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According to Section 97(8) if all the following conditions are satisfied then loss arising on account of purchase and sale of units(hereinafter referred to as original units) shall be ignored for computing income chargeable to tax

1) Any person buys or acquires any units within a period of 3 months before the record date.

2) Such person is allotted additional units without any payment (bonus units) on the basis of holding original units on the record date.

3) Such person sells or transfers all or any of the original units within a period of 9 months after such date while continuing to hold all or any of the bonus units.


For section 97(8) to be applicable all the aforesaid conditions should be satisfied.

Section is applicable to any person [Individual, firm company etc]

Loss incurred may be Capital loss or Business Loss i.e assessee may have incurred such loss under the head "Capital Gains" or "Profits and Loss from Business or Profession"

If all the 3 conditions are satisfied then loss incurred by the assessee shall be deemed to be the cost of bonus units held by him as on the date of transfer. Hence if the bonus units are held for more than 12 months then it shall be treated as Long Term Capital Asset and benefit of indexation will be available.

Published by

Alok Siddapur
Category Income Tax   Report

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