Law:

Section:

Section 47(vii) of the Income-tax Act, 1961 - Capital gains - Transactions not regarded as transfer - Assessment year 1982-83 - Assessee-trust owned certain shares in one company S - Another company A was wholly owned subsidiary of S - Under an amalgamation scheme, S was amalgamated with A - Whether when besides shares of A, assessee was also allotted bonds in consideration of transfer of its shares in amalgamating company S, assessee would not be entitled to benefit of exemption under section 47(vii) - Held, yes Facts The assessee-trust owned certain shares of one company S. Another company A was wholly-owned subsidiary of S. The High Court sanctioned a scheme of amalgamating S with A. Under this amalgamation scheme the assessee, in addition to the original shareholding, received certain redeemable bonds as fully paid up. For the relevant assessment year, the assessee claimed that it was not liable to capital gains tax arising from transfer of equity shares of S in consideration for certain shares and bonds of A. It was contended that even if the aforesaid transaction was transfer within the meaning of section 2(47), it was not to be regarded as transfer under section 47(vii) and nothing contained in section 45 would apply to such transfer and, therefore, it was not liable to pay tax on profits or gains arising from the transfer of shares of S held by it under the head 'Capital gains'. The ITO, however, disallowed the assessee's contention and assessed certain amount under section 45. On appeal, the Tribunal held that merely because the assessee had, in addition to the shares, received bonds from the amalgamated company A, it could not be denied exemption under section 47(vii). On reference: Held Since the language of section 47(vii ) is plain and easily understood, it is not necessary to call in aid any outside consideration to gather its meaning. On a plain reading of that provision, it becomes clear that in order to attract its application, following requirements must be satisfied: (i) there has to be a transfer by a shareholder in a scheme of amalgamation of a capital asset being share or shares held by him in the amalgamating company. But the transfer has…

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