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Clause - 025 - Amendment of section 49.
Clause 25 of the Bill seeks to amend section 49 of the Income-tax Act relating to cost with reference to certain modes of acquisition.
It is proposed to insert a new sub-section (2AE) in the said section so as to provide that where the capital asset, being equity share of a company, became the property of the assessee in consideration of a transfer as referred to in clause (xb) of section 47, the cost of acquisition of the asset shall be deemed to be the cost of the preference share in relation to which such asset is acquired by the assessee.
These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-2019 and subsequent years.
Deemed cost of acquisition: equity received on conversion of preference shares treated as costing the original preference shares. A new deeming provision treats the cost of acquisition of equity shares received in consideration of a transfer under clause (xb) of section 47 as the cost of the preference shares in relation to which those equity shares are acquired, thereby carrying over the preference share cost for computing capital gains.
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