Our amalgamation stopped satisfying a condition after the event. Can the department invoke section 47A to take back the section 47(vi) exemption, and if it can, in which year and on whom?
Section 47A does not reach the amalgamation and demerger clauses at all. It withdraws the exemption in exactly four situations: sub-section (1), where a capital asset transferred under s.47(iv) or (v) — the holding company to wholly-owned subsidiary transfers — is converted into or treated as stock-in-trade, or the whole of the share capital ceases to be held, within eight years; sub-section (2), where shares allotted on a s.47(xi) conversion of a stock exchange membership are transferred within three years; sub-section (3), where a condition in the proviso to s.47(xiii) or (xiv) is broken; and sub-section (4), where a condition in the proviso to s.47(xiiib) is broken. Clauses (vi), (via), (vib), (vic), (vicc), (vid) and (vii) — the amalgamation and demerger exemptions — appear nowhere in section 47A.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2026-04-01, reported as Income-tax Act, 1961, s.47A, as printed on the departmental Year 2026 page and identically on the Year 2024 (No. 2) page. It bears on section 47A, section 47A(1), section 47A(2), section 47A(3), section 47A(4), section 47, section 47(iv), section 47(v), section 47(xi), section 47(xiii), section 47(xiv), section 47(xiiib), section 45, section 2(1B), section 2(19AA), section 72A(3) of the Income Tax Act 1961, in Capital Gains, Capital Gains Exemptions and How Tax Law Is Read matters.
Practitioners frequently assume that the reorganisation exemptions come with a claw-back the way s.54 or s.47(iv) do. They do not. The discipline on an amalgamation or demerger is imposed at the front end, by the definitions in s.2(1B) and s.2(19AA): if a condition of the definition is failed, the transaction was never an amalgamation or a demerger, and the s.47 clauses never applied in the first place. That is a materially different exposure. It is not a deemed income charge in a later year on the transferee; it is the original year's capital gain, assessed on the original transferor, with all that follows for limitation, for who receives the notice and for whether the transferor still exists. The four withdrawals that section 47A does contain each answer the three questions a practitioner needs separately, and the answers are not the same. Under sub-section (1) the withdrawn gain is charged "of the previous year in which such transfer took place" — that is, back in the year of the original transfer, not the year of the breach. Under sub-section (2) it is charged in the previous year in which the shares are transferred. Under sub-section (3) it is charged as the profits and gains of the SUCCESSOR COMPANY for the previous year in which the requirement is not complied with. Under sub-section (4) it is charged for the previous year in which the requirement is not complied with, on "the successor limited liability partnership or the shareholder of the predecessor company, as the case may be" — the only one of the four that can reach a shareholder. Contrast s.72A(3), which for the loss set-off charges the year of breach in the amalgamated company's hands: the tax Act uses both the year-of-breach and the year-of-original-transfer techniques, and you have to read which one applies.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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As printed on the Year 2026 departmental page, section 47A reads in full: 47A. (1) Where at any time before the expiry of a period of eight years from the date of the transfer of a capital asset referred to in clause (iv) or, as the case may be, clause (v) of section 47,— (i) such capital asset is converted by the transferee company into, or is treated by it as, stock-in-trade of its business; or (ii) the parent company or its nominees or, as the case may be, the holding company ceases or cease to hold the whole of the share capital of the subsidiary company, the amount of profits or gains arising from the transfer of such capital asset not charged under section 45 by virtue of the provisions contained in clause (iv) or, as the case may be, clause (v) of section 47 shall, notwithstanding anything contained in the said clauses, be deemed to be income chargeable under the head "Capital gains" of the previous year in which such transfer took place. (2) Where at any time, before the expiry of a period of three years from the date of the transfer of a capital asset referred to in clause (xi) of section 47, any of the shares allotted to the transferor in exchange of a membership in a recognised stock exchange are transferred, the amount of profits and gains not charged under section 45 by virtue of the provisions contained in clause (xi) of section 47 shall, notwithstanding anything contained in the said clause, be deemed to be the income chargeable under the head "Capital gains" of the previous year in which such shares are transferred. (3) Where any of the conditions laid down in the proviso to clause (xiii) or the proviso to clause (xiv) of section 47 are not complied with, the amount of profits or gains arising from the transfer of such capital asset or intangible asset not charged under section 45 by virtue of conditions laid down in the proviso to clause (xiii) or the proviso to clause (xiv) of section 47 shall be deemed to be the profits and gains chargeable to tax of the successor company for the previous year in which the requirements of the proviso to clause (xiii) or the proviso to clause (xiv), as the case may be, are not complied with. (4) Where any of the conditions laid down in the proviso to clause (xiiib) of section 47 are not complied with, the amount of profits or gains arising from the transfer of such capital asset or intangible assets or share or shares not charged under section 45 by virtue of conditions laid down in the said proviso shall be deemed to be the profits and gains chargeable to tax of the successor limited liability partnership or the shareholder of the predecessor company, as the case may be, for the previous year in which the requirements of the said proviso are not complied with. The section ends there.
Section 47A withdraws the exemption in four defined situations only, each keyed to named clauses of section 47: sub-section (1) to clauses (iv) and (v), sub-section (2) to clause (xi), sub-section (3) to the provisos to clauses (xiii) and (xiv), and sub-section (4) to the proviso to clause (xiiib). The withdrawn amount is charged in the previous year in which the original transfer took place under sub-section (1); in the previous year in which the shares are transferred under sub-section (2); as the profits and gains of the successor company for the previous year of non-compliance under sub-section (3); and as the profits and gains of the successor limited liability partnership or the shareholder of the predecessor company, as the case may be, for the previous year of non-compliance under sub-section (4). Section 47A contains no provision withdrawing the exemptions in section 47(vi), (via), (vib), (vic), (vicc), (vid) or (vii).
Not applicable — this is a statement of statutory text taken from departmental pages. No judicial reasoning is involved.
shall be deemed to be the profits and gains chargeable to tax of the successor limited liability partnership or the shareholder of the predecessor company, as the case may be, for the previous year in which the requirements of the said proviso are not complied with.
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Handle my notice → Ask a CA on WhatsAppSection 47A does not reach the amalgamation and demerger clauses at all. It withdraws the exemption in exactly four situations: sub-section (1), where a capital asset transferred under s.47(iv) or (v) — the holding company to wholly-owned subsidiary transfers — is converted into or treated as stock-in-trade, or the whole of the share capital ceases to be held, within eight years; sub-section (2), where shares allotted on a s.47(xi) conversion of a stock exchange membership are transferred within three years; sub-section (3), where a condition in the proviso to s.47(xiii) or (xiv) is broken; and sub-section (4), where a condition in the proviso to s.47(xiiib) is broken. Clauses (vi), (via), (vib), (vic), (vicc), (vid) and (vii) — the amalgamation and demerger exemptions — appear nowhere in section 47A. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 47A, section 47A(1), section 47A(2), section 47A(3), section 47A(4), section 47, section 47(iv), section 47(v), section 47(xi), section 47(xiii), section 47(xiv), section 47(xiiib), section 45, section 2(1B), section 2(19AA), section 72A(3) of the Income Tax Act 1961. It is reported as Income-tax Act, 1961, s.47A, as printed on the departmental Year 2026 page and identically on the Year 2024 (No. 2) page. Practitioners frequently assume that the reorganisation exemptions come with a claw-back the way s.54 or s.47(iv) do. They do not. The discipline on an amalgamation or demerger is imposed at the front end, by the definitions in s.2(1B) and s.2(19AA): if a condition of the definition is failed, the transaction was never an amalgamation or a demerger, and the s.47 clauses never applied in the first place. That is a materially different exposure. It is not a deemed income charge in a later year on the transferee; it is the original year's capital gain, assessed on the original transferor, with all that follows for limitation, for who receives the notice and for whether the transferor still exists. The four withdrawals that section 47A does contain each answer the three questions a practitioner needs separately, and the answers are not the same. Under sub-section (1) the withdrawn gain is charged "of the previous year in which such transfer took place" — that is, back in the year of the original transfer, not the year of the breach. Under sub-section (2) it is charged in the previous year in which the shares are transferred. Under sub-section (3) it is charged as the profits and gains of the SUCCESSOR COMPANY for the previous year in which the requirement is not complied with. Under sub-section (4) it is charged for the previous year in which the requirement is not complied with, on "the successor limited liability partnership or the shareholder of the predecessor company, as the case may be" — the only one of the four that can reach a shareholder. Contrast s.72A(3), which for the loss set-off charges the year of breach in the amalgamated company's hands: the tax Act uses both the year-of-breach and the year-of-original-transfer techniques, and you have to read which one applies. If it applies to you, the first step is this: Read the notice against the actual text of section 47A before answering it. If the department invokes section 47A to withdraw a section 47(vi), (via), (vib), (vic), (vicc), (vid) or (vii) exemption, take the point that the section does not extend to those clauses.
As printed on the Year 2026 departmental page, section 47A reads in full: 47A. (1) Where at any time before the expiry of a period of eight years from the date of the transfer of a capital asset referred to in clause (iv) or, as the case may be, clause (v) of section 47,— (i) such capital asset is converted by the transferee company into, or is treated by it as, stock-in-trade of its business; or (ii) the parent company or its nominees or, as the case may be, the holding company ceases or cease to hold the whole of the share capital of the subsidiary company, the amount of profits or gains arising from the transfer of such capital asset not charged under section 45 by virtue of the provisions contained in clause (iv) or, as the case may be, clause (v) of section 47 shall, notwithstanding anything contained in the said clauses, be deemed to be income chargeable under the head "Capital gains" of the previous year in which such transfer took place. (2) Where at any time, before the expiry of a period of three years from the date of the transfer of a capital asset referred to in clause (xi) of section 47, any of the shares allotted to the transferor in exchange of a membership in a recognised stock exchange are transferred, the amount of profits and gains not charged under section 45 by virtue of the provisions contained in clause (xi) of section 47 shall, notwithstanding anything contained in the said clause, be deemed to be the income chargeable under the head "Capital gains" of the previous year in which such shares are transferred. (3) Where any of the conditions laid down in the proviso to clause (xiii) or the proviso to clause (xiv) of section 47 are not complied with, the amount of profits or gains arising from the transfer of such capital asset or intangible asset not charged under section 45 by virtue of conditions laid down in the proviso to clause (xiii) or the proviso to clause (xiv) of section 47 shall be deemed to be the profits and gains chargeable to tax of the successor company for the previous year in which the requirements of the proviso to clause (xiii) or the proviso to clause (xiv), as the case may be, are not complied with. (4) Where any of the conditions laid down in the proviso to clause (xiiib) of section 47 are not complied with, the amount of profits or gains arising from the transfer of such capital asset or intangible assets or share or shares not charged under section 45 by virtue of conditions laid down in the said proviso shall be deemed to be the profits and gains chargeable to tax of the successor limited liability partnership or the shareholder of the predecessor company, as the case may be, for the previous year in which the requirements of the said proviso are not complied with. The section ends there. The matter was decided on 2026-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Section 47A withdraws the exemption in four defined situations only, each keyed to named clauses of section 47: sub-section (1) to clauses (iv) and (v), sub-section (2) to clause (xi), sub-section (3) to the provisos to clauses (xiii) and (xiv), and sub-section (4) to the proviso to clause (xiiib). The withdrawn amount is charged in the previous year in which the original transfer took place under sub-section (1); in the previous year in which the shares are transferred under sub-section (2); as the profits and gains of the successor company for the previous year of non-compliance under sub-section (3); and as the profits and gains of the successor limited liability partnership or the shareholder of the predecessor company, as the case may be, for the previous year of non-compliance under sub-section (4). Section 47A contains no provision withdrawing the exemptions in section 47(vi), (via), (vib), (vic), (vicc), (vid) or (vii).
Not applicable — this is a statement of statutory text taken from departmental pages. No judicial reasoning is involved. In the words reproduced by the source cited on this page: "shall be deemed to be the profits and gains chargeable to tax of the successor limited liability partnership or the shareholder of the predecessor company, as the case may be, for the previous year in which the requirements of the said proviso are not complied with."
It was decided by the CBDT Circulars & Instructions on 2026-04-01 and is reported as Income-tax Act, 1961, s.47A, as printed on the departmental Year 2026 page and identically on the Year 2024 (No. 2) page. 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 47A, section 47A(1), section 47A(2), section 47A(3), section 47A(4), section 47, section 47(iv), section 47(v), section 47(xi), section 47(xiii), section 47(xiv), section 47(xiiib), section 45, section 2(1B), section 2(19AA), section 72A(3), 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. Section 47A withdraws the exemption in four defined situations only, each keyed to named clauses of section 47: sub-section (1) to clauses (iv) and (v), sub-section (2) to clause (xi), sub-section (3) to the provisos to clauses (xiii) and (xiv), and sub-section (4) to the proviso to clause (xiiib). The withdrawn amount is charged in the previous year in which the original transfer took place under sub-section (1); in the previous year in which the shares are transferred under sub-section (2); as the profits and gains of the successor company for the previous year of non-compliance under sub-section (3); and as the profits and gains of the successor limited liability partnership or the shareholder of the predecessor company, as the case may be, for the previous year of non-compliance under sub-section (4). Section 47A contains no provision withdrawing the exemptions in section 47(vi), (via), (vib), (vic), (vicc), (vid) or (vii). It arises in Capital Gains, Capital Gains Exemptions and How Tax Law Is Read matters, on section 47A, section 47A(1), section 47A(2), section 47A(3), section 47A(4), section 47, section 47(iv), section 47(v), section 47(xi), section 47(xiii), section 47(xiv), section 47(xiiib), section 45, section 2(1B), section 2(19AA), section 72A(3) 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. Where the department's real case is that a condition of section 2(1B) or section 2(19AA) was not satisfied, meet it on that ground and in the correct year — the year of the original transfer, on the original transferor — and take every limitation point that follows. For a section 47(iv) or (v) transfer, diarise the eight-year period from the date of transfer, and watch both triggers: conversion into or treatment as stock-in-trade by the transferee, and any cessation of the whole of the share capital being held. Either one charges the gain in the year of the ORIGINAL transfer. For a section 47(xiii) or (xiv) succession, note that the charge under sub-section (3) falls on the successor company and in the year of non-compliance. For a section 47(xiiib) conversion into a limited liability partnership, note that the charge under sub-section (4) can fall on the successor LLP or on the shareholder of the predecessor company, and settle which before you concede anything. Do not import the section 72A(3) year-of-breach rule into section 47A(1), or the section 47A(1) year-of-transfer rule into section 47A(3) or (4). The four sub-sections choose different years deliberately.
Still good law. The Year 2026 departmental page is the current edition and prints section 47A word for word identically with the Year 2024 (No. 2) page, which is the strongest evidence available on this pass that the section has not moved. No Finance Act text was read and no footnote naming an amending Act could be retrieved, so this entry states the text and not its legislative history. I did not check judicial treatment of section 47A; the library already holds PCIT v Mobisoft Tele Solutions P Ltd on s.47A(3), CIT v Prakash Electric Company on s.47A(3) and ACIT v Celerity Power LLP on s.47A(4). 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.
Section 47A was transcribed in full — sub-sections (1) with clauses (i) and (ii), (2), (3) and (4) — from https://incometaxindia.gov.in/w/section-47a-45, which printed the Act name "Income-tax Act, 1961", the section heading "Withdrawal of exemption in certain cases" and the stamp "Year: 2026", and independently, word for word identically, from https://incometaxindia.gov.in/w/section-47a-40 (Year: 2024 (No. 2)). THE STATED NEGATIVE IN THIS ENTRY IS NOT AN ABSENCE OF EVIDENCE BUT A READING OF THE WHOLE SECTION. Section 47A is short and closed: each of its four sub-sections names the section 47 clauses it operates on — (iv) and (v) in sub-section (1), (xi) in sub-section (2), the proviso to (xiii) and the proviso to (xiv) in sub-section (3), and the proviso to (xiiib) in sub-section (4) — and I transcribed the section from its opening words to the end of sub-section (4) on two separate pages a year and a half apart in vintage. On both, the section ends with sub-section (4) and no clause of the amalgamation or demerger group is mentioned anywhere in it. https://incometaxindia.gov.in/w/section-47a (Year: 2009) also prints sub-sections (1) to (3) with the same clause references and, being pre-2010, has no sub-section (4) at all — useful as legislative history and not as the current position. https://incometaxindia.gov.in/w/section-47a-30 (Year: 2014) confirmed sub-section (4) present. I did not retrieve the footnote apparatus for section 47A and state no amending Act or commencement date for any sub-section. The observation in this entry that a broken definitional condition takes the transaction outside section 47 altogether follows from the opening words of the section 47 clauses, which were separately transcribed this pass from https://incometaxindia.gov.in/w/section-47-64 (Year: 2025); it is not a proposition I took from any judgment. 'decided_on' is the start of the assessment year for which the Year 2026 departmental page speaks; '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.
Section 47A withdraws the exemption in four defined situations only, each keyed to named clauses of section 47: sub-section (1) to clauses (iv) and (v), sub-section (2) to clause (xi), sub-section (3) to the provisos to clauses (xiii) and (xiv), and sub-section (4) to the proviso to clause (xiiib). The withdrawn amount is charged in the previous year in which the original transfer took place under sub-section (1); in the previous year in which the shares are transferred under sub-section (2); as the profits and gains of the successor company for the previous year of non-compliance under sub-section (3); and as the profits and gains of the successor limited liability partnership or the shareholder of the predecessor company, as the case may be, for the previous year of non-compliance under sub-section (4). Section 47A contains no provision withdrawing the exemptions in section 47(vi), (via), (vib), (vic), (vicc), (vid) or (vii).
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