Section 47 of the Income-tax Act: Transactions Not Regarded as Transfer

47 Income Tax Act
-  Transactions not regarded as transfer
Section 47 of Income Tax Act 1961 -  Transactions not regarded as 
transfer
Nothing contained in section 45 shall apply to the following transfers:
(i) 
any distribution of capital assets on the total or partial partition of a Hindu 
undivided family;
1 * * * * *
(iii) any transfer of a capital asset under a 
gift or will or an irrevocable trust :
2 Provided that this clause shall not 
apply to transfer under a gift or an irrevocable trust of a capital asset being 
shares, debentures or warrants allotted by a company directly or indirectly to 
its employees under 3 any Employees Stock Option Plan or Scheme of the company 
offered to such employees in accordance with the guidelines issued by the 
Central Government in this behalf;
(iv) any transfer of a capital asset by a 
company to its subsidiary company, if
(a) the parent company or its nominees 
hold the whole of the share capital of the subsidiary company, and
(b) the 
subsidiary company is an Indian company;
4 (v) any transfer of a capital asset 
by a subsidiary company to the holding company, if (a) the whole of the share 
capital of the subsidiary company is held by the holding company, and
(b) the 
holding company is an Indian company:
5 Provided that nothing contained in 
clause (iv) or clause (v) shall apply to the transfer of a capital asset made 
after the 29th day of February, 1988, as stock-in-trade;
6 (vi) any transfer, 
in a scheme of amalgamation, of a capital asset by the amalgamating company to 
the amalgamated company if the amalgamated company is an Indian company;
7 
(via) any transfer, in a scheme of amalgamation, of a capital asset being a 
share or shares held in an Indian company, by the amalgamating foreign company 
to the amalgamated foreign company, if
(a) at least twenty-five per cent of 
the shareholders of the amalgamating foreign company continue to remain 
shareholders of the amalgamated foreign company, and
(b) such transfer does 
not attract tax on capital gains in the country, in which the amalgamating 
company is incorporated;
8 (viaa) any transfer, in a scheme of amalgamation of 
a banking company with a banking institution sanctioned and brought into force 
by the Central Government under sub-section (7) of section 45 of the Banking 
Regulation Act, 1949 (10 of 1949), of a capital asset by the banking company to 
the banking institution.
Explanation. For the purposes of this clause,
(i) banking company shall have the same meaning assigned to it in clause (c) of 
section 9 of the Banking Regulation Act, 1949 (10 of 1949);
(ii) banking 
institution shall have the same meaning assigned to it in sub-section (15) of 
section 45 of the Banking Regulation Act, 1949 (10 of 1949);
9 (viab) any 
transfer, in a scheme of amalgamation, of a capital asset, being a share of a 
foreign company, referred to in the Explanation 5 to clause (i) of sub-section 
(1) of section 9, which derives, directly or indirectly, its value substantially 
from the share or shares of an Indian company, held by the amalgamating foreign 
company to the amalgamated foreign company, if
(A) at least twenty-five per 
cent. of the shareholders of the amalgamating foreign company continue to remain 
shareholders of the amalgamated foreign company; and
(B) such transfer does 
not attract tax on capital gains in the country in which the amalgamating 
company is incorporated;
10 (vib) any transfer, in a demerger, of a capital 
asset by the demerged company to the resulting company, if the resulting company 
is an Indian company;
(vic) any transfer in a demerger, of a capital asset, 
being a share or shares held in an Indian company, by the demerged foreign 
company to the resulting foreign company, if
(a) the shareholders holding not less than three-fourths in value of the shares 
of the demerged foreign company continue to remain shareholders of the resulting 
foreign company; and
(b) such transfer does not attract tax on capital gains 
in the country, in which the demerged foreign company is incorporated:
Provided that the provisions of sections 391 to 394 of the Companies Act, 1956 
(1 of 1956) shall not apply in case of demergers referred to in this clause;
11 (vica) any transfer in a business reorganisation, of a capital asset by the 
predecessor co-operative bank to the successor co-operative bank;
(vicb) any 
transfer by a shareholder, in a business reorganisation, of a capital asset 
being a share or shares held by him in the predecessor co-operative bank if the 
transfer is made in consideration of the allotment to him of any share or shares 
in the successor co-operative bank.
Explanation. For the purposes of clauses (vica) 
and (vicb), the expressions business reorganisation, predecessor co-operative 
bank and successor co-operative bank shall have the meanings respectively 
assigned to them in section 44DB;
12 (vicc) any transfer in a demerger, of a 
capital asset, being a share of a foreign company, referred to in the 
Explanation 5 to clause (i) of sub-section (1) of section 9, which derives, 
directly or indirectly, its value substantially from the share or shares of an 
Indian company, held by the demerged foreign company to the resulting foreign 
company, if
(a) the shareholders, holding not less than three-fourths in value 
of the shares of the demerged foreign company, continue to remain shareholders 
of the resulting foreign company; and
(b) such transfer does not attract tax 
on capital gains in the country in which the demerged foreign company is 
incorporated: Provided that the provisions of sections 391 to 394 of the 
Companies Act, 1956 (1 of 1956) shall not apply in case of demergers referred to 
in this clause;
(vid) any transfer or issue of shares by the resulting 
company, in a scheme of demerger to the shareholders of the demerged company if 
the transfer or issue is made in consideration of demerger of the undertaking;
(vii) any transfer by a shareholder, in a scheme of amalgamation, of a capital 
asset being a share or shares held by him in the amalgamating company, if
(a) 
the transfer is made in consideration of the allotment to him of any share or 
shares in the amalgamated company except where the shareholder itself is the 
amalgamated company, and
(b) the amalgamated company is an Indian company;
13 (viia) any transfer of a capital asset, being bonds or 14 Global Depository 
Receipts referred to in sub-section (1) of section 115AC, made outside India by 
a non-resident to another non-resident;
15 (viiaa) any transfer, made outside 
India, of a capital asset being rupee denominated bond of an Indian company 
outside India, by a non-resident to another non-resident;
16 (viiab) any transfer of a capital asset, being
(a) bond or Global 
Depository Receipt referred to in sub-section (1) of section 115AC; or
(b) rupee denominated bond of an Indian company; or
(c) derivative,
made by a non-resident on a recognised stock exchange located 
in any International Financial Services Centre and where the consideration for 
such transaction is paid or payable in foreign currency.
Explanation.-For the 
purposes of this clause,-
(a) "International Financial Services Centre" shall have the meaning assigned to 
it in clause (q) of section 2 of the Special Economic Zones Act, 2005;
(b) "recognised 
stock exchange" shall have the meaning assigned to it in clause (ii) of 
Explanation 1 to clause (5) of section 43;
(c) "derivative" shall have the 
meaning assigned to it in clause (ac) of section 2 of the Securities Contracts 
(Regulation) Act, 1956.
17 (viib) any transfer of a capital asset, being a 
Government Security carrying a periodic payment of interest, made outside India 
through an intermediary dealing in settlement of securities, by a nonresident to 
another non-resident.
Explanation.-For the purposes of this clause, 
"Government Security" shall have the meaning assigned to it in clause (b) of 
section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
18 
(viic) any transfer of Sovereign Gold Bond issued by the Reserve Bank of India 
under the Sovereign Gold Bond Scheme, 2015, by way of redemption, by an assessee 
being an individual;
19 (viii) any transfer of agricultural land in India 
effected before the 1st day of March, 1970;
20 (ix) any transfer of a capital 
asset, being any work of art, archaeological, scientific or art collection, 
book, manuscript, drawing, painting, photograph or print, to the Government or a 
University or the National Museum, National Art Gallery, National Archives or 
any such other public museum or institution as may be notified by the Central 
Government in the Official Gazette to be of national importance or to be of 
renown throughout any State or States.
Explanation.-For the purposes of this 
clause, "University" means a University established or incorporated by or under 
a Central, State 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;
21 (x) any transfer by way of 22 
conversion of bonds or debentures, debenture-stock or deposit certificates in 
any form, of a company into shares or debentures of that company;
23 (xa) any 
transfer by way of conversion of bonds referred to in clause (a) of sub-section 
(1) of section 115AC into shares or debentures of any company;
24 (xb) any 
transfer by way of conversion of preference shares of a company into equity 
shares of that company;
25 (xi) any transfer made on or before the 2631st day 
of December, 1998 by a person (not being a company) of a capital asset being 
membership of a recognised stock exchange to a company in exchange of shares 
allotted by that company to the transferor.
Explanation.-For the purposes of 
this clause, the expression "membership of a recognised stock exchange" means 
the membership of a stock exchange in India which is recognised under the 
provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
(xii) any transfer of a capital asset, being land of a sick industrial company, 
made under a scheme prepared and sanctioned under section 18 of the Sick 
Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) where such sick 
industrial company is being managed by its workers’ co-operative:
Provided 
that such transfer is made during the period commencing from the previous year 
in which the said company has become a sick industrial company under sub-section 
(1) of section 17 of that Act and ending with the previous year during which the 
entire net worth of such company becomes equal to or exceeds the accumulated 
losses.
Explanation.-For the purposes of this clause, "net worth" shall have the meaning 
assigned to it in clause (ga) of sub-section (1) of section 3 of the Sick 
Industrial Companies (Special Provisions) Act, 1985 (1 of 1986);
27 (xiii) 28 
any transfer 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, or any transfer of a capital asset to a company in the course of 29 
demutualisation or corporatisation of a recognised stock exchange in India as a 
result of which an association of persons or body of individuals is succeeded by 
such company:
Provided that-
(a) all the assets and liabilities of the firm or of the 
association of persons or body of individuals relating to the business 
immediately before the succession become the assets and liabilities of the 
company;
(b) 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;
(c) 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
(d) the aggregate of the shareholding in the 
company of the partners of the firm is not less than fifty per cent of the total 
voting power in the company and their shareholding continues to be as such for a 
period of five years from the date of the succession;
30 (e) the 29 
demutualisation or corporatisation of a recognised stock exchange in India is 
carried out in accordance with a scheme for 29 demutualisation or 
corporatisation which is approved by the Securities and Exchange Board of India 
established under section 3 of the Securities and Exchange Board of India Act, 
1992 (15 of 1992);
31 (xiiia) any transfer of a capital asset being a 
membership right held by a member of a recognised stock exchange in India for 
acquisition of shares and trading or clearing rights acquired by such member in 
that recognised stock exchange in accordance with a scheme for demutualisation 
or corporatisation which is approved by the Securities and Exchange Board of 
India established under section 3 of the Securities and Exchange Board of India 
Act, 1992 (15 of 1992);
32 (xiiib) any transfer of a capital asset or 
intangible asset by a private company or unlisted public company (hereafter in 
this clause referred to as the company) to a limited liability partnership or 
any transfer of a share or shares held in the company by a shareholder as a 
result of conversion of the company into a limited liability partnership in 
accordance with the provisions of section 56 or section 57 of the Limited 
Liability Partnership Act, 2008 (6 of 2009):
Provided that-
(a) all the assets and liabilities of the company immediately before the 
conversion become the assets and liabilities of the limited liability 
partnership;
(b) all the shareholders of the company immediately before the 
conversion 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;
(c) the shareholders of the company do not receive any 
consideration or benefit, directly or indirectly, in any form or manner, other 
than by way of share in profit and capital contribution in the limited liability 
partnership;
(d) the aggregate of the profit sharing ratio of the shareholders 
of the company in the limited liability partnership shall not be less than fifty 
per cent at any time during the period of five years from the date of 
conversion;
(e) the total sales, turnover or gross receipts in the business of 
the company in any of the three previous years preceding the previous year in 
which the conversion takes place does not exceed sixty lakh rupees; 33 ***
34 
(ea) the total value of the assets as appearing in the books of account of the 
company in any of the three previous years preceding the previous year in which 
the conversion takes place does not exceed five crore rupees; and
(f) 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 a period of three years from the date of conversion.
Explanation.-For the purposes of this clause, the expressions "private company" 
and "unlisted public company" shall have the meanings respectively assigned to 
them in the Limited Liability Partnership Act, 2008 (6 of 2009);
(xiv) where a 
sole proprietary concern is succeeded by a company in the business carried on by 
it as a result of which the sole proprietary concern sells or otherwise 
transfers any capital asset or intangible asset to the company :
Provided 
that-
(a) all the assets and liabilities of the sole proprietary concern relating to 
the business immediately before the succession become the assets and liabilities 
of the company;
(b) the shareholding of the sole proprietor in the company is 
not less than fifty per cent of the total voting power in the company and his 
shareholding continues to remain as such for a period of five years from the 
date of the succession; and
(c) the sole proprietor does 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;
(xv) any transfer in a 
scheme for lending of any securities under an agreement or arrangement, which 
the assessee has entered into with the borrower of such securities and which is 
subject to the guidelines issued by the Securities and Exchange Board of India, 
established under section 3 of the Securities and Exchange Board of India Act, 
1992 (15 of 1992) 35 or the Reserve Bank of India constituted under sub-section 
(1) of section 3 of the Reserve Bank of India Act, 1934 (2 of 1934), in this 
regard;
36 (xvi) any transfer of a capital asset in a transaction of reverse 
mortgage under a scheme made and notified by the Central Government;
37 (xvii) 
any transfer of a capital asset, being share of a special purpose vehicle to a 
business trust in exchange of units allotted by that trust to the transferor.
Explanation.-For the purposes of this clause, the expression "special purpose 
vehicle" shall have the meaning assigned to it in the Explanation to clause 
(23FC) of section 10;
38 (xviii) any transfer by a unit holder of a capital 
asset, being a unit or units, held by him in the consolidating scheme of a 
mutual fund, made in consideration of the allotment to him of a capital asset, 
being a unit or units, in the consolidated scheme of the mutual fund:
Provided 
that the consolidation is of two or more schemes of equity oriented fund or of 
two or more schemes of a fund other than equity oriented fund.
Explanation.-For the purposes of this clause,-
(a) "consolidated scheme" means the scheme with which the consolidating scheme 
merges or which is formed as a result of such merger;
(b) "consolidating 
scheme" means the scheme of a mutual fund which merges under the process of 
consolidation of the schemes of mutual fund in accordance with the Securities 
and Exchange Board of India (Mutual Funds) Regulations, 1996 made under the 
Securities and Exchange Board of India Act, 1992 (15 of 1992);
(c) "equity 
oriented fund" shall have the meaning assigned to it in clause (38) of section 
10;
(d) "mutual fund" means a mutual fund specified under clause (23D) of 
section 10.
38 (xix) any transfer by a unit holder of a capital asset, being a 
unit or units, held by him in the consolidating plan of a mutual fund scheme, 
made in consideration of the allotment to him of a capital asset, being a unit 
or units, in the consolidated plan of that scheme of the mutual fund.
Explanation.-For the purposes of this clause,-
(a) "consolidating plan" means the plan within a scheme of a mutual fund which 
merges under the process of consolidation of the plans within a scheme of mutual 
fund in accordance with the Securities and Exchange Board of India (Mutual 
Funds) Regulations, 1996 made under the Securities and Exchange Board of India 
Act, 1992 (15 of 1992);
(b) "consolidated plan" means the plan with which the 
consolidating plan merges or which is formed as a result of such merger;
(c) 
"mutual fund" means a mutual fund specified under clause (23D) of section 10.
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1. Clause (ii) omitted by Act 11 of 1987, s. 14 (w.e.f. 
1-4-1988).
2. Ins. by Act 10 of 2000, s. 21 (w.e.f. 1-4-2001).
3. Subs. by Act 14 of 2001, s. 29, for the Employees Stock option Plan or Scheme 
(w.e.f. 1-4-2001).
4. Ins. by Act 10 of 1965, s. 15 (w.e.f. 1-4-1965).
5. Ins. by Act 26 of 1988, s. 17 (w.e.f. 1-4-1988).
6. Ins. by Act 20 of 1967, s. 19 (w.e.f. 1-4-1967).
7. Ins. by Act 18 of 1992, s. 23 (w.e.f. 1-4-1993).
8. Ins. by Act 18 of 2005, s. 15 (w.e.f. 1-4-2005).
9. Ins. by Act 20 of 2015, s. 14 (w.e.f. 1-4-2016).
10. Ins. by Act 27 of 1999, s. 34 (w.e.f. 1-4-2000).
11. Ins. by Act 22 of 2007, s. 16 (w.e.f. 1-4-2008).
12. Ins. by Act 20 of 2015, s. 14 (w.e.f. 1-4-2016).
13. Ins. by Act 18 of 1992, s. 23 (w.e.f. 1-6-1992).
14. Subs. by Act 14 of 2001, s. 29, for shares (w.e.f. 1-4-2002).
15. Ins. by Act 7 of 2017, s. 23 (w.e.f. 1-4-2018).
16. Ins. by Act 13 of 2018, s. 17 (w.e.f. 1-4-2019).
17. Ins. by Act 25 of 2014, s. 18 (w.e.f. 1-4-2015).
18. Ins. by Act 28 of 2016, s. 28 (w.e.f. 1-4-2017).
19. Ins. by Act 19 of 1970, s. 11 (w.e.f. 1-4-1970).
20. Ins. by Act 66 of 1976, s. 11 (w.e.f. 1-4-1977).
21. Ins. by Act 49 of 1991, s. 18 (w.e.f. 1-4-1962).
22. Subs. by Act 18 of 1992, s. 23 for "conversion of debentures" (w.e.f. 
1-4-1962).
23. Ins. by Act 18 of 2008, s. 14 (w.e.f. 1-4-2008).
24. Ins. by Act 7 of 2017, s. 23 (w.e.f. 1-4-2018).
25. Ins. by Act 26 of 1997, s. 16 (w.e.f. 1-4-1998).
26. Subs. by Act 21 of 1998, s. 21 for "31st day of December, 1997" (w.e.f. 
1-4-1998).
27. Ins. by Act 21 of 1998, s. 21 (w.e.f.1-4-1999).
28. Subs. by Act 14 of 2001, s. 29, for certain words (w.e.f. 1-4-2002).
29. Subs. by Act 32 of 2003, s. 30, for "corporatisation" (w.e.f. 1-4-2004).
30. Ins. by Act 14 of 2001, s. 29 (w.e.f. 1-4-2002).
31. Ins. by Act 32 of 2003, s. 30 (w.e.f. 1-4-2004).
32. Ins. by Act 14 of 2010, s. 18 (w.e.f. 1-4-2011).
33. The word "and" omitted by Act 28 of 2016, s. 28 (w.e.f. 1-4-2017).
34. Ins. by s. 28, ibid. (w.e.f. 1-4-2017).
35. Ins. by Act 20 of 2002, s. 23 (w.e.f. 1-4-2003).
36. Ins. by Act 18 of 2008, s. 14 (w.e.f. 1-4-2008).
37. Ins. by Act 25 of 2014, s. 18 (w.e.f. 1-4-2015).
38. Ins. by Act 20 of 2015, s. 14 (w.e.f. 1-4-2016).
39. Ins. by Act 28 of 2016, s. 28 (w.e.f. 1-4-2017).