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Taxation Central Ministry of Finance Income Tax Act, 1961

Guidelines under section 9B and sub-section (4) of section 45 of the Income-tax act, 1961

02-Jul-2021 | 14/2021

Central Board of Direct Taxes has issued guidelines under section 9B and sub-section (4) of section 45 of the Income-tax Act, 1961.

Finance Act, 2021 inserted a new section 98 in the Income-tax Act 1961. This section mandates that whenever a specified person receives any capital asset or stock in trade or both from a specified entity, during the previous year, in connection with the dissolution or reconstitution of such specified entity, then it shall be deemed that the specified entity has transferred such capital asset or stock in trade or both, as the case may be, to the specified person (hereinafter referred to as "deemed transfer"). Any profits and gains arising from such deemed transfer is deemed to be the income of such specified entity of the previous year in which such capital asset or stock in trade or both were received by the specified person.

Similarly, the Finance Act 2021 substituted sub-section (4) of section 45 of the Act. This newly substituted sub-section (4) now provides that where a specified person receives any money or capital asset or both from a specified entity, during the previous year, in connection with the reconstitution of such specified entity, then any profits or gains arising from receipt of such receipt
by the specified person shall be chargeable to income-tax as income of the specified entity under the head "Capital gains".

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