Section 54E

¹[Capital gain on transfer of capital assets not to be charged in certain cases.

54E. (1) Where the capital gain arises from the transfer of a capital asset, not being a short-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset), and the assessee has, within a period of six months after the date of such transfer, invested or deposited the ²[whole or any part of the net consideration] in any specified asset (such specified asset being hereafter in this section referred to as the new asset), 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 new asset is not less than the ³[net consideration] in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ;

(b) if the cost of the new asset is less than the ³[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 new asset bears to the ⁴[net consideration] shall not be charged under section 45 .

Explanation 1 : ⁵[For the purposes of this sub-section, "specified asset" means—

(a) in a case where the original asset is transferred before the 1st day of March, 1979, any of the following assets, namely :—]

(i) securities of the Central Government or a State Government;

(ii) savings certificates as defined in clause (c) of section 2 of the Government Savings Certificates Act, 1959 (46 of 1959) ;

(iii) units in the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963) ;

(iv) debenture specified by the Central Government for the purposes of clause (ii) of sub-section (1) of section 80L ;

(v) shares in any Indian company which are issued to the public or are listed in a recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and any rules made there under ⁶[, where the investment in such shares is made before the 1st day of March, 1978] ;

⁶[(va) equity shares forming part of any eligible issue of capital, where the investment in such shares is made after the 28 th day of February, 1978 ;]

(vi) deposits for a period of not less than three years with the State Bank of India established under the State Bank of India Act, 1955 (23 of 1955), or any subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), or any nationalised bank, that is to say, any corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or any co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank) ;

¹[(b) in a case where the original asset is transferred after the 28th ay of February, 1979, such National Rural Development Bonds as the Central Government may notify in this behalf in the Official Gazette*.]

²[Explanation 2 : "Eligible issue of capital" shall have the meaning assigned to it in sub-section (3) of section 80CC.

Explanation 3 : An assessee shall not be deemed to have invested ³[the whole or any part of the net consideration in any equity shares referred to in sub-clause (va) of clause (a)] of Explanation 1, unless the assessee has subscribed to or purchased the shares in the manner specified in sub-section (4) of section 80CC ]

Explanation ⁴[4i : "Cost" in relation to any new asset, being a deposit referred to in ⁵[sub-clause (vi) of clause (a)] of Explanation 1, means the amount of such deposit.

¹[Explanation 5 : "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 capita] asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.]

²[(1A) Where the assessee deposits after the 27 the day of April, 1978 the ⁶[whole or any part of the net consideration in respect] of the original asset in any new asset, being a deposit referred to in ⁵[sub-clause(vi) of clause of (a)] of Explanation 1 below sub-section ;1), the cost of such new asset shall not be taken into account for the purposes of that sub-section unless the following conditions are fulfilled, namely : —

(a) the assessee furnishes, along with the deposit, a declaration in writing, to the bank or the co-operative society referred to in the said ⁵[sub-clause (vi)] with which such deposit is made, to the effect that the assessee will not take any loan or advance on the security of such deposit during a period of three years from the date on which the deposit is made ;

(b) the assessee furnishes, along with the return of income for the assessment year relevant to the previous year in which the transfer of the original asset was effected or within such further time as may be allowed by the Income-tax Officer, a copy of the declaration referred to in clause (a) duly attested by an officer not below the rank of sub-agent, agent or manager of such bank or an officer of corresponding rank of such co-operative society.]

²[(1B) Where on the fulfilment of the conditions specified in sub-section (1A), the cost of the new asset referred to in that sub-section is taken into account for the purposes of sub-section (1), the assessee shall, within a period of ninety days from the expiry of the period of three years reckoned from the date of such deposit, furnish to the Income-tax Officer a certificate from the officer referred to in clause (b) of sub-section (1.A) to the effect that the assessee has not taken any loan or advance on the security of such deposit during the said period of three years.]

(2) Where the new asset is transferred, or converted (otherwise than by transfer) into money, within a period of three years from the date of its acquisition, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case maybe, clause, of sub-section (1) shall be deemed to be income chargeable under the head "Capital gains" relating to capital assets other than short-term capital assets of t he previous year in which the new asset is transferred or converted (otherwise than by transfer) into money.]

¹[Explanation : Where the assessee deposits after the 27th day of April, 1978 the ²[whole or any part of the net consideration in respect] of the original asset in any new asset, being a deposit referred to in ³[sub-clause (vi) of clause (a)] of Explanation 1 below sub-section (1), and such assessee takes any loan or advance on the security of such deposit, he shall be deemed to have converted (otherwise than by transfer) such deposit into monev on the date on which such loan or advance is taken.]

⁴[(3) Where the transfer of the original asset is by way of compulsory acquisition under anv law or where the full value of the consideration for the transfer of the capital asset is determined or approved by the Central Government or the Reserve Bank of India, and the compensation awarded for such acquisition or, as the case may be, the full value of the consideration so determined or approved is enhanced by any court, tribunal or other authority, then, so much of the capital gain, computed under section 48 by taking the compensation or consideration as so enhanced as the full value of the consideration received or accruing as a result of such transfer, as is attributable to the enhancement of the compensation or consideration (hereafter in this sub-section referred to as the unadjusted capital gain) shall, if the assessee has, within a period of six months after the date of receipt of the additional compensation or, as the case may be, the additional consideration, invested or deposited the whole or any part of such additional compensation or consideration in any specified asset (hereafter in this section referred to as the relevant asset), be dealt with in the following manner, that is to say,—

(a) if the cost of the relevant asset is not less than the additional compensation or consideration, the whole of the unadjusted capital gain shall not be charged under section 45 ;

(b) if the cost of the relevant asset is less than the additional compensation or consideration, so much of the unadjusted capital gain as bears to the whole of the unadjusted capital gain the same proportion as the cost of acquisition of the relevant asset bears to the additional compensation or consideration shall not be charged under section 45.

Explanation : For the purposes of this sub-section,—

(i) "additional compensation" shall have the meaning assigned to it in clause (1) of the Explanation to sub-section (2) of section 54 ; '

(ii) "additional consideration", in relation to the transfer of any capital asset the consideration for which was determined or approved by the Central Government or the Reserve Bank of India, means the difference between the amount of consideration for such transfer as enhanced by any court, tribunal or other authority and the amount of consideration which would have been payable if such enhancement had not been made ;

 (iii) "cost", in relation to any relevant asset, being a deposit referred to in ¹[sub-clause (vi) of clause (a)] of Explanation 1 below sub-section (1), means the amount of such deposit,

 ²[(iiia) "specified asset" means—

(a) in relation to any additional compensation or additional consideration received before the 1st day of March, 1979, any of the assets referred to in clause (a) of Explanation 1 below sub-section (1).

(b) in relation to any additional compensation or additional consideration received after the 28th day of February, 1979, the National Rural development Bonds referred to in clause (b) of Explanation 1 below sub-section (1);]

(iv) the capital gain attributable to the enhancement by any court, tribunal or other authority of the compensation for the compulsory acquisition of any capital asset or of the consideration for the transfer of any capital asset as determined or approved by the Central Government or the Reserve Bank of India shall be deemed to be so much of the capital gain arising from the transfer of the capital asset as bears to the whole of the capital gain as computed under section 48 by taking the compensation or consideration as so enhanced as the full value of the consideration received or accruing as a result of the transfer, the same proportion as the amount of additional compensation or consideration bears to the compensation or consideration as so enhanced.

(4) Where the relevant asset is transferred, or converted (otherwise than by transfer) into money, within a period of three years from the date of its acquisition, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such relevant asset as provided in clause or or, as the case may be, clause (b), of sub-section (3) shall be deemed to be income chargeable under the head "Capital gains" relating to capital assets other than short-term capital assets of the previous year in which the relevant asset is transferred, or converted (otherwise than by transfer) into money.

Explanation : Where the assessee deposits after the 27 th day of April, 1978, the whole or any pan of the additional compensation or, as the case may be, the additional consideration referred to in sub-section (3) in any relevant asset, being a deposit referred to in ¹[sub-clause (vi) of clause (a)] of Explanation 1 below sub - section (1), and such assessee takes any loan or advance on the security of such deposit, he shall be deemed to have converted (otherwise than by transfer) such deposit into money on the date on which such loan or advance is taken.

(5) Where the assessee deposits the whole or any part of the additional compensation or, as the case may be, the additional consideration referred to in sub-section (3) in any relevant asset, being a deposit referred to in ¹[sub-clause (vi) of clause (a)] of Explanation 1 below sub-section (1), the provisions of sub-sections (1A) and (1B) shall apply in relation to such deposit as they apply in relation to the deposit referred to in the said sub-sections.

(6) Where the cost of the equity shares referred to in ³[sub-clause (va) of clause (a)] of Explanation 1 below sub-section (1) is taken into account for the purposes of clause (a) or clause (b) of sub-section (1) or clause (a) or clause (b) of sub-section (3), a deduction with reference to such cost shall not be allowed under section 80CC ]

 

 

 

[AS AMENDED BY THE FINANCE ACT, 1982]