Amended and updated notes on section 9B of Income Tax Act 1961 as amended by the Finance Act 2022. Read with the Income-tax Rules, 1962. Detail discussion on provisions and rules related to Income on receipt of capital asset or stock in trade by specified person from specified entity.
Chapter II (Sections 4 to 9B) of the Income Tax Act 1961 deals with the provisions related to basis of charge. Section 9B of IT Act 1961-2023 provides for Income on receipt of capital asset or stock in trade by specified person from specified entity.
Recently, we have discussed in detail section 9A (Certain activities not to constitute business connection in India) of IT Act 1961. Today, we learn the provisions of section 9B of Income-tax Act 1961. The amended provision of section 9B is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 9B of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962 as provided by Ministry of Law and Justice, Government of India.
Section-9B: Income on receipt of capital asset or stock in trade by specified person from specified entity
[Section 9B of Income Tax Act is inserted by the Finance Act w.e.f. 1-April-2021]
Section 9B(1) of Income Tax Act
Where a specified person receives during the previous year any capital asset or stock in trade or both from a specified entity in connection with the dissolution or reconstitution of such specified entity, then the specified entity shall be deemed to have transferred such capital asset or stock in trade or both, as the case may be, to the specified person in the year in which such capital asset or stock in trade or both are received by the specified person.
Section 9B(2) of Income Tax Act
Any profits and gains arising from such deemed transfer of capital asset or stock in trade or both, as the case may be, by the specified entity shall be –
(i) deemed to be the income of such specified entity of the previous year in which such capital asset or stock in trade or both were received by the specified person; and
(ii) chargeable to income-tax as income of such specified entity under the head “Profits and gains of business or profession” or under the head “Capital gains”, in accordance with the provisions of this Act.
Section 9B(3) of Income Tax Act
For the purposes of this section, fair market value of the capital asset or stock in trade or both on the date of its receipt by the specified person shall be deemed to be the full value of the consideration received or accruing as a result of such deemed transfer of the capital asset or stock in trade or both by the specified entity.
Section 9B(4) of Income Tax Act
If any difficulty arises in giving effect to the provisions of this section and sub-section (4) of section 45, the Board may, with the approval of the Central Government, issue guidelines for the purposes of removing the difficulty.
Section 9B(5) of Income Tax Act
Every guideline issued by the Board under sub-section (4) shall, as soon as may be after it is issued, be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the assessee.
Explanation: For the purposes of this section, –
(i) “reconstitution of the specified entity” means, where –
- (a) one or more of its partners or members, as the case may be, of such specified entity ceases to be partners or members; or
- (b) one or more new partners or members, as the case may be, are admitted in such specified entity in such circumstances that one or more of the persons who were partners or members, as the case may be, of the specified entity, before the change, continue as partner or partners or member or members after the change; or
- (c) all the partners or members, as the case may be, of such specified entity continue with a change in their respective share or in the shares of some of them;
(ii) “specified entity” means a firm or other association of persons or body of individuals (not being a company or a co-operative society);
(iii) “specified person” means a person, who is a partner of a firm or member of other association of persons or body of individuals (not being a company or a co-operative society) in any previous year