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Excise Case Synopsis

48. Financial year of taxability

48. Financial year of taxability.—(1) The income from the transfer of an investment asset specified in column (2) of the Table given below shall be the income of the transferor in the financial year specified in column (3) of the said Table :

Table

Financial year of taxability

Serial number	Nature of transfer	Financial year
(1)	(2)	(3)
1. Transfer referred to in clause (d) or clause (e) of sub-section (1) of section 47		(a) In a case where the investment asset is converted by the transferee into, or is treated by it as, business trading asset, the financial year in which the investment asset is converted or treated as a business trading asset ;
		(b) In a case where the parent company, or its nominees, cease to hold the whole of the share capital of the subsidiary company, the financial year in which the parent company or its nominees so cease to hold the whole of the share capital of the subsidiary company.
2. Transfer referred to in clause (f) of sub-section (1) of section 47		The financial year in which any of the conditions referred to in clause (16) or clause (74), as the case may be, of section 314 is not complied with.
3. Transfer referred to in clause (j) or clause (n) of sub-section (1) of section 47		The financial year in which any of the conditions specified in the said clauses is not complied with.
4. Transfer—		The financial year in which the compensation, or consideration, as the case may be, or such compensation or consideration enhanced or further enhanced by any court, tribunal or other authority, is received.
	(i) by way of compulsory acquisition under any law for the time being in force ; or
	(ii) the consideration for which was determined or approved by the Central Government or the Reserve Bank of India
5. Transfer by way of conversion of an investment asset into, or its treatment as business trading asset		The financial year in which such asset, so converted or treated, is sold or otherwise transferred.
6. Transfer by way of—		The financial year in which the asset is transferred or distributed.
	(i) contribution of the asset, whether by way of capital or otherwise, to an unincorporated body, in which the transferor is, or becomes, a participant ; or
	(ii) the distribution of the asset on account of dissolution of an unincorporated body.
7. Transfer by way of distribution of money or asset to a participant in an unincorporated body on account of his retirement from the body		The financial year in which the money or the asset is distributed.
8. Transfer by way of part performance a contract, referred to in sub-clause (i) of clause (267) of section 314		The financial year in which the possession of the immovable property is allowed to be taken or retained.
9. Transfer by way of any transaction enabling the enjoyment of any immovable property referred to in sub-clause (j) of clause (267) of section 314		The financial year in which the enjoyment of the property is enabled.
10. Transfer by way of slump sale, to in sub-clause (l) of clause (267) of section 314		The financial year in which the transfer took place.
11. Transfer by any mode other than the modes referred to in serial numbers 1 to 10.		The financial year in which the transfer took place.

(2) Notwithstanding anything in sub-section (1),—

(a) any money or asset received under an insurance from an insurer on account of damage or destruction of an insured asset referred to in sub-clause (m) of clause (267) of section 314 shall be deemed to be the income of the recipient of the financial year in which the money or asset is received ;

(b) any money or asset received by the participant on account of his retirement from an unincorporated body referred to in sub-clause (o) of clause (267) of section 314 shall be deemed to be the income of the recipient of the financial year in which the money or asset is received ;

(c) any money or asset received by the shareholder on account of liquidation or dissolution of a company referred to in sub-clause (h) of clause (267) of section 314 as reduced by the amount assessed as dividend within the meaning of sub-clause (c) of clause (81) of section 314, shall be deemed to be the income of the recipient of the financial year in which the money or asset is received ;

(d) any consideration from transfer made by the depository or participant of any beneficial interest in a security shall be deemed to be the income of the beneficial owner of the financial year in which such transfer took place ;

(e) the amount referred to in clause (d) of sub-section (2) of section 46 shall be the income of the financial year in which such amount is withdrawn ;

(f) the amount referred to in clause (e) of sub-section (2) of section 46 shall be the income of the third financial year immediately following the financial year in which the transfer of the original asset is effected.

(g) the amount referred to in clause (f) of sub-section (2) of section 46 shall be the income of the financial year in which any condition referred to in sub-section (6) of section 55 is not complied with.

(3) In clause (d) of sub-section (2), "beneficial owner" shall have the same meaning as assigned to it in clause (a) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996).

Clause 48 provides that the financial year of taxability of the income from the transfer of an investment asset shall be the financial year in which the transfer takes place and income shall be taxable in the hands of the transferor. However, such income shall be deemed to be the income of the recipient in the following cases for the financial year specified below—

(a) in the case of any money or asset received under an insurance from an insurer on account of damage or destruction of an insured asset, the financial year in which the money or asset is received ;

(b) in the case of any money or asset received by the participant on account of his retirement from a unincorporated body, the financial year in which the money or asset is received ;

(c) in respect of any money or asset received by the shareholder on account of liquidation or dissolution of a company as reduced by the amount assessed as dividend within the meaning of item (c) of sub-clause (81) of clause 314, the financial year in which the money or asset is received.

The said clause also provides that any consideration from transfer made by the depository or participant of any beneficial interest in a security shall be deemed to be the income of the beneficial owner of the financial year in which such transfer took place.

The said clause further provides that the amount referred to in item (d) of sub-clause (2) of clause 46 shall be the income of the financial year in which such amount is withdrawn and the amount referred to in item (e) of sub-clause (2) of clause 46 shall be the income of the third financial year immediately following the financial year in which the transfer of the original asset is effected. The amount referred to in item (f) of sub-clause (2) of clause 46 shall be the income of the financial year in which any conditions referred to in sub-clause (6) of clause 55 is not complied with.

The said clause also defines the term "beneficial owner".

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