Certain Transactions not regarded as transfer

Section 47 (viab)

Any transfer,

 in a scheme of amalgamation,

of a capital asset, being a share of a foreign company referred to in Explanation 5 to section 9(1)(i),

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

would be exempt,

if the following conditions are satisfied:

(A) at least 25% 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.


When this amalgamated company later sells these assets,

  • Cost of Acquisition of Amalgamated Company=Cost of Acquisition of Amalgamating Company
  • Cost of Improvement of both Amalgamated and Amalgamating Company will be tajen
  • Period of holding Amalgamated and Amalgamating Company shall be taken into account.

Section 49(1)(iii)(e)



Example 1

A Ltd USA purchased shares of Rs 100 crores of Indian Company  A ltd India on 10 April 2013

A ltd USA was amalgamated over by B Ltd ,USA on  15 May 2015

Hence shares held by A Ltd later became shares of B Ltd

Whether these transfer of shares by A to B is covered in capital gain?


View Answer


Example 2

Continuing previous question,if company later sold the assets for Rs 125 crores on 18  Dec 2015

Compute Income from Capital Gain?

View Answer
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CA Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 14 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.