Notifies the transactions of acquisition of equity share for the purpose of special rate of tax

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Notifies the transactions of acquisition of equity share for the purpose of special rate of tax u/s 112A – 60/2018 – Income Tax

MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 1st October, 2018
INCOME-TAX

S.O. 5054(E)—In exercise of the powers conferred by sub-section (4) of section 112A of the Income-tax Act, 1961 (43 of 1961) hereinafter  referred  to as the Income-tax  Act, the Central Government,  with a view to specify the nature of acquisition in respect of which the provision of sub-clause (a) of clause (iii) of sub-section (1) of section 112A of the Income-tax Act shall not apply, hereby notifies the transactions of acquisition of equity share entered into¾

(I) before the 1st day of October, 2004; or
(II) on or after the 1st day of October, 2004 which are not chargeable to securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004 (23 of 2004), other than the following, namely:¾

(a)  where acquisition of existing listed equity share in a company whose equity shares are not frequently traded in a recognised stock exchange of India is made through a preferential issue:

Provided that nothing contained in this clause shall apply to acquisition of listed equity shares in a company;¾

(i)  which has been approved by the Supreme Court, High Court, National Company Law Tribunal, Securities and Exchange Board of India or Reserve Bank of India in this behalf;

(ii) by any non-resident in accordance with foreign direct investment guidelines issued by the Government of India;

(iii) by an investment fund referred  to in clause (a) of Explanation 1 to section 115UB of the Income-tax Act or a venture capital  fund referred to in clause (23FB) of section 10 of the Income-tax Act or a Qualified Institutional Buyer; and

(iv) through preferential issue to which  the  provisions of chapter VII of  the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 does not apply.

(b) where transaction for acquisition of existing listed equity share in a company is not entered through a recognised stock exchange in India:

Provided that nothing contained  in this clause shall apply to the acquisition of listed equity shares in a company which has been made in accordance with the provisions of the Securities Contracts  (Regulation) Act, 1956 (42 of 1956), and is—

(i)  through an issue of share by a company other than the issue referred to in clause (a);

(ii)  by scheduled banks, reconstruction or securitisation companies or public financial institutions during their ordinary course of business;

(iii) approved by  the Supreme  Court, High  Courts, National Company Law Tribunal,  Securities and Exchange Board of India or Reserve Bank of India in this behalf;

(iv) under employee stock option scheme or employee stock purchase scheme framed under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,1999;

(v) by any non-resident  in accordance  with foreign  direct  investment  guidelines  of the Government  of India;

(vi) in accordance with Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulation, 2011;

(vii) from the Government;

(viii) by an investment  fund referred to in clause (a) to Explanation  1 to section 115UB of the Income-tax Act or a venture  capital  fund referred  to in clause (23FB)  of section 10 of the income-tax  Act or a Qualified Institutional Buyer; and

(ix) by mode of transfer referred to in section 47 or  section 50B or sub-section  (3) of section 45 or sub- section (4) of section 45 of the Income-tax Act, if the previous owner or the transferor, as the case may be, of such shares has not acquired them by any mode referred to in clause (a) or clause (b) or clause (c) [other than the transactions referred to in the proviso to clause (a) or clause (b)].

(c) acquisition of equity share of a company during the period beginning  from the date on which the company is delisted from a recognised  stock exchange and ending on the date immediately preceding the date on which the company is again listed on a recognised stock exchange in accordance with the Securities Contracts (Regulation) Act, 1956 read with Securities and Exchange Board of India Act, 1992 (15 of 1992) and the rules made thereunder;

Explanation.¾ For the purposes of this notification,¾

(a)  “frequently traded shares” means shares of a company, in which the traded turnover on a recognised stock  exchange  during  the  twelve  calendar  months  preceding  the  calendar  month  in  which  the acquisition and transfer is made, is at least ten per cent. of the total number of shares of such class of the company:

Provided  that where the share capital  of a particular  class of shares of the company is not identical throughout such period, the weighted average number of total shares of such class of the company shall represent the total number of shares;

(b)  ‘listed’  means listed in a recognised stock exchange in India in accordance with the  Securities Contracts (Regulation) Act, 1956 and the rules made thereunder;

(c) “preferential issue” and “Qualified Institutional Buyer” shall have the meanings respectively assigned to them in sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009;

(d) “public  financial institution” and “scheduled bank” shall have the meanings respectively  assigned  to them in Explanation to clause (viia) of sub-section (1) of section 36 of Income-tax Act;

(e)  “recognised stock exchange” shall have the same meaning assigned to it in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956; and

(f) “reconstruction company” and “securitisation company” shall have the meanings respectively assigned to them in sub-section (1) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002).

2. This notification shall come into force with effect from the 1st day of April, 2019 and shall accordingly apply in relation to the assessment year 2019-20 and subsequent assessment years.

[Notification No. 60/2018/F. No.370142/9/2017-TPL]
PRAVIN RAWAL, Director (TPL-II)

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