Amendment of section 47.
17. In section 47 of the Income-tax Act, in clause (viiab), with effect from the 1st day of April, 2020,––
(A) for sub-clause (c), the following sub-clauses shall be substituted, namely:––
“(c) derivative; or
(d) such other securities as may be notified by the Central Government in this behalf,”;
(B) in the long line, after the words “made by a non-resident”, the words “or a specified fund” shall be inserted;
(C) in the Explanation, after clause (c), the following clauses shall be inserted, namely:-
(d) “securities” shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
(e) “specified fund” means a fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate,-
(i) which has been granted a certificate of registration as a 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);
(ii) which is located in any International Financial Services Centre;
(iii) which is deriving income solely in convertible foreign exchange;
(iv) of which all the units are held by non-residents;
(f) “trust” means a trust established under the Indian Trusts Act, 1882 (2 of 1882) or under any other law for the time being in force;
(g) “unit” means beneficial interest of an investor in the fund and shall include shares or partnership interests;
(h) “convertible foreign exchange” means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Management Act, 1999 (42 of 1999) and the rules made thereunder;’.
Note:
While Passing the bill in the Loksabha as on 18-7-2019, the following amendments were made:
Clause 17
Amendments made:
Page 9, omit lines 13 and 14 (10)
Page 9, omit lines 18 to 32 (11)
Thus the amended provision will be
17. In section 47 of the Income-tax Act, in clause (viiab), with effect from the 1st day of April, 2020,––
(A) for sub-clause (c), the following sub-clauses shall be substituted, namely:––
“(c) derivative; or
(d) such other securities as may be notified by the Central Government in this behalf,”;
(B) x x x x x x x x x
(C) in the Explanation, after clause (c), the following clauses shall be inserted, namely:-
(d) “securities” shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
(e) x x x x x x x x x
(f) x x x x x x x x x
(g) x x x x x x x x x
(h) x x x x x x x x x
Notes on Clauses:
Clause 17 of the Bill seeks to amend section 47 of the Incometax Act relating to transactions not regarded as transfer.
The provisions of the said section provide that any transfer of a capital asset, being bonds or Global Depository Receipts referred to in sub-section (1) of section 115AC or rupee denominated bond of an Indian company or derivative, made by a non-resident through 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, shall not be regarded as transfer.
It is proposed to amend the said section so as to provide that any transfer of a capital asset, being bonds or Global Depository Receipts referred to in sub-section (1) of section 115AC or rupee denominated bond of an Indian company or derivative, made by a specified fund through 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, shall not be regarded as transfer.
It is also proposed to provide that transfer, at a recognised stock exchange located in any International Financial Services Centre, of such other securities as may be notified by the Central Government in this behalf, shall not be regarded as transfer in the hands of a non-resident or a specified fund.
It is also proposed to insert the definitions of the expressions “securities”, “specified fund”, “trust”, “unit” and “convertible foreign exchange” in the Explanation to clause (viiab) of section 47.
These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020- 2021 and subsequent assessment years.
