CBDT vide Notification No. 35/2023 dated 31.05.2023 in G.S.R. 403(E) amended Rule 11UAC of the Income-tax Rules, 1962 (‘Rules’) to expand the scope of non-applicability of provisions of section 56(2)(x) of the Income-tax Act, 1961 (‘Act’) in case of receipt of equity shares under strategic disinvestment from a public sector company.
The Board has substituted sub-rule (4) of Rule 11UAC with a new sub-rule (4) to include ‘public sector company’ receipt from whom equity shares under strategic disinvestment shall remain outside the scope of provisions of section 56(2)(x). Prior to the amendment, only the receipt of equity shares of a public sector company from the Central Government or any State Government was covered. Post changes, receipt of equity shares of a public sector company from a public sector company also qualifies for exemption from applicability of section 56(2)(x).
The revised Rule 11UAC(4) also applies to circumstances where the acquisition of equity shares of a ‘Company’ is involved. Previously, the Rule only applied to receiving equity shares of a public sector company.
Rule 11UAC(4) before the amendment reads as follows-
"(4) any movable property, being equity shares, of the public sector company, received by a person from the Central Government or any State Government under strategic disinvestment.
Explanation- For the purpose of this clause, "strategic disinvestment" shall have the same meaning as assigned to it in clause (iii) of Explanation to clause (d) of sub-section (1) of section 72A."
which is substituted with the following new sub-rule (4)-
(4) any movable property, being equity shares, of a public sector company or a company, received by a person from a public sector company or the Central Government or any State Government under strategic disinvestment.
Explanation-For the purposes of this clause, 'strategic disinvestment' shall have the same meaning as assigned to it in clause (iii) of Explanation to clause (d) of sub-section (1) of section 72A.
Read the full text of CBDT Notification 35/2023 dated 31.05.2023 on Amendment to Rule 11UAC to exclude Strategic Disinvestment from section 56(2)(x)
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 31st May, 2023
INCOME-TAX
G.S.R. 403(E).—In exercise of the powers conferred by clause (XI) of the proviso to clause (x) of subsection (2) of section 56 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 (Eighth Amendment) Rules, 2023.
(2) They shall come into force from the 1st day of April, 2023 and shall be applicable for the assessment year 2023-2024 and subsequent assessment years.
2. In the Income-tax Rules, 1962, in rule 11UAC, for clause (4), the following clause shall be substituted, namely: —
“(4) any movable property, being equity shares, of a public sector company or a company, received by a person from a public sector company or the Central Government or any State Government under strategic disinvestment.
Explanation - For the purposes of this clause, 'strategic disinvestment' shall have the same meaning as assigned to it in clause (iii) of Explanation to clause (d) of sub-section (1) of section 72A.”.
[Notification No. 35 /2023/F. No. 370142/ 14 /2023-TPL]
JIVITESH ANAND, Under Secy. (Tax Policy and Legislation)
Note : The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section-3, Sub-section (ii) vide number S.O. 969(E), dated the 26th March, 1962 and last amended by the Income-tax (Seventh Amendment) Rules, 2023, vide notification number G.S.R. 399 (E), dated 30th May, 2023
Explanatory Memorandum : It is certified that no person is being adversely affected by giving retrospective effect to this notification.
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