Income-tax (15th Amendment) Rules, 2020

Last updated: 02 July 2020

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The Central Board of Direct Taxes has issued the Income-tax (15th Amendment) Rules, 2020, which came into effect on 1st April 2020. These rules introduce an exception to Section 50CA of the Income-tax Act, 1961. Specifically, the provisions of Section 50CA will not apply to the transfer of unquoted shares of a company, its subsidiary, or a subsidiary of its subsidiary under certain conditions. These conditions involve the suspension of the company's Board of Directors by the Tribunal and the transfer of shares pursuant to a resolution plan approved by the Tribunal.

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

New Delhi, the 30th June, 2020

G.S.R. 423(E).—In exercise of the powers conferred by section 50CA read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules,1962, namely:─

1. Short title and commencement.‒ (1) These rules may be called the Income-tax (15th Amendment) Rules, 2020.

(2) They shall come into force from the 1st day of April, 2020 and shall be applicable for assessment year 2020-21and subsequent assessment years.

2. In the Income-tax Rules, 1962, after the rule 11UAC, the following rule shall be inserted, namely:—

Prescribed class of persons for the purpose of section 50CA.

11UAD. The provisions of section 50CA of the Act shall not apply to transfer of any movable property, being unquoted shares, of a company and its subsidiary and the subsidiary of such subsidiary by an assessee, where,—

(i) the Tribunal, on an application moved by the Central Government under section 241 of the Companies Act, 2013, has suspended the Board of Directors of such company and has appointed new directors nominated by the Central Government under section 242 of the said Act; and

(ii) share of such company and its subsidiary and the subsidiary of such subsidiary has been transferred pursuant to a resolution plan approved by the Tribunal under section 242 of the Companies Act, 2013 after affording a reasonable opportunity of being heard to the jurisdictional Principal Commissioner or Commissioner.

Explanation.-For the purposes of this sub-rule,-

(a) a company shall be a subsidiary of another company, if such other company holds more than half in nominal value of the equity share capital of the company;

(b) "Tribunal" shall have the same meaning assigned to it in clause (90) of section 2 of the Companies Act, 2013.

[Notification No.42 /2020/F. No.370149/143/2019-TPL]

ANKUR GOYAL, Under Secy. (Tax Policy and Legislation)

Explanatory Memorandum : It is hereby certified that no person is being adversely affected by giving retrospective effect to these rules.

Note : The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section-3, Subsection (ii) vide number S.O. 969(E), dated the 26th March, 1962 and last amended vide notification number G.S.R 421(E) dated 29th June, 2020.

FAQ :

These are new rules made by the Central Board of Direct Taxes to further amend the Income-tax Rules, 1962, and they came into force on 1st April 2020.

The rules introduce an exception to Section 50CA of the Income-tax Act, 1961, meaning its provisions will not apply to certain transfers of unquoted shares.

The exception applies to the transfer of movable property, specifically unquoted shares of a company and its subsidiary (and subsidiary of such subsidiary).

Section 50CA does not apply if the Tribunal has suspended the company's Board of Directors and appointed new ones nominated by the Central Government, and if the shares are transferred as part of a resolution plan approved by the Tribunal.

These rules are applicable from 1st April 2020 for the assessment year 2020-21 and subsequent assessment years.