Central Government notifies Transactions of Acquisition of Equity Share subject to Securities Transaction Tax

Oct 04, 2018 | by Avantis RegTech Legal Research Team


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 Section 112A(1) of the Income-tax Act (in a case where the long-term capital asset is in the nature of an equity share in a company, been paid on acquisition and transfer of such capital asset) shall not apply, has notified the transactions of acquisition of equity share entered into:

(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 Act, 2004, other than the following, namely:

(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;

(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 subsection (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 and the rules made thereunder;

This notification shall come into force with effect from April 01, 2019 and shall accordingly apply in relation to the assessment year 2019-20 and subsequent assessment years.

[S.O. 5054(E)]

URL: http://www.egazette.nic.in/WriteReadData/2018/190360.pdf


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