Section 54EA of Income Tax Act "Capital gain on transfer of long-term capital assets not to be charged in the case of investment in specified securities"
54EA. (1) Where the capital gain arises from the transfer
of a long-term capital asset before the 1st day of April,
2000 (the capital asset so transferred being hereafter in
this section referred to as the original asset) and the
assessee has, at any time within a period of six months
after the date of such transfer, invested the whole or any
part of the net consideration in any of the bonds,
debentures, shares of a public company or units of any
mutual fund referred to in clause (23D) of section 10,
specified by the Board in this behalf by notification in the
Official Gazette (such assets hereafter in this section
referred to as the specified securities), the capital gain
shall be dealt with in accordance with the following
provisions of this section, that is to say,-
(a) if the cost of the specified securities is not less than
the net consideration in respect of the original asset, the
whole of such capital gain shall not be charged under
section 45;
(b) if the cost of the specified securities is less than the
net consideration in respect of the original asset, so much
of the capital gain as bears to the whole of the capital
gain the same proportion as the cost of acquisition of the
specified securities bears to the net consideration shall
not be charged under section 45.
(2) Where the specified securities are transferred or
converted (otherwise than by transfer) into money at any
time within a period of three years from the date of their
acquisition, the amount of capital gain arising from the
transfer of the original asset not charged under section 45
on the basis of the cost of such specified securities as
provided in clause (a) or clause (b) of sub-section (1)
shall be deemed to be the income chargeable under the head
"Capital gains" relating to long-term capital assets of the
previous year in which the specified securities are
transferred or converted (otherwise than by transfer) into
money.
Explanation.-In a case where the original asset is
transferred and the assessee invests the whole or any part
of the net consideration in respect of the original asset in
any specified securities and such assessee takes any loan or
advance on the security of such specified securities, he
shall be deemed to have converted (otherwise than by
transfer) such specified securities into money on the date
on which such loan or advance is taken.
(3) Where the cost of the specified securities has been
taken into account for the purposes of clause (a) or clause
(b) of sub-section (1), a rebate with reference to such cost
shall not be allowed under section 88.
Explanation.-For the purposes of this section,-
(a) "cost", in relation to any specified securities, means
the amount invested in such specified securities out of the
net consideration received or accruing as a result of the
transfer of the original asset ;
(b) "net consideration", in relation to the transfer of a
capital asset, means the full value of the consideration
received or accruing as a result of the transfer of the
capital asset as reduced by the expenditure incurred wholly
and exclusively in connection with such transfer.