Section 47 is the structural counterpoint to section 2(47) wide-net transfer definition. The carve-outs preserve tax-neutrality for specified transactions deemed not 'real' transfers for charging purposes. The architecture: (a) Family-based transfers (gift / will / inheritance / HUF partition); (b) Corporate restructuring (amalgamation / demerger / holding-subsidiary transfers); (c) Conversion structures (LLP-to-company); (d) IFSC framework; (e) Special situations (cooperative bank reorganisation).
Each carve-out has specific conditions. For example: section 47(iv)/(v) holding-subsidiary transfers require 100% ownership of subsidiary by holding company. Section 47(vi) amalgamation requires the amalgamated company to be INDIAN. Section 47(xiiib) LLP-to-company conversion requires multiple conditions — partnership profit-sharing pattern preserved; capital account preserved; no fresh investment within 3 years; etc.
Section 49(1) operates in tandem — transferee under section 47 carve-out takes the TRANSFEROR'S cost basis for future computation. This ensures the tax neutrality is temporal — the gain is preserved for future taxation when the transferee sells. The 'indexation benefit' starts from the original acquisition year, not the s. 47 transfer year.
Section 47A withdraws the section 47 exemption if subsequent conditions are violated. Example: section 47(xiiib) LLP-to-company conversion — if shareholding pattern changes within 5 years OR conversion conditions breached, the original transfer becomes taxable in the year of breach.
TLAA 2021 carve-out for IBC — transfer pursuant to NCLT-approved Resolution Plan does NOT attract section 45 charge; section 79 loss CF also preserved. This is operationally significant for distressed-asset acquisition planning.
The transition to the Income-tax Act, 2025 preserves the section 47 framework.
FINANCE ACT AMENDMENT TIMELINE
■ FA 1962 — Section 47 came into force.
■ FA 1972 — Section 47(vi) amalgamation carve-out refined.
■ FA 1988 — Section 47(vii) shareholder amalgamation swap.
■ FA 1999 — Section 47(vi-b) demerger carve-out.
■ FA 2010 — Section 47(xiiib) LLP-to-company conversion.
■ FA 2020 — Section 47(viiac) IFSC framework.
■ FA 2021 — Section 9B reconstitution operates alongside.
Facts. The Department sought to apply a surcharge provision retrospectively to block-period assessments. The assessee contended that the amendment was substantive and could not have retrospective operation absent express legislative direction.
Issue. Whether amendments to taxing statutes operate prospectively unless the legislature has expressly or by necessary implication conferred retrospective effect.
HELD. The Constitution Bench reaffirmed the general rule against retrospectivity of taxing statutes. A taxing provision must be construed prospectively unless the language compels otherwise; mere insertion or substitution by amendment is not sufficient to deny vested rights.
“Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation.”
Relevance. Anchor authority for any argument that an amendment to a charging or computational provision must apply only from the AY notified — useful in transitional disputes around FA 2025 and the 1961 → 2025 changeover.
Facts. Section 52(2) (since deleted) deemed sale consideration to be FMV where FMV exceeded the declared consideration by 15%. The Department applied it on a literal reading even when the assessee had not in fact received more than the declared price.
Issue. Whether a deeming provision in a charging schema can be construed literally where its plain reading produces a result manifestly contrary to legislative object.
HELD. The Court read down section 52(2) to apply only where the assessee had actually received consideration in excess of the declared sum. A literal construction yielding absurd or unjust results must yield to an object-based interpretation; the CBDT's contemporaneous Circular No. 96 was held binding on the Revenue.
“It is well settled that a literal construction of a statutory provision ought not to be adopted if it produces a manifestly unjust result… Where a literal construction creates an anomaly, the courts will adopt that construction which avoids the anomaly.”
Relevance. Anchor authority for purposive construction of deeming fictions across the 1961 Act — applies wherever a deeming clause (e.g., s. 50C, s. 56(2)(x), s. 2(22)(e)) yields a result contrary to legislative purpose.
▸ Mathuram Agrawal v. State of Madhya Pradesh (1999) 8 SCC 667 ; (2000) 1 SCR 1 (Supreme Court)
Facts. A municipal levy was challenged on the ground that the charging provision did not clearly specify the rate, the persons charged, and the measure of tax.
Issue. Whether a tax can be imposed in the absence of a clear, unambiguous charging provision identifying the subject, measure, rate, and incidence.
HELD. Article 265 demands that tax be levied only by clear authority of law. The four components — taxable event, person, rate, and measure — must be clearly discernible from the charging provision; ambiguity is fatal to the levy.
“The intention of the Legislature in a taxation statute is to be gathered from the language of the provisions, particularly when the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose other than what is given expression to.”
Relevance. Foundational authority on the rigour required of charging sections — underpins arguments that ambiguous deeming fictions, surcharge formulas, and rate prescriptions must be strictly construed.
▸ Commissioner of Income-tax v. B.C. Srinivasa Setty (1981) 128 ITR 294 ; (1981) 2 SCC 460 (Supreme Court)
Facts. The assessee transferred goodwill of a self-generated nature. The Department sought to tax the consideration as capital gains; the assessee contended that no cost of acquisition could be ascertained, hence the computation provisions failed.
Issue. Whether capital gains arises where the asset has no ascertainable cost of acquisition — i.e., whether the charging provision can be invoked independently of a workable computation provision.
HELD. The charging section and the computation provisions form an integrated code; if the computation provisions cannot apply (because the cost is incapable of ascertainment), the charge itself fails. Self-generated goodwill is not taxable as capital gains.
“The charging section and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section.”
Relevance. Anchor for the 'charge fails when computation fails' doctrine — useful in valuation impasses, self-generated assets, and computational ambiguity (though now largely overtaken by section 55(2)(a)(i) deeming cost as nil).
▸ Commissioner of Income-tax v. Excel Industries Ltd. (2013) 358 ITR 295 ; (2014) 2 SCC 1 (Supreme Court)
Facts. The assessee, an export-oriented unit, received DEPB licences and Advance Licences. The Department sought to tax the value of these incentives on accrual at the time of issue; the assessee contended that no income accrued until the licence was actually used or sold.
Issue. When does income accrue under the mercantile system — at the moment a right is created, or at the moment the right becomes enforceable as a debt?
HELD. Income accrues only when there is a corresponding liability of the other party. Mere creation of a contingent or unmatured right does not amount to accrual; the right must crystallise into a debt before tax incidence.
“Income accrues when there arises in favour of the assessee a debt — when there is a corresponding liability of the other party to pay the amount. It is not enough that the right has come into being; the right must ripen into a debt.”
Relevance. Anchor for accrual-vs-receipt timing disputes under section 5 / section 145 — relevant for retention monies, export incentives, contingent claim settlements, milestone-based contracts.
CBDT CIRCULARS — ECOSYSTEM
▸ CBDT Circular No. 14(XL-35) of 1955 dated 11 April 1955
Subject. Duty of officers to assist assessees in claiming and securing relief
Substance. Foundational circular directing that the AO should not exploit assessee ignorance to deny legitimate reliefs; officer is required to draw attention to refunds or reliefs to which the assessee is entitled. The circular has been judicially noted in several appellate decisions and remains operative for first-appellate practice.
Substance. Explained the FA 1987 / FA 1989 amendments unifying the previous year with the financial year preceding the AY, including transitional provisions for assessees with different accounting years. Useful in any controversy on the timing of accrual / chargeability for early post-1989 AYs.
▸ CBDT Circular No. 5 of 2014 dated 11 February 2014
Subject. Section 14A — dis-allowance even where no exempt income earned (since modulated)
Substance. Initially directed AOs to apply Rule 8D disallowance under section 14A even where no exempt income was earned in the year; subsequently modulated by Cheminvest (Del HC) and Maxopp (SC). FA 2022 amendment to section 14A re-asserted the position but remains under litigation.
▸ CBDT Circular No. 6 of 2019 dated 20 March 2019
Subject. Withdrawal of low-tax-effect appeals — monetary thresholds
Substance. Revised monetary thresholds for departmental appeals — ITAT (Rs 50L), HC (Rs 1 Cr), SC (Rs 2 Cr); subsequently further revised. Operates as a non-statutory limitation on the Revenue's appellate engagement, binding under section 119.
WORKED EXAMPLES
Illustration — Illustration 1 — Gift to relative (s. 47(iii))
Illustration — Illustration 3 — Amalgamation (s. 47(vi)/(vii))
Facts. Q Ltd amalgamates with R Ltd. Shareholders of Q get R shares.
Computation.
S. 47(vi) — Q's assets transfer to R (Indian-company amalgamated) → no CG.
S. 47(vii) — Shareholders' swap of Q shares for R shares → no CG.
R's cost basis on Q's assets — Q's original cost (s. 49(1)).
Shareholders' cost basis on R shares — original Q-share cost (s. 49(2)).
Result. Comprehensive amalgamation tax-neutrality; cost basis preserved across the chain.
Illustration — Illustration 4 — LLP-to-company conversion (s. 47(xiiib))
Facts. XYZ LLP converts to private limited company.
Computation.
S. 47(xiiib) — Detailed conditions: (a) all partners become shareholders in same profit-sharing ratio; (b) capital account preserved; (c) no fresh investment within 3 years; (d) etc.
If conditions met → no s. 45 charge on LLP / partners.
Company's cost basis on LLP assets — LLP's cost (s. 49 framework).
S. 47A — If conditions breached within 3 / 5 years → withdrawal; CG arises in year of breach.
Result. LLP conversion structurally facilitated but with strict s. 47A vigilance.
Illustration — Illustration 5 — IBC Resolution Plan transfer
Facts. Distressed UV Ltd undergoes IBC; NCLT-approved Resolution Plan transfers assets to acquirer W.
STATUTORY ARCHITECTURE — 18-ROW MAP
01. Section & marginal note
Section 47 — 'Transactions not regarded as transfer' — Chapter IV-D.
02. Sub-section structure
Single section with multiple clauses (i)-(xiiib) listing carve-outs.
03. Operative trigger
Specific transfer falling within one of section 47 categories.
04. Persons affected
Transferors of capital assets in specified scenarios.
05. Time anchor — PY / AY
PY of transfer; carve-out preserves tax-neutrality.
06. Income anchor
No CG charge under s. 45.
07. Residential-status nexus
Some carve-outs (e.g., amalgamation) require Indian-company status.
08. Rate / charge mechanism
No charge; transferee takes stepped cost basis.
09. TDS / TCS interaction
S. 194-IA / 195 may still apply but reversal procedures available.
10. Advance-tax obligation
No advance tax on s. 47 transfers.
11. Presumptive provisions
N/A.
12. Exemption / deduction mechanism
Section 47 IS the exemption framework.
13. Refund / credit
Standard.
14. Return / disclosure reporting
ITR Schedule CG — s. 47 disclosure.
15. Penalty exposure
Section 270A on incorrect carve-out claim.
16. Prosecution exposure
Section 277 false statement.
17. Cross-statute interplay
Companies Act / LLP Act / IBC / Hindu Succession Act / SEBI.
18. Repeal & saving — 1961 → 2025
Preserved comprehensively.
HISTORICAL CONTEXT
Section 47 is the structural counterpoint to section 2(47) wide-net transfer definition. The carve-outs preserve tax-neutrality for specified transactions deemed not 'real' transfers for charging purposes. The architecture: (a) Family-based transfers (gift / will / inheritance / HUF partition); (b) Corporate restructuring (amalgamation / demerger / holding-subsidiary transfers); (c) Conversion structures (LLP-to-company); (d) IFSC framework; (e) Special situations (cooperative bank reorganisation).
Each carve-out has specific conditions. For example: section 47(iv)/(v) holding-subsidiary transfers require 100% ownership of subsidiary by holding company. Section 47(vi) amalgamation requires the amalgamated company to be INDIAN. Section 47(xiiib) LLP-to-company conversion requires multiple conditions — partnership profit-sharing pattern preserved; capital account preserved; no fresh investment within 3 years; etc.
Section 49(1) operates in tandem — transferee under section 47 carve-out takes the TRANSFEROR'S cost basis for future computation. This ensures the tax neutrality is temporal — the gain is preserved for future taxation when the transferee sells. The 'indexation benefit' starts from the original acquisition year, not the s. 47 transfer year.
Section 47A withdraws the section 47 exemption if subsequent conditions are violated. Example: section 47(xiiib) LLP-to-company conversion — if shareholding pattern changes within 5 years OR conversion conditions breached, the original transfer becomes taxable in the year of breach.
TLAA 2021 carve-out for IBC — transfer pursuant to NCLT-approved Resolution Plan does NOT attract section 45 charge; section 79 loss CF also preserved. This is operationally significant for distressed-asset acquisition planning.
The transition to the Income-tax Act, 2025 preserves the section 47 framework.
FINANCE ACT AMENDMENT TIMELINE
■ FA 1962 — Section 47 came into force.
■ FA 1972 — Section 47(vi) amalgamation carve-out refined.
■ FA 1988 — Section 47(vii) shareholder amalgamation swap.
■ FA 1999 — Section 47(vi-b) demerger carve-out.
■ FA 2010 — Section 47(xiiib) LLP-to-company conversion.
■ FA 2020 — Section 47(viiac) IFSC framework.
■ FA 2021 — Section 9B reconstitution operates alongside.
■ FA 2024 — Cosmetic refinements.
■ FA 2025 — Minor.
■ Income-tax Act, 2025 — Section 47 successor, operative 1-4-2026.
JUDICIAL EVOLUTION — VERIFIED LANDMARK AUTHORITIES
▸ Commissioner of Income-tax v. Vatika Township Pvt. Ltd. (2014) 367 ITR 466 ; (2015) 1 SCC 1 (Supreme Court — 5-Judge Constitution Bench)
Facts. The Department sought to apply a surcharge provision retrospectively to block-period assessments. The assessee contended that the amendment was substantive and could not have retrospective operation absent express legislative direction.
Issue. Whether amendments to taxing statutes operate prospectively unless the legislature has expressly or by necessary implication conferred retrospective effect.
HELD. The Constitution Bench reaffirmed the general rule against retrospectivity of taxing statutes. A taxing provision must be construed prospectively unless the language compels otherwise; mere insertion or substitution by amendment is not sufficient to deny vested rights.
“Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation.”
Relevance. Anchor authority for any argument that an amendment to a charging or computational provision must apply only from the AY notified — useful in transitional disputes around FA 2025 and the 1961 → 2025 changeover.
▸ K.P. Varghese v. Income-tax Officer, Ernakulam (1981) 131 ITR 597 ; (1981) 4 SCC 173 (Supreme Court — 3-Judge Bench)
Facts. Section 52(2) (since deleted) deemed sale consideration to be FMV where FMV exceeded the declared consideration by 15%. The Department applied it on a literal reading even when the assessee had not in fact received more than the declared price.
Issue. Whether a deeming provision in a charging schema can be construed literally where its plain reading produces a result manifestly contrary to legislative object.
HELD. The Court read down section 52(2) to apply only where the assessee had actually received consideration in excess of the declared sum. A literal construction yielding absurd or unjust results must yield to an object-based interpretation; the CBDT's contemporaneous Circular No. 96 was held binding on the Revenue.
“It is well settled that a literal construction of a statutory provision ought not to be adopted if it produces a manifestly unjust result… Where a literal construction creates an anomaly, the courts will adopt that construction which avoids the anomaly.”
Relevance. Anchor authority for purposive construction of deeming fictions across the 1961 Act — applies wherever a deeming clause (e.g., s. 50C, s. 56(2)(x), s. 2(22)(e)) yields a result contrary to legislative purpose.
▸ Mathuram Agrawal v. State of Madhya Pradesh (1999) 8 SCC 667 ; (2000) 1 SCR 1 (Supreme Court)
Facts. A municipal levy was challenged on the ground that the charging provision did not clearly specify the rate, the persons charged, and the measure of tax.
Issue. Whether a tax can be imposed in the absence of a clear, unambiguous charging provision identifying the subject, measure, rate, and incidence.
HELD. Article 265 demands that tax be levied only by clear authority of law. The four components — taxable event, person, rate, and measure — must be clearly discernible from the charging provision; ambiguity is fatal to the levy.
“The intention of the Legislature in a taxation statute is to be gathered from the language of the provisions, particularly when the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose other than what is given expression to.”
Relevance. Foundational authority on the rigour required of charging sections — underpins arguments that ambiguous deeming fictions, surcharge formulas, and rate prescriptions must be strictly construed.
▸ Commissioner of Income-tax v. B.C. Srinivasa Setty (1981) 128 ITR 294 ; (1981) 2 SCC 460 (Supreme Court)
Facts. The assessee transferred goodwill of a self-generated nature. The Department sought to tax the consideration as capital gains; the assessee contended that no cost of acquisition could be ascertained, hence the computation provisions failed.
Issue. Whether capital gains arises where the asset has no ascertainable cost of acquisition — i.e., whether the charging provision can be invoked independently of a workable computation provision.
HELD. The charging section and the computation provisions form an integrated code; if the computation provisions cannot apply (because the cost is incapable of ascertainment), the charge itself fails. Self-generated goodwill is not taxable as capital gains.
“The charging section and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section.”
Relevance. Anchor for the 'charge fails when computation fails' doctrine — useful in valuation impasses, self-generated assets, and computational ambiguity (though now largely overtaken by section 55(2)(a)(i) deeming cost as nil).
▸ Commissioner of Income-tax v. Excel Industries Ltd. (2013) 358 ITR 295 ; (2014) 2 SCC 1 (Supreme Court)
Facts. The assessee, an export-oriented unit, received DEPB licences and Advance Licences. The Department sought to tax the value of these incentives on accrual at the time of issue; the assessee contended that no income accrued until the licence was actually used or sold.
Issue. When does income accrue under the mercantile system — at the moment a right is created, or at the moment the right becomes enforceable as a debt?
HELD. Income accrues only when there is a corresponding liability of the other party. Mere creation of a contingent or unmatured right does not amount to accrual; the right must crystallise into a debt before tax incidence.
“Income accrues when there arises in favour of the assessee a debt — when there is a corresponding liability of the other party to pay the amount. It is not enough that the right has come into being; the right must ripen into a debt.”
Relevance. Anchor for accrual-vs-receipt timing disputes under section 5 / section 145 — relevant for retention monies, export incentives, contingent claim settlements, milestone-based contracts.
CBDT CIRCULARS — ECOSYSTEM
▸ CBDT Circular No. 14(XL-35) of 1955 dated 11 April 1955
Subject. Duty of officers to assist assessees in claiming and securing relief
Substance. Foundational circular directing that the AO should not exploit assessee ignorance to deny legitimate reliefs; officer is required to draw attention to refunds or reliefs to which the assessee is entitled. The circular has been judicially noted in several appellate decisions and remains operative for first-appellate practice.
▸ CBDT Circular No. 549 dated 31 October 1989
Subject. Explanatory notes — Finance Act 1989 amendments (incl. PY unification)
Substance. Explained the FA 1987 / FA 1989 amendments unifying the previous year with the financial year preceding the AY, including transitional provisions for assessees with different accounting years. Useful in any controversy on the timing of accrual / chargeability for early post-1989 AYs.
▸ CBDT Circular No. 5 of 2014 dated 11 February 2014
Subject. Section 14A — dis-allowance even where no exempt income earned (since modulated)
Substance. Initially directed AOs to apply Rule 8D disallowance under section 14A even where no exempt income was earned in the year; subsequently modulated by Cheminvest (Del HC) and Maxopp (SC). FA 2022 amendment to section 14A re-asserted the position but remains under litigation.
▸ CBDT Circular No. 6 of 2019 dated 20 March 2019
Subject. Withdrawal of low-tax-effect appeals — monetary thresholds
Substance. Revised monetary thresholds for departmental appeals — ITAT (Rs 50L), HC (Rs 1 Cr), SC (Rs 2 Cr); subsequently further revised. Operates as a non-statutory limitation on the Revenue's appellate engagement, binding under section 119.
WORKED EXAMPLES
Illustration — Illustration 1 — Gift to relative (s. 47(iii))
Facts. A gifts shares worth Rs 50 L to son B.
Computation.
S. 47(iii) — Gift carve-out.
No s. 45 CG charge on A.
B's cost basis under s. 49(1) — A's original cost.
Section 56(2)(x) — Gift from relative carve-out → no income.
Future sale by B — CG computed using A's cost basis + holding period from A's acquisition.
Result. Gift to relative is structurally tax-neutral; stepped cost preserves future CG.
Illustration — Illustration 2 — Holding-subsidiary transfer (s. 47(iv))
Facts. P Ltd (holding) transfers building to S Ltd (100% subsidiary). FMV Rs 5 cr; book value Rs 2 cr.
Computation.
S. 47(iv) — 100% ownership condition met.
No s. 45 charge on P Ltd.
S Ltd's cost basis under s. 49(1) — P Ltd's Rs 2 cr.
Section 47A — if shareholding falls below 100% within 8 years, withdrawal of exemption.
Subsequent sale by S Ltd — CG = sale − Rs 2 cr (P Ltd's cost).
Result. 100%-owned holding-subsidiary transfers tax-neutral; section 47A 8-year vigilance.
Illustration — Illustration 3 — Amalgamation (s. 47(vi)/(vii))
Facts. Q Ltd amalgamates with R Ltd. Shareholders of Q get R shares.
Computation.
S. 47(vi) — Q's assets transfer to R (Indian-company amalgamated) → no CG.
S. 47(vii) — Shareholders' swap of Q shares for R shares → no CG.
R's cost basis on Q's assets — Q's original cost (s. 49(1)).
Shareholders' cost basis on R shares — original Q-share cost (s. 49(2)).
Result. Comprehensive amalgamation tax-neutrality; cost basis preserved across the chain.
Illustration — Illustration 4 — LLP-to-company conversion (s. 47(xiiib))
Facts. XYZ LLP converts to private limited company.
Computation.
S. 47(xiiib) — Detailed conditions: (a) all partners become shareholders in same profit-sharing ratio; (b) capital account preserved; (c) no fresh investment within 3 years; (d) etc.
If conditions met → no s. 45 charge on LLP / partners.
Company's cost basis on LLP assets — LLP's cost (s. 49 framework).
S. 47A — If conditions breached within 3 / 5 years → withdrawal; CG arises in year of breach.
Result. LLP conversion structurally facilitated but with strict s. 47A vigilance.
Illustration — Illustration 5 — IBC Resolution Plan transfer
Facts. Distressed UV Ltd undergoes IBC; NCLT-approved Resolution Plan transfers assets to acquirer W.
Computation.
TLAA 2021 framework — IBC-driven transfers preserved.
No s. 45 charge on UV Ltd.
W's cost basis — Resolution Plan terms.
Section 79 loss CF — preserved (s. 79(3)(a) IBC carve-out).
Comprehensive tax-neutrality for distressed-asset acquisition.
Result. IBC framework preserves both s. 47 / s. 79 — major lever for distressed-asset transactions.
PRACTITIONER PLANNING NOTES
■ Indexation post FA 2024 — abolished for unlisted assets; listed equity 12.5% without indexation (post 23-7-2024).
■ FA 2024 LTCG rate harmonised at 12.5% across asset classes (most); listed equity threshold Rs 1.25 L.
■ Holding period — listed securities 12 months; unlisted shares 24 months; immovable property 24 months (FA 2024 reduction).
■ Section 50C / 50CA stamp value parallel — preserve actual-sale-consideration documentation.
■ Section 56(2)(x) parallel for buyer (gift framework).
■ Section 54 / 54F / 54EC reinvestment exemptions — strict timing + investment-pattern compliance.
■ Capital Gains Account Scheme (CGAS) — for un-utilised exemption funds before due date.
■ Section 47 carve-outs — corporate restructuring / family settlements / inheritance.
■ Section 49 stepped-up cost basis — for inherited / gifted / transferred assets.
■ Section 50 depreciable asset block — STCG framework regardless of holding period.
■ Section 50B slump sale — net worth methodology + Rule 11UAE for unlisted shares.
■ Section 55(2)(b) FMV election — for assets held before 1-4-2001; second-best election.
■ Form 26QB — TDS on immovable property > Rs 50 L (s. 194-IA).
■ Documentation discipline — purchase / sale deeds + valuation + reinvestment evidence — 7 years.
■ Annual practitioner review of FA changes to indexation / rates / thresholds.
LITIGATION DEFENCE
■ Strict construction — Mathuram Agrawal.
■ Object-based — K.P. Varghese.
■ Prospective amendment — Vatika Township for FA 2024 indexation abolition.
■ BC Srinivasa Setty — computation impossibility (self-generated assets).
■ Excel Industries accrual — for sale-completion timing.
■ Vodafone International — for cross-border transfer characterisation.
■ Calcutta Discount Article 226 — for jurisdictional challenges.
■ Section 47 carve-out defence — preserve corporate restructuring documentation.
■ Section 50C stamp value challenge — produce market evidence / valuation officer reference.
■ Section 54 / 54F reinvestment defence — preserve CGAS deposit + reinvestment evidence.
■ Section 49 stepped-up cost defence — preserve inheritance / gift documentation.
■ Slump sale defence — preserve net worth computation + lump-sum nature evidence.
■ Beneficial circulars defence.
■ Section 273B reasonable-cause defence.
■ Section 270A bona-fide claim defence (Reliance Petroproducts anchor).
■ Holding-period documentation — share certificates / property registry.
PROCEDURE
Step 1. Identify transfer event
s. 2(47).
Step 2. Map to s. 47 carve-out category
Specific clause.
Step 3. Verify all conditions of the carve-out
Strict compliance.
Step 4. Apply s. 47 exemption
No s. 45 charge.
Step 5. Section 49(1) cost basis carry-over
For transferee.
Step 6. Section 47A vigilance
For subsequent withdrawal triggers.
Step 7. Companies Act / LLP Act / IBC compliance
Parallel.
Step 8. NCLT order documentation
For amalgamation / demerger / IBC.
Step 9. Shareholder-swap documentation
For s. 47(vii).
Step 10. ITR Schedule CG
Disclose with s. 47 reference.
Step 11. Documentation 7 years
Comprehensive transaction record.
Step 12. Section 47A breach monitoring
Subsequent-year vigilance.
Step 13. Stamp duty implications
State-specific.
Step 14. Tax-residency preservation
For Indian-company conditions.
Step 15. Annual FA update
Track carve-out additions / changes.
PRACTITIONER CHECKLIST
☐ Transfer event identified.
☐ Section 47 carve-out category mapped.
☐ All conditions strictly satisfied.
☐ Section 47 exemption claimed.
☐ Section 49(1) cost basis preserved.
☐ Section 47A subsequent-vigilance plan.
☐ Companies Act / LLP Act / IBC compliance.
☐ NCLT order obtained where applicable.
☐ Shareholder-swap documentation.
☐ ITR Schedule CG.
☐ Section 56(2)(x) buyer parallel checked.
☐ Section 50C interaction (for property carve-outs).
☐ Stamp duty + state-specific.
☐ Documentation 7 years.
☐ Section 273B defence prepared.
☐ Section 270A bona-fide claim defence.
☐ Vodafone / TLAA 2021 — for cross-border.
☐ Annual FA review.
☐ Client briefing on carve-out compliance.
CROSS-REFERENCES
▸ Section 2(14) — Capital asset.
▸ Section 2(47) — Transfer.
▸ Section 4 — Charge.
▸ Section 9(1)(i) — Indirect transfer.
▸ Section 9B — Reconstitution.
▸ Section 28 — PGBP (conversion interaction).
▸ Section 45 — CG charge.
▸ Section 47 — THIS SECTION.
▸ Section 47A — Withdrawal of exemption.
▸ Section 48 — Computation.
▸ Section 49 — Cost basis carry-over.
▸ Section 50C — Stamp duty (interaction).
▸ Section 50CA — Unquoted shares.
▸ Section 56(2)(x) — Gift framework parallel.
▸ Section 79 — Closely-held company ownership.
▸ Section 80-IAC — Eligible startup.
▸ Section 111A / 112 / 112A — Rates.
▸ Companies Act, 2013 — Sections 230-232.
▸ LLP Act, 2008.
▸ Insolvency and Bankruptcy Code, 2016.
▸ Hindu Succession Act, 1956.
▸ Indian Trusts Act, 1882.
▸ TLAA 2021 — Retro-tax repeal.
▸ TPA — Section 53A part-performance.
▸ SEBI ICDR Regulations.
▸ Form 26QB — TDS challan.
▸ DTAA Article 13 — Capital gains treaty.
▸ Income-tax Act, 2025 — Section 47 (successor), operative 1-4-2026.
▸ Income-tax Act, 2025 — Section 536 (saving).