86540
Lawyers Network
103860
Users
630
Cities Serving
114
Law Schools Network
59824
FINANCE (NO. 2) ACT, 1996
33 of 1996
September 28,1996
An Act to give effect to the financial proposals of tile Central Government for the Financial Year 1996-97 Be it enacted by Parliament in the Forty-seventh Year of the Republic of India as follows:-
SECTION 01: SHORT TITLE AND COMMENCEMENT
(1) This Act may be called the Finance (No. 2) Act, 1996.
(2) Save as otherwise provided in this Act, Sections 2-to58-andSection 88-shall be deemed to have come into force on the 1st day of April, 1996.
SECTION 02: INCOME TAX
(1) Subject to the provisions of sub-sections (2) and (3), for the assessment year commencing on the 1st day of April, 1996, income tax shall be charged at the rates specified in Part I of the First Schedule and such tax shall be increased in the cases to which Paragraph E of that Part applies by a surcharge calculated in the manner provided therein.
(2) In the cases to which sub-paragraph I or sub-paragraph II of Paragraph A of Part I of the First Schedule applies, where the assessee has, in the previous year, any net agricultural income exceeding six hundred rupees, in addition to total income, and the total income exceeds,-
(i) in case to which the said sub-paragraph I applies, forty thousand rupees, and
(ii) in a case to which the said sub-paragraph II applies, eighteen thousand rupees, then,-
(a) the net agricultural income shall be taken into account, in the manner provided in clause (b) [that is to say, as if the net agricultural income were comprised in the total income after,-
(i) in a case to which the said sub-paragraph I applies, the first forty thousand rupees, and
(ii) in a case to which the sub-paragraph II applies, the first eighteen thousand rupees, of the total income but without being liable to tax], only for the purpose of charging income tax in respect of the total income; and
(b) the income tax chargeable shall be calculated as follows : -
(i) the total income and the net agricultural income shall be aggregated and the amount of income tax shall be determined in respect of the aggregate income at the rates specified in sub -paragraph I or, as the case may be, sub- paragraph II of the said Paragraph A, as if such aggregate income were the total income;
(ii) the net agricultural income shall be increased,-
(A) in a case to which the said sub -paragraph I applies, by a sum of forty thousand rupees; and
(B) in a case to which the said sub-paragraph II applies, by a sum of eighteen thousand rupees, and the amount of income lax shall be determined in respect of the net agricultural income as so increased at the rates specified in sub - paragraph I or, as the case may be, sub-paragraph II of the said Paragraph A, as if the net agricultural income as so increased were the total income;
(iii) the amount of income tax determined in accordance with sub-clause (i) shall be reduced by the amount of income tax determined in accordance with sub-clause (ii) and the sum so arrived at shall be the income tax in respect of the total income.
(3) In cases to which the provisions of Chapter XII or Chapter XII-A or sub-section (1-A) ofSection 161-orSection 164-orSection 164A-orSection 167B of the Income Tax Act, 1961 (43 of 1961)-(hereinafter referred to as the Income Tax Act) apply, the tax chargeable shall be determined as provided in that Chapter or that section, and with reference to the rates imposed by sub-section (1) or the rates as specified in that Chapter or section, as the case may be : Provided that the amount of income tax computed in accordance with the provisions ofSections 112-and113 of the Income Tax Act-shall be increased in the case of a domestic company by a surcharge as provided in Paragraph E of Part I of the First Schedule : Provided further that in respect of any income chargeable to tax underSection 115B-, or in the case of a domestic company having a total income exceeding seventy -five thousand rupees underSection 115BB, of the Income Tax Act -, the income tax computed shall be increased by a surcharge calculated at the rate of fifteen per cent of such income tax.
(4) In cases in which tax has to be deducted underSections 193-,194-,194A-,194B-,194BB-,194D-and195 of the Income Tax Act -at the rates in force, the deduction shall be made at the rates specified in Part II of the First Schedule and shall be increased, in the cases to which the provisions of sub-item (a) of Item 2 of that part apply, by a surcharge calculated in the manner provided therein.
(5) In cases in which tax has to be deducted underSections 194C-,194G-,194I-,194J-and194K of the Income Tax Act-, the deduction shall be made at the rates specified in those sections and shall be increased in the case of an assessee, being a domestic company, by a surcharge calculated at the rate of seven - and-a-half per cent of such deduction.
(6) In cases in which tax has to be collected underSection 206C of the Income Tax Act-, the collection shall be made at the rates specified in that section and shall be increased in the case of a buyer, being a domestic company, by a surcharge calculated at the rate of seven- and-a-half per cent of such collection.
(7) Subject to the provisions of sub-section (8), in cases in which income tax has to be calculated under the first proviso to sub-section (5) ofSection 132 of the Income Tax Act-or charged under sub-section (4) ofSection 172-or sub-section (2) ofSection 174- rSection 175-or sub-section (2) ofSection 176-of the said Act or deducted underSection 192-of the said Act from income chargeable under the head "Salaries" or in which the "advance tax" payable under Chapter XVII-C of the said Act has to be computed at the rate or rates in force, such income tax or, as the case may be, "advance tax" shall be so calculated, charged, deducted or computed at the rate or rates specified in Part III of the First Schedule and such tax shall be increased, in the cases to which Paragraph E of that Part applies, by a surcharge calculated in the manner provided therein : Provided that in the cases to which the provisions of Chapter XII or Chapter XII-A or sub-section (1-A) ofSection 161-orSection 164-orSection 164A-orSection 167B of the Income Tax Act-apply, "advance tax" shall be computed with reference to the rates imposed by this sub-section or the rates as specified in that chapter or section, as the case may be : Provided further that the amount of income tax computed in accordance with the provisions ofSections 112-and113 of the Income Tax Act -shall be increased in the case of a domestic company by a surcharge as provided in Paragraph E of Part III of the First Schedule: Provided also that in respect of any income chargeable to tax underSection 115B-, or in the case of a domestic company, underSection 115BB of the Income Tax Act-, having a total income exceeding seventy-five thousand rupees, the "advance tax" computed under the first proviso shall be increased by a surcharge calculated at the rate of seven -and-a-half per cent of such "advance tax".
(8) In the cases to which Paragraph A of Part III of First Schedule applies, where the assessee has, in the previous year or, if by virtue of any provision of the Income Tax Act, income tax is to be charged in respect of the income of a period other than the previous year, in such other period, any net agricultural income exceeding six hundred rupees, in addition to total income and the total income exceeds forty thousand rupees, then, in calculating income tax under the first proviso to sub -section (5) of Section 132 of the Income Tax Act-or in charging income tax under sub-section (2) ofSection 174-orSection 175-or sub-section (2) ofSection 176-of the said Act or in computing the "advance tax" payable under Chapter XVII-C of the said Act, at the rate or rates in force, -
(a) the net agricultural income shall be taken into account, in the manner provided in clause (b) [that is to say, as if the net agricultural income were comprised in the total income after the first forty thousand rupees of the total income but without being liable to tax], only for the purpose of calculating, charging or computing such income tax or, as the case may be, "advance tax" in respect of the total income; and
(b) such income tax or, as the case may be, "advance tax" shall be so calculated, charged or computed as follows :-
(i) the total income and the net agricultural income shall be aggregated and the amount of income tax or "advance tax" shall be determined in respect of the aggregate income at the rates specified in the said Paragraph A as if such aggregate income were the total income;
(ii) the net agricultural income shall be increased by a sum of forty thousand rupees, and the amount of income tax or "advance tax" shall be determined in respect of the net agricultural income as so increased at the rates specified in the said Paragraph A as if the net agricultural income as so increased were the total income;
(iii) the amount of income tax or "advance tax" determined in accordance with sub-clause (i) shall be reduced by the amount of income tax or, as the case may be, "advance tax" determined in accordance with sub -clause (ii) and the sum so arrived at shall be the income tax or, as the case may be, "advance tax" in respect of the total income.
(9) For the purposes of this section and the First Schedule,-
(a) "domestic company" means an Indian company, or any other company which, in respect of its income is liable to income tax under the Income Tax Act for the assessment year commencing on the 1st day of April, 1996, has made the prescribed arrangements for the declaration and payment within India of the dividends (including dividends on preference shares) payable out of such income in accordance with the provisions of Section 194-of the Act;
(b) "insurance commission" means any remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business (including business relating to the continuance, renewal or revival of policies of insurance);
(c) "net agricultural income", in relation to a person, means the total amount of agricultural income from whatever source derived, of that person computed in accordance with the rules contained in Part IV of the First Schedule;
(d) all other words and expressions used in this section or in the First Schedule but not defined in this sub - section and defined in the Income Tax Act shall have the meanings respectively assigned to them in that Act.
SECTION 03: AMENDMENT OF SECTION 2
–In Section 2 of the Income Tax Act-with effect from the 1st day of October, 1996,-
(a) in clause (7-A), for the words "Assistant Commissioner" and "Deputy Commissioner" the words "Assistant Commissioner or Assistant Director" and "Deputy Commissioner" or "Deputy Director" shall respectively be substituted,
(b) in clause (24), after sub-clause (x), the following sub-clause shall be inserted, namely:-
'(xi) any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy.
Explanation.-For the purposes of this clause, the expression "keyman insurance policy" shall have the meaning assigned to it in the Explanation to clause (10-D) of Section 10;'.
SECTION 04: AMENDMENT OF SECTION 10
–In Section 10 of the Income Tax-Act,-
(a) in clause (10-A), after sub-clause (ii), the following sub-clause shall be inserted with effect from the 1st day of April, 1997, namely :- "(iii) any payment in commutation of pension received from a fund under clause (23-AAB);";
(b) in clause (10-D), after the words, brackets figures and letters "other than any sum received under sub-section (3) ofSection 80DDA", the following shall be inserted with effect from the 1st day of October, 1996, namely :- 'or under a Keyman insurance policy. Explanation.-For the purposes of this clause, "Keyman insurance policy" means a life insurance policy taken by a person on the life of another person who is or was the employee of the first mentioned person or is or was connected in any manner whatsoever with the business of the first mentioned person;';
(c) in clause (15), in sub-clause (iv), after item (i), in the Explanation, for clause (e), the following clause shall be substituted with effect from the 1st day of April, 1997, namely :- "(e) the operation of ships or aircraft's or construction or operation of rail systems;";
(d) after clause (23-AAA), the following clause shall be inserted with effect from the 1st day of April, 1997, namely :- '(23-AAB) any income of a fund, by whatever name called, set up by the Life Insurance Corporation of India on or after the 1st day of August, 1996 under a pension scheme,- (i) to which contribution is made by any person for the purpose of receiving pension from such fund; (ii) which is approved by the Controller of Insurance. Explanation.-For the purposes of this clause, the expression "Controller of Insurance" shall have the meaning assigned to it in clause (5-B) of Section 2 of the Insurance Act, 1938 (4 of 1938);';
(e) after clause (23-BBB), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1992, namely:- "(23-BBC) any income of the SAARC Fund for Regional Project set up by Colombo Declaration issued on the 21st day of December, 1991 by the Heads of State or Government of the Member Countries of South Asian Association for Regional Cooperation established on the 8th day of December, 1985 by the Charter of the South Asian Association for Regional Cooperation;";
(f) after clause (23-F), the following clause shall be inserted with effect from the 1st day of April, 1997, namely :- "(23-G) any income by way of dividends, interest or long-term capital gains of an infrastructure capital fund or an infrastructure capital company from investments made by way of shares or long-term finance in any enterprise carrying on the business of developing, maintaining and operating any infrastructure facility, which fulfils the conditions specified in sub-section (4- A) ofSection 80IA. Explanation.-For the purposes of this clause,-
(a) "infrastructure capital company" means such company as has made investments by way of acquiring shares or providing long-term finance to an enterprise carrying on the business of developing, maintaining and operating infrastructure facility;
(b) "infrastructure capital fund" means such fund operating under a trust deed, registered underthe provisions of the Registration Act, 1908 (16 of 1908)-, established to raise monies by the trustees for investment by way of acquiring shares or providing long-term finance to an enterprise carrying on the business of developing, maintaining and operating infrastructure facility;
(c) "infrastructure facility" shall have the meaning assigned to it in clause (ca) of sub -section (12) of Section 80IA;
(d) "long-term finance" shall have the meaning assigned to it in clause (viii) of sub-section (1) of Section 36-;';
(g) for clause (24), the following clause shall be substituted with effect from the 1st day of April, 1997, namely :- '(24) any income chargeable under the heads "Income from house property" and "Income from other sources" of-
(a) a registered union within the meaning of theTrade Unions Act, 1926 (16 of 1926)- formed primarily for the purpose of regulating the relations between workmen and employers or between workmen and workmen;
(b) an association of registered unions referred to in sub-clause (a)','.
SECTION 05: AMENDMENT OF SECTION 12A
In Section 12A of the Income Tax Act-, in clause (a) for the words "whichever is later", the words, figures and letters "whichever is later and such trust or institution is registered underSection 12AA" shall be substituted with effect from the 1st day of April, 1997.
SECTION 06: INSERTION OF NEW SECTION 12AA
After Section 12A of the Income Tax Act -, the following section shall be inserted with effect from the 1st day of April, 1997, namely :- "12-AA. Procedure for registration.-(1) The Chief Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) ofSection 12A, shall-
(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and
(b) after satisfying himself about the object of the trust or institution and the genuineness of its activities, he-
(i) shall pass an order in writing registering the trust or institution;
(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or
institution, and a copy of such order shall be sent to the applicant : Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.
(2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) ofSection 12A".
SECTION 07: AMENDMENT OF SECTION 16
In Section 16 of the Income Tax Act-, for clause (i), the following clauses shall be substituted with effect from the 1st day of April, 1997, namely:-
'(i) in the case of an assessee whose income from salary, before allowing a deduction under this clause, does not exceed sixty thousand rupees, a deduction of a sum equal to thirty-three and onethird per cent of the salary or eighteen thousand rupees, whichever is less;
(ia) in any other case, a deduction of a sum equal to thirty-three-and-one-third per cent of the salary or fifteen thousand rupees, whichever is less : Provided that in the case of an assessee, being a woman, whose total income before making any deduction under this clause, does not exceed seventy-five thousand rupees, the provisions of this clause shall have effect as if for the words "fifteen thousand rupees", the words "eighteen thousand rupees" had been substituted. Explanation.-For the removal of doubts, it is hereby declared that where, in the case of an assessee, salary is due from, or paid or allowed by, more than one employer, the deduction under this clause shall be computed with reference to the aggregate salary due, paid or allowed to the assessee and shall in no case exceed the amount specified under clause (i) or clause (i-a), as the case may be;'.
SECTION 08: AMENDMENT OF SECTION 17
In Section 17 of the Income Tax Act-, in clause (3), in sub-clause (ii), for the words "interest on such contributions", the following shall be substituted with effect from the 1st day of October, 1996, namely :- 'interest on such contributions or any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy. Explanation.-For the purposes of this subclause, the expression "Keyman insurance policy" shall have the meaning assigned to it in clause (10-D) of Section 10.'.
SECTION 09: AMENDMENT OF SECTION 24
InSection 24 of the Income Tax Act-, in sub-section (2), in the proviso,-
(a) for the words "ten thousand rupees", the words "fifteen thousand rupees" shall be substituted with effect from the 1st day of April. 1997;
(b) after the words, brackets, figures and letters "sub-clause (i) of clause (a) of sub- section (2) ofSection 23-", the words, brackets and figures "or sub-section (3) ofSection 23-" shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1995.
SECTION 10: AMENDMENT OF SECTION 28
In Section 28 of the Income Tax Act-, after clause (v), the following clause shall be inserted with effect from the 1st day of October, 1996, namely:-
'(vi) any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy. Explanation.-For the purposes of this clause, the expression "Keyman insurance policy" shall have the meaning assigned to it in clause (IO-D) of Section 10;'.
SECTION 11: AMENDMENT OF SECTION 32
In Section 32 of the Income Tax Act-, with effect from the 1st day of April, 1997-
(a) in sub-section (1), after the words "plant or furniture owned", the words "wholly or partly", shall be inserted;
(b) in sub-section (1), after the third proviso, the following proviso shall be inserted, namely:- "Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture allowable to the predecessor and the successor in the case of succession, referred to in Section 170-or the amalgamating company and the amalgamated company in the case of amalgamation, as the case may be, shall not exceed in any previous year the deduction calculated at the prescribed rates as if the succession or the amalgamation had not taken place, and such deduction shall be apportioned between the predecessor and the successor, or the amalgamating company and the amalgamated company, as the case may be, in the ratio of the number of days for which the assets were used by them.";
(c) for sub-section (2), the following sub-section shall be substituted, namely :- "(2) Where in the assessment of the assessee full effect cannot be given to any allowance under clause (ii) of subsection
(1) in any previous year owing to there being no profits or gains chargeable for that
previous year or owing to the profits or gains being less than the allowance, then the allowance or the part of allowance to which effect has not been given (hereinafter referred to as unabsorbed depreciation allowance), as the case may be,-
(i) shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year;
(ii) if the unabsorbed depreciation allowance cannot be wholly set off under clause (i), the amount not so set off shall be set off from the income under any other head, if any, assessable for that assessment year;
(iii) if the unabsorbed depreciation allowance cannot be wholly set off under clause (i) and clause (ii), the amount of allowance not so set off shall be carried forward to the following assessment year and-
(a) it shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year;
(b) if the unabsorbed depreciation allowance cannot be wholly so set off, the amount of unabsorbed depreciation allowance not so set off shall be carried forward to the following assessment year not being more than eight assessment years immediately succeeding the assessment year for which the aforesaid allowance was first computed :
Provided that the business or profession for which the allowance was originally computed continued to be carried on by him in the previous year relevant for that assessment year: Provided further that the time-limit of eight assessment years specified in sub-clause (b) shall not apply in the case of a company for the assessment year beginning with the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub -section (1) ofSection 17 of the Sick Industrial Company (Special Provisions) Act, 1985 (1 of 1986)-and ending with the assessment year relevant to the previous year in which the entire networth 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).'.
SECTION 12: AMENDMENT OF SECTION 35
-In Section 35 of the Income Tax Act-, in sub-section (2-AA), for the provisos, the following proviso shall be substituted with effect from the 1st day of October, 1996, namely :- "Provided that prescribed authority shall, before granting approval, satisfy itself about the feasibility of carrying out the scientific research and shall submit its report to the Director-General in such form as may be prescribed.".
SECTION 13: AMENDMENT OF SECTION 35AC
-InSection 35AC of the Income Tax Act-, after sub-section (3) and before the Explanation, the following sub-sections shall be inserted with effect from the 1st day of October, 1996, namely :-
"(4) Where an association or institution is approved by the National Committee under sub-section (1), and subsequently that Committee is satisfied that the project or the scheme is not being carried on in accordance with all or any of the conditions subject to which approval was granted, it may, at any time, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the association or institution concerned, withdraw the approval.
(5) Where any project or scheme has been notified as an eligible project or scheme under clause (b) of the Explanation and subsequently the National Committee is satisfied that the project or the scheme is not being carried out in accordance with all or any of the conditions subject to which such project or scheme was notified, such notification may be withdrawn in the same manner in which it was issued : Provided that a reasonable opportunity of showing cause against the proposed withdrawal shall be given by the National Committee to the association concerned, institution, public sector company or the local authority, as the case may be.".
SECTION 14: AMENDMENT OF SECTION 36
-InSection 36 of the Income Tax Act-, in sub-section (1), in clause (viii),-
(a) for the words "before making any deduction under this section", the words "before making any deduction under this clause" shall be substituted and shall be deemed to have been substituted;
(b) in the second proviso, for the brackets and words "(excluding the amounts capitalised from reserves)", the words "and of the general reserves" shall be substituted with effect from the 1st day of April, 1997;
(c) in the Explanation, after clause (d), the following clause shall be inserted and shall be deemed to have been inserted, namely :- '(e) "long-term finance" means any loan or advance where the terms under which moneys are loaned or advanced provide for repayment along with interest thereof during a period of not less than seven years.'.
SECTION 15: AMENDMENT OF SECTION 40A
-InSection 40A of the Income Tax Act-, in sub- section (3), for the words "ten thousand" wherever they occur, the words "twenty thousand" shall be substituted with effect from the 1st day of April, 1997,
SECTION 16: AMENDMENT OF SECTION 41
-InSection 41 of the Income Tax Act-, Explanation occurring below sub-section (1) shall be renumbered as Explanation 2, and before Explanation 2 as so renumbered, the following Explanation shall be inserted with effect from the 1st day of April 1997, namely :- "Explanation 1.-For the purposes of this sub-section, the expression loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof shall include the remission or cessation of any liability by a unilateral act by the first mentioned person under clause (a) or the successor in business under clause (b) of that sub-section by way of writing off such liability in his accounts.".
SECTION 17: AMENDMENT OF SECTION 43
-InSection 43 of the Income Tax Act-, in clause (1), after Explanation 4, the following Explanation shall be inserted with effect from the 1st day of October, 1996, namely :-
"Explanation 4-A.-Where before the date of acquisition by the assessee (hereinafter referred to as the first mentioned person) the assets were at any time used by any other person (hereinafter referred to as the second mentioned person) for the purposes of his business or profession and depreciation allowance has been claimed in respect of such assets in the case of the second mentioned person and such person acquires on lease, hire or otherwise assets from the first mentioned person, then, notwithstanding anything contained in Explanation 3, the actual cost of the transferred assets, in the case of first mentioned person, shall be the same as the written down value of the said assets at the time of transfer thereof by the second mentioned person.".
SECTION 18: AMENDMENT OF SECTION 43B
-InSection 43B of the Income Tax Act-, with effect from the 1st day of April, 1997-
(a) in clause (d), for the words "governing such loan or borrowing", the words "governing such loan or borrowing; or" shall be substituted',
(b) after clause (d), the following clause shall be inserted, namely :- "(e) any sum payable by the assessee as interest on any term loan from a scheduled bank in accordance with the terms and conditions of the agreement governing such loan."
(c) after Explanation 3, the following Explanation shall be inserted, namely :-
"Explanation 3-A.-For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (e) of this section is allowed in computing the income referred to in Section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1996, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.";
(d) in Explanation 4, after clause (a), the following clause shall be inserted, namely:-
'(aa) "scheduled bank" shall have the meaning assigned to it in clause (ii) of the Explanation to clause (vii-a) of sub-section (1) ofSection 36-;'.
SECTION 19: AMENDMENT OF SECTION 45
-InSection 45 of the Income Tax Act-, in sub-section (1), after the figures and letter "54-E", the figures and letters "54-EA, 54-EB" shall be inserted with effect from the 1st day of October, 1996.
SECTION 20: INSERTION OF NEW SECTIONS 54-EA AND 54-EB
-AfterSection 54-E of the Income Tax Act-, the following sections shall be inserted with effect from the 1st day of October, 1996, namely:- '54-EA. Capital gain on transfer of long-term capital assets not to be charged in the case of investment in specified bonds or debentures.-
(1) Where the capital gain arises from the transfer of a long-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of the net consideration in any of the bonds, debentures or units of any mutual fund referred to in clause (23-D) ofSection 10-specified by the Board in this behalf by notification in the Official Gazette (such assets hereafter in this section referred to as the specified bonds or debentures), 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 specified bonds or debentures is not less than the net consideration in respect of the original assets, the whole of such capital gain shall not be charged underSection 45 -;
(b) if the cost of the specified bonds or debentures is less that 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 specified bonds or debentures bears to the net consideration shall not be charged
underSection 45 -.
(2) Where the specified bonds or debentures are transferred or converted (otherwise than by transfer) into money at any time within a period of three years from the date of their acquisition, the amount of capital gain arising from the transfer of the original asset not charged underSection 45-on the basis of the cost of such specified bonds or debentures as provided in clause (a) or clause (b) of sub-section (1) shall be deemed to be the income chargeable under the head "Capital gains" relating to long- term capital assets of the previous year in which the specified bonds or debentures are transferred or converted (otherwise than by transfer) into money.
Explanation.-In a case where the original asset is transferred and the assessee invests the whole or any part of the net consideration in respect of the original asset in any specified bonds or debentures and such assessee takes any loan or advance on the security of such specified bonds or debentures, he shall be deemed to have converted (otherwise than by transfer) such specified bonds or debentures into money on the date on which such loan or advance is taken.
(3) Where the cost of the specified bonds or debentures has been taken into account for the purposes of clause (a) or clause (b) of sub-section (1), a rebate with reference to such cost shall not be allowed underSection 88-.
Explanation.-For the purposes of this section,-
(a) "cost", in relation to any specified bonds or debentures, means the amount invested in such specified bonds or debentures out of the net consideration received or accruing as a result of the transfer of the original asset;
(b) "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 the expenditure incurred wholly and exclusively in connection with such transfer.
54-EB. Capital gain on transfer of long-term capital assets not be charged in certain cases.-(1) Where the capital gain arises from the transfer of a long-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset), and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains, in any of the assets specified by the Board in this behalf by notification in the Official Gazette (such assets hereafter in this section referred to as the long-term specified assets), the capital gain shall be dealt with in accordance with the following provisions of
86540
103860
630
114
59824