sub-section shall,
in relation to so much of such compensation as is not received
on the date of the transfer, be reckoned from the date immediately
following the date on which such compensation is received
by the assessee or the 31st day of March, 1992, whichever
is earlier].
Explanation 1.— For the purposes of this sub-section,
“specified asset” means,—
(a) in a case where the original asset is transferred before
the 1st day of March, 1979, any of the following assets, namely:—
(i) securities of the Central Government or a State Government;
(ii) savings certificates as defined in clause (c) of section
2 of the Government Savings Certificates Act, 1959 (46 of
1959);
(iii) units in the Unit Trust of India established under the
Unit Trust of India Act, 1963 (52 of 1963);
(iv) debentures specified by the Central Government for
the purposes of clause (ii) of sub-section (1) of section
80L;
(v) shares in any Indian company which are issued to the
public or are listed in a recognised stock exchange in India
in accordance with the Securities Contracts (Regulation) Act,
1956 (42 of 1956), and any rules made thereunder, where the
investment in such shares is made before the 1st day of March,
1978;
(va) equity shares forming part of any eligible issue of capital,
where the investment in such shares is made after the 28th
day of February, 1978;
(vi) deposits for a period of not less than three years with
the State Bank of India established under the State Bank of
India Act, 1955 (23 of 1955), or any subsidiary bank as defined
in the State Bank of India (Subsidiary Banks) Act, 1959 (38
of 1959) or any nationalised bank, that is to say, any corresponding
new bank, constituted under section 3 of the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1970 (5 of
1970), or any co-operative society engaged in carrying on
the business of banking (including a co-operative land mortgage
bank or a co-operative land development bank);
(b) in a case where the original asset is transferred after
the 28th day of February, 1979 but before the 1st day of March,
1983, such National Rural Development Bonds as the Central
Government may notify in this behalf in the Official Gazette;
(c) in a case where the original asset is transferred after
the 28th day of February, 1983 but before the 1st day of April,
1986, any of the following assets, namely :—
(i) securities of the Central Government which that Government
may, by notification in the Official Gazette, specify in this
behalf;
(ii) special series of units of the Unit Trust of India
established under the Unit Trust of India Act, 1963 (52 of
1963), which the Central Government may, by notification in
the Official Gazette, specify in this behalf;
(iii) such National Rural Development Bonds as have been
notified under clause (b) of Explanation 1 or as may be notified
in this behalf under this clause by the Central Government;
(iv) such debentures issued by the Housing and Urban Development
Corporation Limited a Government company as defined in section
617 of the Companies Act, 1956 (1 of 1956), as the Central
Government may, by notification in the Official Gazette, specify
in this behalf;
(d) in a case where the original asset is transferred after
the 31st day of March, 1986, any of the assets specified in
clause (c) and such bonds issued by any public sector company,
as the Central Government may, by notification in the Official
Gazette, specify in this behalf;
(e) in a case where the original asset is transferred after
the 31st day of March, 1989, any of the assets specified in
clauses (c) and (d) and such debentures or bonds issued by
the National Housing Bank established under section 3 of the
National Housing Bank Act, 1987 (53 of 1987), as the Central
Government may, by notification in the Official Gazette, specify
in this behalf.
Explanation 2.—“Eligible issue of capital”
shall have the meaning assigned to it in sub-section (3) of
section 80CC.
Explanation 3.—An assessee shall not be deemed to have
invested the whole or any part of the net consideration in
any equity shares referred to in sub- clause (va) of clause
(a) of Explanation 1, unless the assessee has subscribed to
or purchased the shares in the manner specified in sub-section
(4) of section 80CC.
Explanation 4.—“Cost”, in relation to any
new asset, being a deposit referred to in sub-clause (vi)
of clause (a) of Explanation 1, means the amount of such deposit.
Explanation 5.—“Net consideration”, in
relation to the transfer of a capital asset, means the full
value of the consideration received or accruing as a result
of the transfer of the capital asset as reduced by any expenditure
incurred wholly and exclusively in connection with such transfer.
(1A) Where the assessee deposits after the 27th day of April,
1978, the whole or any part of the net consideration in respect]
of the original asset in any new asset, being a deposit referred
to in sub-clause (vi) of clause (a) of Explanation 1 below
sub-section (1), the cost of such new asset shall not be taken
into account for the purposes of that sub-section unless the
following conditions are fulfilled, namely :—
(a) the assessee furnishes, along with the deposit, a declaration
in writing, to the bank or the co-operative society referred
to in the said sub-clause (vi) with which such deposit is
made, to the effect that the assessee will not take any loan
or advance on the security of such deposit during a period
of three years from the date on which the deposit is made;
(b) the assessee furnishes, along with the return of income
for the assessment year relevant to the previous year in which
the transfer of the original asset was effected or within
such further time as may be allowed by the Assessing Officer,
a copy of the declaration referred to in clause (a) duly attested
by an officer not below the rank of sub-agent, agent or manager
of such bank or an officer of corresponding rank of such co-operative
society.
(1B) Where on the fulfilment of the conditions specified
in sub-section (1A), the cost of the new asset referred to
in that sub-section is taken into account for the purposes
of sub-section (1), the assessee shall, within a period of
ninety days from the expiry of the period of three years reckoned
from the date of such deposit, furnish to the Assessing Officer
a certificate from the officer referred to in clause (b) of
sub-section (1A) to the effect that the assessee has not taken
any loan or advance on the security of such deposit during
the said period of three years.
(1C) Notwithstanding anything contained in sub-section (1),
where the capital gain arises from the transfer of the original
asset, made after the 31st day of March, 1992, in respect
of which the assessee had received any amount by way of advance
on or before the 29th day of February, 1992 and had invested
or deposited the whole or any part of such amount in the new
asset on or before the later date, then, the provisions of
clauses (a) and (b) of sub-section (1) shall apply in the
case of such investment or deposit as they apply in the case
of investment or deposit under that sub-section.
(2) Where the new asset is transferred, or converted (otherwise
than by transfer) into money, within a period of three years
from the date of its acquisition, the amount of capital gain
arising from the transfer of the original asset not charged
under section 45 on the basis of the cost of such new asset
as provided in clause (a) or, as the case may be, clause (b),
of sub-section (1) shall be deemed to be income chargeable
under the head “Capital gains” relating to long-term
capital assets of the previous year in which the new asset
is transferred or converted (otherwise than by transfer) into
money.
Explanation 1.—Where the assessee deposits after the
27th day of April, 1978, the whole or any part of the net
consideration in respect of the original asset in any new
asset, being a deposit referred to in sub-clause (vi) of clause
(a) of Explanation 1 below sub-section (1), and such assessee
takes any loan or advance on the security of such deposit,
he shall be deemed to have converted (otherwise than by transfer)
such deposit into money on the date on which such loan or
advance is taken.
Explanation 2.—In a case where the original asset is
transferred after the 28th day of February, 1983 and the assessee
invests the whole or any part of the net consideration in
respect of the original asset in any new asset and such assessee
takes any loan or advance on the security of such new asset,
he shall be deemed to have converted (otherwise than by transfer)
such new asset on the date on which such loan or advance is
taken.
(3) Where the cost of the equity shares referred to in sub-clause
(va) of clause (a) of Explanation 1 below sub-section (1)
is taken into account for the purposes of clause (a) or clause
(b) of sub-section (1), a deduction with reference to such
cost shall not be allowed under section 80CC.
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