Which transfers in an amalgamation or a demerger are outside section 45, and what cost and holding period do the shares in the transferee company carry afterwards?
Seven clauses of section 47 take reorganisation transfers out of section 45. At company level: (vi) a transfer in a scheme of amalgamation of a capital asset by the amalgamating company to the amalgamated company, if the amalgamated company is an Indian company; (vib) a transfer in a demerger of a capital asset by the demerged company to the resulting company, if the resulting company is an Indian company; (via) a transfer in a scheme of amalgamation of shares held in an Indian company by an amalgamating foreign company to an amalgamated foreign company, on two conditions; and (vic) and (vicc), the corresponding foreign demerger cases. At shareholder level: (vid) any transfer or issue of shares by the resulting company in a demerger to the shareholders of the demerged company in consideration of the demerger; and (vii) a transfer by a shareholder in a scheme of amalgamation of shares in the amalgamating company, if made in consideration of the allotment of shares in the amalgamated company except where the shareholder is itself the amalgamated company, and the amalgamated company is an Indian company. Clause (vi) is the central one: any transfer, in a scheme of amalgamation, of a capital asset by the amalgamating company to the amalgamated company, if the amalgamated company is an Indian company — this is what takes the transfer of the undertaking itself out of section 45. On cost, s.49(2) gives the shareholder who receives shares in an amalgamated Indian company on a s.47(vii) transfer the cost of his shares in the amalgamating company; s.49(2C) splits the cost of the demerged company's shares to the resulting company's shares in the ratio the net book value of the assets transferred bears to the net worth of the demerged company immediately before the demerger; and s.49(2D) reduces the cost of the original shares by the amount so arrived at.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2025-04-01, reported as Sections 47 and 49 of the Income-tax Act, 1961, as amended up to 2025, with Explanation 1(i)(g) to section 2(42A). It bears on section 47, section 47(vi), section 47(via), section 47(vib), section 47(vic), section 47(vicc), section 47(vid), section 47(vii), section 49, section 49(2), section 49(2C), section 49(2D), section 2(42A), section 2(1B), section 2(19AA), section 45, section 47A of the Income Tax Act 1961, in Capital Gains, Capital Gains Exemptions and How Tax Law Is Read matters.
A reader who gets the exemption right and the cost wrong is no better off, and the two errors are made at opposite ends of the file. Four traps sit in this material. First, the words in clause (vii) "except where the shareholder itself is the amalgamated company": in an upstream merger of a subsidiary into its parent, the parent's own shares in the subsidiary are outside the clause, and the parent's gain or loss on extinguishment is not sheltered by clause (vii). Second, clauses (vib), (vid) and (vii) all require the transferee to be an Indian company or, for clause (vid), operate only on an issue or transfer by the resulting company in consideration of the demerger — a cash element or a debt instrument is outside them. Third, clauses (vic) and (vicc) each carry a proviso in the same words, that "the provisions of sections 391 to 394 of the Companies Act, 1956 (1 of 1956) shall not apply in case of demergers referred to in this clause" — that is a deliberate disapplication for the foreign demerger cases and it is easy to misread as the opposite. Fourth, and most often missed, clause (via) sets the shareholder continuity threshold at TWENTY-FIVE per cent for the foreign amalgamation case, not three-fourths, while clauses (vic) and (vicc) use three-fourths for the foreign demerger cases. On the arithmetic afterwards, s.49(2C) is a proportion of COST, computed on a ratio of net book value of assets transferred to net worth of the demerged company immediately before the demerger, and s.49(2D) is a matching reduction — the two must be applied together or the shareholder double counts. For holding period, Explanation 1(i)(g) to s.2(42A) includes, for shares in an Indian company received in consideration of a demerger, the period for which the shares in the demerged company were held. The condition precedent is not academic. In Avaya Global Connect Ltd. v. ACIT Range 7(3) (ITAT Mumbai, 29 July 2008) the Tribunal held at para 19 that "All the conditions laid down in Section 2(19AA) have to be satisfied in a case to be called a demerger for the purpose of Section 47(vib) of the Act", refused to read sub-clauses (iv) and (v) as inapplicable where there was no consideration, and held the transfer before it was not a demerger — so section 47(vib) was unavailable and the gain was chargeable.
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As section 47 currently stands: (vi) any transfer, in a scheme of amalgamation, of a capital asset by the amalgamating company to the amalgamated company if the amalgamated company is an Indian company; (via) any transfer, in a scheme of amalgamation, of a capital asset being a share or shares held in an Indian company, by the amalgamating foreign company to the amalgamated foreign company, if— (a) at least twenty-five per cent 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; (vib) any transfer, in a demerger, of a capital asset by the demerged company to the resulting company, if the resulting company is an Indian company; (vic) any transfer in a demerger, of a capital asset, being a share or shares held in an Indian company, by the demerged foreign company to the resulting foreign company, if— (a) the shareholders holding not less than three-fourths in value of the shares of the demerged foreign company continue to remain shareholders of the resulting foreign company; and (b) such transfer does not attract tax on capital gains in the country, in which the demerged foreign company is incorporated: Provided that the provisions of sections 391 to 394 of the Companies Act, 1956 (1 of 1956) shall not apply in case of demergers referred to in this clause; (vicc) the corresponding clause for a transfer in a demerger of 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 demerged foreign company to the resulting foreign company, on the same two conditions and with the same proviso; (vid) any transfer or issue of shares by the resulting company, in a scheme of demerger to the shareholders of the demerged company if the transfer or issue is made in consideration of demerger of the undertaking; (vii) any transfer by a shareholder, in a scheme of amalgamation, of a capital asset being a share or shares held by him in the amalgamating company, if— (a) the transfer is made in consideration of the allotment to him of any share or shares in the amalgamated company except where the shareholder itself is the amalgamated company, and (b) the amalgamated company is an Indian company. As section 49 currently stands: (2) Where the capital asset being a share or shares in an amalgamated company which is an Indian company became the property of the assessee in consideration of a transfer referred to in clause (vii) of section 47, the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the share or shares in the amalgamating company. (2C) The cost of acquisition of the shares in the resulting company shall be the amount which bears to the cost of acquisition of shares held by the assessee in the demerged company the same proportion as the net book value of the assets transferred in a demerger bears to the net worth of the demerged company immediately before such demerger. (2D) The cost of acquisition of the original shares held by the shareholder in the demerged company shall be deemed to have been reduced by the amount as so arrived at under sub-section (2C).
The seven clauses take the specified reorganisation transfers outside the charge in section 45, each on its own conditions, and each conditional on the transaction being an "amalgamation" within section 2(1B) or a "demerger" within section 2(19AA). Clause (vi) covers the transfer of the capital asset by the amalgamating company to the amalgamated company where the amalgamated company is an Indian company, and clause (vib) the corresponding transfer by the demerged company to an Indian resulting company; clause (vi) is not, and must not be confused with, the holding-and-subsidiary clauses in section 47(iv) and (v), which are separate, are subject to the stock-in-trade proviso, and are the only ones section 47A(1) can claw back. The shareholder continuity threshold is twenty-five per cent in clause (via) and three-fourths in clauses (vic) and (vicc). Clause (vii) does not extend to shares in the amalgamating company held by the amalgamated company itself. On cost, section 49(2) substitutes the cost of the amalgamating company's shares; section 49(2C) apportions the cost of the demerged company's shares in the ratio of net book value of the assets transferred to the net worth of the demerged company immediately before the demerger; and section 49(2D) reduces the cost of the original shares by that amount. For holding period, Explanation 1(i)(g) to section 2(42A) includes the period for which the demerged company's shares were held.
Not applicable — this is a statement of statutory text taken from the published editions of the sections. No judicial reasoning is involved.
The cost of acquisition of the shares in the resulting company shall be the amount which bears to the cost of acquisition of shares held by the assessee in the demerged company the same proportion as the net book value of the assets transferred in a demerger bears to the net worth of the demerged company immediately before such demerger.
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Handle my notice → Ask a CA on WhatsAppSeven clauses of section 47 take reorganisation transfers out of section 45. At company level: (vi) a transfer in a scheme of amalgamation of a capital asset by the amalgamating company to the amalgamated company, if the amalgamated company is an Indian company; (vib) a transfer in a demerger of a capital asset by the demerged company to the resulting company, if the resulting company is an Indian company; (via) a transfer in a scheme of amalgamation of shares held in an Indian company by an amalgamating foreign company to an amalgamated foreign company, on two conditions; and (vic) and (vicc), the corresponding foreign demerger cases. At shareholder level: (vid) any transfer or issue of shares by the resulting company in a demerger to the shareholders of the demerged company in consideration of the demerger; and (vii) a transfer by a shareholder in a scheme of amalgamation of shares in the amalgamating company, if made in consideration of the allotment of shares in the amalgamated company except where the shareholder is itself the amalgamated company, and the amalgamated company is an Indian company. Clause (vi) is the central one: any transfer, in a scheme of amalgamation, of a capital asset by the amalgamating company to the amalgamated company, if the amalgamated company is an Indian company — this is what takes the transfer of the undertaking itself out of section 45. On cost, s.49(2) gives the shareholder who receives shares in an amalgamated Indian company on a s.47(vii) transfer the cost of his shares in the amalgamating company; s.49(2C) splits the cost of the demerged company's shares to the resulting company's shares in the ratio the net book value of the assets transferred bears to the net worth of the demerged company immediately before the demerger; and s.49(2D) reduces the cost of the original shares by the amount so arrived at. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 47, section 47(vi), section 47(via), section 47(vib), section 47(vic), section 47(vicc), section 47(vid), section 47(vii), section 49, section 49(2), section 49(2C), section 49(2D), section 2(42A), section 2(1B), section 2(19AA), section 45, section 47A of the Income Tax Act 1961. It is reported as Sections 47 and 49 of the Income-tax Act, 1961, as amended up to 2025, with Explanation 1(i)(g) to section 2(42A). A reader who gets the exemption right and the cost wrong is no better off, and the two errors are made at opposite ends of the file. Four traps sit in this material. First, the words in clause (vii) "except where the shareholder itself is the amalgamated company": in an upstream merger of a subsidiary into its parent, the parent's own shares in the subsidiary are outside the clause, and the parent's gain or loss on extinguishment is not sheltered by clause (vii). Second, clauses (vib), (vid) and (vii) all require the transferee to be an Indian company or, for clause (vid), operate only on an issue or transfer by the resulting company in consideration of the demerger — a cash element or a debt instrument is outside them. Third, clauses (vic) and (vicc) each carry a proviso in the same words, that "the provisions of sections 391 to 394 of the Companies Act, 1956 (1 of 1956) shall not apply in case of demergers referred to in this clause" — that is a deliberate disapplication for the foreign demerger cases and it is easy to misread as the opposite. Fourth, and most often missed, clause (via) sets the shareholder continuity threshold at TWENTY-FIVE per cent for the foreign amalgamation case, not three-fourths, while clauses (vic) and (vicc) use three-fourths for the foreign demerger cases. On the arithmetic afterwards, s.49(2C) is a proportion of COST, computed on a ratio of net book value of assets transferred to net worth of the demerged company immediately before the demerger, and s.49(2D) is a matching reduction — the two must be applied together or the shareholder double counts. For holding period, Explanation 1(i)(g) to s.2(42A) includes, for shares in an Indian company received in consideration of a demerger, the period for which the shares in the demerged company were held. The condition precedent is not academic. In Avaya Global Connect Ltd. v. ACIT Range 7(3) (ITAT Mumbai, 29 July 2008) the Tribunal held at para 19 that "All the conditions laid down in Section 2(19AA) have to be satisfied in a case to be called a demerger for the purpose of Section 47(vib) of the Act", refused to read sub-clauses (iv) and (v) as inapplicable where there was no consideration, and held the transfer before it was not a demerger — so section 47(vib) was unavailable and the gain was chargeable. If it applies to you, the first step is this: Identify every transfer in the reorganisation separately — the undertaking, the shares held by the demerged or amalgamating company, and the shareholders' own shares — and match each to the clause that covers it. They are not all covered by the same clause and some may not be covered at all.
As section 47 currently stands: (vi) any transfer, in a scheme of amalgamation, of a capital asset by the amalgamating company to the amalgamated company if the amalgamated company is an Indian company; (via) any transfer, in a scheme of amalgamation, of a capital asset being a share or shares held in an Indian company, by the amalgamating foreign company to the amalgamated foreign company, if— (a) at least twenty-five per cent 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; (vib) any transfer, in a demerger, of a capital asset by the demerged company to the resulting company, if the resulting company is an Indian company; (vic) any transfer in a demerger, of a capital asset, being a share or shares held in an Indian company, by the demerged foreign company to the resulting foreign company, if— (a) the shareholders holding not less than three-fourths in value of the shares of the demerged foreign company continue to remain shareholders of the resulting foreign company; and (b) such transfer does not attract tax on capital gains in the country, in which the demerged foreign company is incorporated: Provided that the provisions of sections 391 to 394 of the Companies Act, 1956 (1 of 1956) shall not apply in case of demergers referred to in this clause; (vicc) the corresponding clause for a transfer in a demerger of 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 demerged foreign company to the resulting foreign company, on the same two conditions and with the same proviso; (vid) any transfer or issue of shares by the resulting company, in a scheme of demerger to the shareholders of the demerged company if the transfer or issue is made in consideration of demerger of the undertaking; (vii) any transfer by a shareholder, in a scheme of amalgamation, of a capital asset being a share or shares held by him in the amalgamating company, if— (a) the transfer is made in consideration of the allotment to him of any share or shares in the amalgamated company except where the shareholder itself is the amalgamated company, and (b) the amalgamated company is an Indian company. As section 49 currently stands: (2) Where the capital asset being a share or shares in an amalgamated company which is an Indian company became the property of the assessee in consideration of a transfer referred to in clause (vii) of section 47, the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the share or shares in the amalgamating company. (2C) The cost of acquisition of the shares in the resulting company shall be the amount which bears to the cost of acquisition of shares held by the assessee in the demerged company the same proportion as the net book value of the assets transferred in a demerger bears to the net worth of the demerged company immediately before such demerger. (2D) The cost of acquisition of the original shares held by the shareholder in the demerged company shall be deemed to have been reduced by the amount as so arrived at under sub-section (2C). The matter was decided on 2025-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. The seven clauses take the specified reorganisation transfers outside the charge in section 45, each on its own conditions, and each conditional on the transaction being an "amalgamation" within section 2(1B) or a "demerger" within section 2(19AA). Clause (vi) covers the transfer of the capital asset by the amalgamating company to the amalgamated company where the amalgamated company is an Indian company, and clause (vib) the corresponding transfer by the demerged company to an Indian resulting company; clause (vi) is not, and must not be confused with, the holding-and-subsidiary clauses in section 47(iv) and (v), which are separate, are subject to the stock-in-trade proviso, and are the only ones section 47A(1) can claw back. The shareholder continuity threshold is twenty-five per cent in clause (via) and three-fourths in clauses (vic) and (vicc). Clause (vii) does not extend to shares in the amalgamating company held by the amalgamated company itself. On cost, section 49(2) substitutes the cost of the amalgamating company's shares; section 49(2C) apportions the cost of the demerged company's shares in the ratio of net book value of the assets transferred to the net worth of the demerged company immediately before the demerger; and section 49(2D) reduces the cost of the original shares by that amount. For holding period, Explanation 1(i)(g) to section 2(42A) includes the period for which the demerged company's shares were held.
Not applicable — this is a statement of statutory text taken from the published editions of the sections. No judicial reasoning is involved. In the words reproduced by the source cited on this page: "The cost of acquisition of the shares in the resulting company shall be the amount which bears to the cost of acquisition of shares held by the assessee in the demerged company the same proportion as the net book value of the assets transferred in a demerger bears to the net worth of the demerged company immediately before such demerger."
It was decided by the CBDT Circulars & Instructions on 2025-04-01 and is reported as Sections 47 and 49 of the Income-tax Act, 1961, as amended up to 2025, with Explanation 1(i)(g) to section 2(42A). Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 47, section 47(vi), section 47(via), section 47(vib), section 47(vic), section 47(vicc), section 47(vid), section 47(vii), section 49, section 49(2), section 49(2C), section 49(2D), section 2(42A), section 2(1B), section 2(19AA), section 45, section 47A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The seven clauses take the specified reorganisation transfers outside the charge in section 45, each on its own conditions, and each conditional on the transaction being an "amalgamation" within section 2(1B) or a "demerger" within section 2(19AA). Clause (vi) covers the transfer of the capital asset by the amalgamating company to the amalgamated company where the amalgamated company is an Indian company, and clause (vib) the corresponding transfer by the demerged company to an Indian resulting company; clause (vi) is not, and must not be confused with, the holding-and-subsidiary clauses in section 47(iv) and (v), which are separate, are subject to the stock-in-trade proviso, and are the only ones section 47A(1) can claw back. The shareholder continuity threshold is twenty-five per cent in clause (via) and three-fourths in clauses (vic) and (vicc). Clause (vii) does not extend to shares in the amalgamating company held by the amalgamated company itself. On cost, section 49(2) substitutes the cost of the amalgamating company's shares; section 49(2C) apportions the cost of the demerged company's shares in the ratio of net book value of the assets transferred to the net worth of the demerged company immediately before the demerger; and section 49(2D) reduces the cost of the original shares by that amount. For holding period, Explanation 1(i)(g) to section 2(42A) includes the period for which the demerged company's shares were held. It arises in Capital Gains, Capital Gains Exemptions and How Tax Law Is Read matters, on section 47, section 47(vi), section 47(via), section 47(vib), section 47(vic), section 47(vicc), section 47(vid), section 47(vii), section 49, section 49(2), section 49(2C), section 49(2D), section 2(42A), section 2(1B), section 2(19AA), section 45, section 47A of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Do not confuse section 47(vi) with section 47(iv) and (v). Clause (vi) is the amalgamation clause — amalgamating company to amalgamated company, the amalgamated company being an Indian company. Clauses (iv) and (v) are the holding-and-subsidiary clauses, they carry the proviso excluding a transfer made after 29 February 1988 as stock-in-trade, and they are the only clauses of the two groups that section 47A(1) withdraws. Before relying on any of these clauses, satisfy yourself that the transaction is an "amalgamation" within s.2(1B) or a "demerger" within s.2(19AA). Every one of these clauses is conditional on that, and section 47A contains no clawback for them because a failed condition means the clause never applied. In an upstream merger, deal separately with the shares the amalgamated company itself held in the amalgamating company: clause (vii) expressly excepts them. For a cross-border amalgamation, apply the twenty-five per cent continuity test in clause (via) and its second condition that the transfer does not attract capital gains tax in the country in which the amalgamating company is incorporated, and get an opinion on that foreign law point in writing. For a foreign demerger under clause (vic) or (vicc), apply the three-fourths continuity test and the same foreign-tax condition, and note the proviso disapplying sections 391 to 394 of the Companies Act, 1956 for those clauses. Compute the shareholder's cost under s.49(2C) on the ratio of net book value of the assets transferred to the net worth of the demerged company immediately before the demerger, and reduce the cost of the original shares by the same amount under s.49(2D) in the same working. For the resulting company's shares, include the holding period of the demerged company's shares under Explanation 1(i)(g) to s.2(42A) before you classify the gain as short or long term.
Searched for later treatment; none was found. That is not the same as a source affirming it. The clauses this entry sets out are unamended, and the section 49 limb is verified on the most recent published edition of that section, which gives sub-section (2) (cost of shares in the amalgamated company deemed to be the cost of the shares in the amalgamating company, on a s.47(vii) transfer), sub-section (2C) (the net book value to net worth apportionment on demerger) and sub-section (2D) (the corresponding reduction in the cost of the original shares in the demerged company) in the words the entry states, with no amendment footnote against any of them. Section 47 has been amended since, but in other clauses only: the Finance (No. 2) Act, 2024 recast clause (iii), the gift, will and irrevocable trust clause, with effect from 1 April 2025, and the Finance Act, 2025 substituted the definition of 'resultant fund' in clause (viiad) with effect from 1 April 2026 and extended the date in clause (b) of its Explanation from 31 March 2025 to 31 March 2030. None of that touches clauses (vi), (via), (vib), (vic), (vicc), (vid) or (vii). One limit on the entry: no amending Act or commencement date is stated for any of the seven clauses, because no footnote apparatus was retrieved for either section, and no survey of judicial treatment has been made. The one decision cited, Avaya Global Connect Ltd. v. ACIT Range 7(3) (ITAT Mumbai, 29 July 2008), is carried for the proposition that the conditions in s.2(19AA) are cumulative and that s.47(vib) is unavailable if any of them fails; it has not otherwise been read in full. Every clause here is conditional on the transaction being an 'amalgamation' within s.2(1B) or a 'demerger' within s.2(19AA), so the definitions decide the case before s.47 is reached. This states the law under the Income-tax Act, 1961, which governs every assessment year up to and including AY 2026-27 and the disputes arising from those years. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Clauses (vi), (via), (vib), (vic), (vicc), (vid) and (vii) of section 47 were transcribed in sequence, verbatim, from the published edition headed 'Income-tax Act, 1961' under the section heading 'Transactions not regarded as transfer'. Sub-sections (2), (2C) and (2D) of section 49 were transcribed from the published edition headed 'Cost with reference to certain modes of acquisition'. Paragraph (g) of Explanation 1(i) to section 2(42A) was transcribed from the edition of section 2 as amended up to 2024, which prints it as: 'in the case of a capital asset, being a share or shares in an Indian company, which becomes the property of the assessee in consideration of a demerger, there shall be included the period for which the share or shares held in the demerged company were held by the assessee'. FOUR LIMITATIONS THE READER SHOULD KNOW. (1) THE CORRESPONDING HOLDING-PERIOD PARAGRAPH FOR SHARES RECEIVED IN AN AMALGAMATION COULD NOT BE RETRIEVED. The consolidated text of section 2 breaks off before clause (42A) on one edition, and the edition used gave paragraphs (f), (g) and (h) only. This entry therefore states the DEMERGER holding-period rule and says nothing about the amalgamation one; a reader who needs it must go to Explanation 1, sub-clause (i), paragraphs (a) to (e) of section 2(42A). (2) NO SECTION 47 OR SECTION 49 FOOTNOTES WERE RETRIEVED, so no amending Act and no commencement date is stated for any clause — including the words 'except where the shareholder itself is the amalgamated company' in clause (vii), which are present on the current text and are not dated here. (3) A CAUTION ON IDENTIFYING THE SECTION. Several electronic references under the number 47 serve Finance Act index material rather than the Income-tax Act, and older printings of the section go back to 1966. Check the Act name and the heading 'Transactions not regarded as transfer' before using any reference. (4) Clause (vi) is easily confused with clause (iv). Clause (vi) reads 'any transfer, in a scheme of amalgamation, of a capital asset by the amalgamating company to the amalgamated company if the amalgamated company is an Indian company', and was confirmed on two editions read for clauses (iv), (v), (vi) and (via) in sequence, which are word for word identical on clauses (vi) to (vii). Clause (iv) is the parent-to-subsidiary clause, is subject to the stock-in-trade proviso, and is one of the two clauses that section 47A(1) can claw back; clause (vi) is neither. Section 49(2), (2C) and (2D) were re-read and are verbatim as printed above, but remain sourced to a single edition. 'decided_on' is the start of the assessment year for which the editions used speak; 'bench' and 'favours' are inapplicable. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The seven clauses take the specified reorganisation transfers outside the charge in section 45, each on its own conditions, and each conditional on the transaction being an "amalgamation" within section 2(1B) or a "demerger" within section 2(19AA). Clause (vi) covers the transfer of the capital asset by the amalgamating company to the amalgamated company where the amalgamated company is an Indian company, and clause (vib) the corresponding transfer by the demerged company to an Indian resulting company; clause (vi) is not, and must not be confused with, the holding-and-subsidiary clauses in section 47(iv) and (v), which are separate, are subject to the stock-in-trade proviso, and are the only ones section 47A(1) can claw back. The shareholder continuity threshold is twenty-five per cent in clause (via) and three-fourths in clauses (vic) and (vicc). Clause (vii) does not extend to shares in the amalgamating company held by the amalgamated company itself. On cost, section 49(2) substitutes the cost of the amalgamating company's shares; section 49(2C) apportions the cost of the demerged company's shares in the ratio of net book value of the assets transferred to the net worth of the demerged company immediately before the demerger; and section 49(2D) reduces the cost of the original shares by that amount. For holding period, Explanation 1(i)(g) to section 2(42A) includes the period for which the demerged company's shares were held.
TaxSphere, “Statutory position — s.47(vi), (via), (vib), (vic), (vicc), (vid) and (vii): the amalgamation and demerger transfers that are not transfers, with the cost rules in s.49(2), (2C) and (2D)”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-47-amalgamation-demerger-exemptions-with-cost-under-49-and-holding-period/ (validity last checked 2026-09-08)
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We hived off a division under a court-sanctioned scheme and claimed section 47(vib) and section 72A(4). The Assessing Officer says it is not a "demerger". What exactly does section 2(19AA) require, and what is the position where Ind AS forced us to record the assets at a different value?
The NCLT has sanctioned our scheme and the order calls it an amalgamation. The Assessing Officer says it is not an amalgamation for income-tax and has refused section 47 and section 72A. Can he do that?
Our demerger was sanctioned by the High Court. The AO now says it is not a demerger under s.2(19AA) and has taxed capital gains and dividend distribution tax. Can he go behind the sanctioned scheme?
My shares in the amalgamating company simply ceased to exist on the merger. Is that a transfer at all?
