Capital gains taxation is a significant part of the Income Tax Act, 1961, falling under Chapter IV-E. Section 45(1) of the Act is the charging section, which states that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income tax under the head “Capital Gains” and shall be deemed to be the income of the previous year in which the transfer took place. The word “transfer” becomes essential for determining the taxability of a capital gain.
However, Section 47 of the Act provides a list of transactions that are not regarded as transfers and hence are not subject to capital gains tax. These transactions are treated as exceptions to the general rule laid out under Section 45. Among them, clause (iii) of Section 47 holds special significance. Before its recent amendment, it provided that any transfer of a capital asset under a gift or will or an irrevocable trust would not be regarded as a transfer for capital gains taxation. This meant that such transfers were excluded from the scope of capital gains tax.
With the introduction of the Finance (No. 2) Act, 2024, a major shift has occurred. This amendment has effectively curtailed the benefit of exemption under Section 47(iii) solely to individuals and Hindu Undivided Families (HUFs). As a result, companies and other entities making a gift of capital assets can no longer claim exemption from capital gains tax under this clause. This legislative shift has brought renewed focus to the concept of corporate gifting and its tax implications.
Historical Interpretation of Gifts Under Section 47(iii)
The interpretation of the term “gift” under Section 47(iii) has not always been straightforward. The absence of a statutory definition under the Income Tax Act itself meant that reliance had to be placed on general legal principles, including the Transfer of Property Act, 1882, and judicial precedents. While individuals making gifts of movable or immovable property, including capital assets, was a well-accepted concept in law and recognized as a non-taxable transaction under Section 47(iii), complexities arose when companies tried to avail of the same exemption.
One of the core controversies revolved around whether a company, being an artificial person, can have the donative intent required to make a valid gift. Under general legal principles, a gift is defined as the voluntary transfer of property by one person to another without consideration. This involves an element of “voluntariness” and “donative intent,” which are inherently subjective and associated with natural persons. The question arose whether such attributes could be ascribed to a corporate entity.
Furthermore, the role of corporate gifts in tax planning came under scrutiny. Several transactions involving the transfer of shares or assets without consideration, especially to group companies, subsidiaries, or associated enterprises, were undertaken under the guise of gifts to avoid taxation. The revenue authorities viewed such practices with suspicion, often treating them as tax avoidance measures rather than genuine gifts. This led to the need for clarity, which the amendment to Section 47(iii) has attempted to provide.
Orient Green Power Case and the AAR’s Interpretation
The case of Orient Green Power Pvt. Ltd., In re, decided by the Authority for Advance Ruling (AAR), addressed the issue of whether a transfer of shares by a company to its associated enterprise without consideration could be treated as a gift under Section 47(iii). In this case, the assessee-company sought an advance ruling on whether such a transfer would be exempt under Section 47(iii).
The AAR held that the transaction would not fall under the scope of a gift as contemplated in Section 47(iii). The AAR reasoned that the provision envisaged gifts made by natural persons who possess the mental capacity to make a voluntary decision. It was observed that a company, being an artificial person, cannot exercise the mental act of making a gift, particularly in the absence of natural love and affection, which is often considered the basis for a gift. Thus, the AAR considered inter-corporate gifts as conceptually inconsistent with the provisions of Section 47(iii).
Although the AAR remanded the case to the assessing authority for verification of facts and did not provide a final ruling, it laid the foundation for a stricter interpretation of what constitutes a gift for capital gains taxation. The underlying concern of the AAR was the potential misuse of Section 47(iii) by companies seeking to avoid capital gains tax through strategic intra-group asset transfers disguised as gifts.
The ITAT’s View in the Redington India Case
Contrary to the AAR’s view, the Income Tax Appellate Tribunal (ITAT) in the case of Redington (India) Ltd. v. Joint Commissioner of Income Tax took a different stance. In this case, the assessee-company transferred shares to its wholly owned subsidiary without any consideration and claimed exemption under Section 47(iii).
The ITAT examined the issue from a legal standpoint, referring extensively to the Transfer of Property Act, 1882. The tribunal noted that under the Act, a “living person” includes a company or association,, or body of individuals. Therefore, a company, although an artificial person, qualifies as a living person and is capable of making a transfer of property, including by way of gift.
Furthermore, the ITAT pointed out that the Transfer of Property Act does not require the existence of natural love and affection as a condition for a valid gift. The only requirements are that the transfer must be voluntary, made without consideration, and accepted by the donee. Since the transfer of shares by the company in this case fulfilled these conditions, the ITAT concluded that the transaction qualified as a gift and was exempt under Section 47(iii).
This ruling offered some relief to companies engaging in intra-group transfers and sought to legitimize such transactions under the gift exemption clause. However, it also opened the door to potential tax avoidance strategies, prompting further legal and legislative intervention.
High Court Decision in Redington India and the Reversal
The High Court of Madras, in Principal Commissioner of Income Tax v. Redington (India) Ltd., reversed the decision of the ITAT and held that the transfer of shares by the assessee-company to its wholly owned subsidiary without consideration did not qualify as a gift under Section 47(iii). The court emphasized that for a transaction to qualify as a gift, there must be clear evidence of donative intent and the voluntary nature of the transfer.
The court observed that simply transferring shares without consideration was not sufficient to establish that the transaction was a gift. The mental element, being the intention to make a gift, was missing. In corporate settings, actions are generally governed by resolutions, board approvals, and corporate objectives. The court found that there was no specific intention or declaration by the assessee company that it intended to gift the shares. Instead, the court viewed the transaction as part of a larger restructuring exercise aimed at achieving certain commercial benefits.
This decision underlined the importance of intent and documentation in establishing a gift and cast serious doubt on the ability of companies to claim exemption under Section 47(iii). It signaled a shift in judicial thinking, aligning more with the revenue’s suspicion of corporate gifting practices as potential tax avoidance devices.
The Legislative Amendment Through Finance (No. 2) Act, 2024
In response to the growing divergence in judicial interpretations and potential misuse of the exemption, the Finance (No. 2) Act, 2024, introduced an amendment to Section 47(iii). The amended provision now restricts the exemption to gifts made only by individuals or Hindu Undivided Families. The explanatory memorandum to the Finance Bill suggested that the intention was to plug a loophole that was being exploited by corporate entities to evade tax under the guise of gifts.
By narrowing the scope of Section 47(iii), the legislature has effectively removed companies, firms, and other artificial entities from the ambit of the exemption. The amendment puts an end to the debate on whether a company can make a gift for capital gains exemption under this provision. It aligns the statute with the interpretation advanced by the High Court in the Redington case, while nullifying the more lenient view expressed by the ITAT.
Impact of the Amendment on Corporate Transactions
The amendment to Section 47(iii) has created significant implications for the corporate world, particularly concerning internal group restructurings and asset reallocations between group entities. Before the amendment, corporate groups would occasionally rely on the exemption provided under Section 47(iii) to transfer assets such as shares, intellectual property, or other capital assets without consideration, treating the transaction as a gift and therefore not attracting capital gains tax. These transactions were especially prevalent in the context of family-run businesses or joint ventures where ownership structures and asset distributions were frequently realigned for operational convenience or succession planning.
With the amendment now explicitly excluding companies from the purview of Section 47(iii), such transfers will be considered as taxable transfers. The fact that no consideration is received will not alter the taxability, as the income tax provisions recognize deemed consideration for determining fair market value in such cases. This will directly impact the feasibility of tax-neutral asset transfers among group companies unless they are structured in a way that falls under other specific exemptions or restructuring provisions of the Act, such as amalgamations, demergers, or reconstitution of firms under Section 47(iv), (v), (vi), and other relevant clauses.
For companies looking to transfer assets without consideration purely for organizational convenience, the tax cost will now be a significant factor to evaluate. Tax planning that previously revolved around characterizing such transfers as gifts will need to be revisited. This may also result in greater reliance on judicial precedents and alternative structuring mechanisms, making tax compliance and planning more complex for corporate groups.
Effect on Subsidiary and Group Company Transfers
One of the major areas impacted by the amendment is the transfer of assets between a parent company and its subsidiaries. Often, companies transfer shares or other capital assets to wholly owned subsidiaries or sister concerns without monetary consideration as part of corporate restructuring. Until now, these were sometimes claimed to be gifts, especially when the transferor and transferee were under common control and the transaction was not aimed at gaining any commercial benefit.
With the amendment now in force, companies will be taxed on such transactions under the head of capital gains. The computation of capital gains in such cases is not straightforward, as the absence of consideration poses challenges in determining the full value of consideration received or accruing to the assessee. Section 50D of the Act becomes relevant in such scenarios, which provides that if the consideration received or accruing is not ascertainable, the fair market value of the asset on the date of transfer shall be deemed to be the full value of consideration for computing capital gains.
Thus, a company transferring an asset to a group entity for nil consideration will now be deemed to have received consideration equivalent to the market value of that asset, and capital gains will be calculated accordingly. This will create significant tax liability, especially where high-value shares or immovable properties are involved. The amendment, therefore, discourages casual or informal intra-group transfers and mandates that companies give due consideration to the tax implications before undertaking such restructuring.
Legal Personality and Intention to Gift
A central issue that emerged from various judicial decisions and was a key driver behind the amendment is the question of whether a company can truly make a gift in the legal sense. A gift under the law is defined as a voluntary transfer of property by one person to another without any consideration and with donative intent. The presence of donative intent is critical. While individuals can exhibit natural love and affection, companies are artificial persons created by law and governed by objectives enshrined in their memorandum of association.
A company does not have emotions or feelings and is restricted in its actions by its charter documents and the decisions of its board. Therefore, the argument that a company can form a donative intention similar to an individual has always been legally and philosophically debated. Courts have held divergent views on this, as seen in the contrast between the ITAT’s view and the High Court’s ruling in Redington (India) Ltd.
The legislative amendment now lays this debate to rest by affirmatively stating that gifts made by entities other than individuals and HUFs will not enjoy the exemption under Section 47(iii). This puts the focus squarely back on the legal personality of the transferor and recognizes that gifting as a concept, at least for this section, is inherently human.
Effect on Family-Owned Businesses and Succession Planning
In India, a significant number of businesses are family-owned and operate through closely held companies. In many instances, shares in operating companies or investment vehicles are transferred within the family group through holding entities or trusts. These transactions, especially those made with the intention of succession planning, were sometimes structured as gifts from one corporate entity to another. Such arrangements helped avoid capital gains tax while ensuring continuity of control within the family.
The amendment now restricts the use of corporate entities as conduits for tax-free succession planning via gifts. Family businesses will now have to evaluate alternate approaches for transferring ownership, such as through the use of family settlements, direct transfers by individuals, or the creation of private family trusts. However, even these options must be scrutinized in light of other tax provisions, including clubbing provisions and potential applicability of Section 56(2)(x), which deals with taxation of receipts without or for inadequate consideration.
Therefore, succession planning will now demand a more nuanced and comprehensive approach, with attention not only to business continuity and control but also to tax implications. Professional advice and careful structuring will become indispensable for families seeking to pass on business assets or control to the next generation without triggering prohibitive tax liabilities.
Interaction with Section 56(2)(x) and Anti-Avoidance Provisions
Another significant aspect to consider in the context of gifting by companies is the interaction between the amended Section 47(iii) and Section 56(2)(x) of the Income Tax Act. Section 56(2)(x) provides that where any person receives property, including shares or other specified capital assets, for inadequate consideration or without consideration, the fair market value of such property shall be taxable in the hands of the recipient as income from other sources. The provision has broad application and is aimed at curbing tax avoidance through undervalued or sham transactions.
Before the amendment to Section 47(iii), corporate gifts were generally exempt in the hands of the transferor and, depending on the facts, could also avoid tax in the hands of the recipient by arguing that the transaction was a genuine gift or reorganization. However, with the new restriction in place, companies making such transfers will face capital gains tax under Section 45, while recipients may simultaneously face taxation under Section 56(2)(x) if the receipt is not exempt under any specific clause.
This dual taxation possibility—once in the hands of the transferor and again in the hands of the recipient—adds a significant tax burden to transactions involving corporate gifts. Furthermore, the general anti-avoidance rule (GAAR) provisions under Chapter X-A of the Income Tax Act could be invoked if the transaction lacks commercial substance and is primarily undertaken to obtain a tax benefit. GAAR empowers the tax authorities to disregard, recharacterize, or modify a transaction if it is found to be an impermissible avoidance arrangement.
The combination of the amendment to Section 47(iii), the provisions of Section 56(2)(x), and the GAAR framework significantly strengthens the hands of the tax authorities in challenging and taxing inter-company asset transfers, especially those that do not have a commercial rationale or involve related parties.
Potential Challenges and Litigation
Although the amendment provides statutory clarity, it is likely to result in increased litigation in the short term. Transactions undertaken before the effective date of the amendment may still be assessed under the old provisions, leading to disputes over the applicable law and the characterization of the transaction. Companies that had relied on the earlier interpretation of Section 47(iii) may challenge assessments seeking to tax such transactions, citing judicial precedents and the principle of prospective application of tax laws.
Further, there may be cases where companies argue that the transaction was not a transfer at all or that it falls under some other exempt category of Section 47. The classification of a transaction as a gift, reorganization, business transfer, or even a settlement will become subject to detailed scrutiny. The documentation, board resolutions, corporate objectives, and contemporaneous correspondence will play a crucial role in determining the tax treatment.
Valuation Challenges in the Absence of Consideration
One of the most significant practical implications of the amendment to Section 47(iii) relates to the issue of valuation. In transactions involving gifts, particularly where no monetary consideration is involved, the determination of capital gains becomes dependent on the concept of deemed consideration. As per Section 50D of the Income Tax Act, where the consideration received or accruing as a result of the transfer of a capital asset is not ascertainable or cannot be determined, the fair market value of the said asset on the date of transfer shall be deemed to be the full value of the consideration received or accruing as a result of such transfer.
In the case of corporate gifts that no longer qualify for exemption under Section 47(iii), the value of the asset transferred without consideration must now be assessed at its fair market value. This introduces a number of technical and interpretational issues. Determining the fair market value of capital assets, such as unquoted shares, intellectual property, or business goodwill, can be a complex process involving subjective assumptions, estimations, and methodologies. The income tax rules prescribe different methods of valuation for different types of assets, but disputes often arise regarding which method is appropriate and how it should be applied in a particular context.
For instance, in the case of unlisted shares, the fair market value is generally calculated using a combination of the net asset value method and the discounted cash flow method. Each of these involves different assumptions about future cash flows, discount rates, and business performance. Discrepancies between the valuation adopted by the taxpayer and that determined by the tax authority are a common source of litigation. In the absence of actual consideration, the scope for such differences is even wider, increasing the risk of scrutiny and dispute.
Further, questions also arise regarding the timing of valuation. Since capital gains are computed based on the fair market value on the date of transfer, it becomes important to ensure that the valuation report corresponds accurately with that date. Delays in preparing or obtaining valuation reports can complicate compliance and expose the taxpayer to penalties for inaccurate or incomplete disclosures. Hence, the amendment not only increases the tax burden but also adds administrative and procedural complexity for companies undertaking asset transfers.
Implications for Trust Structures and Philanthropic Transfers
Another domain affected by the amendment to Section 47(iii) is that of philanthropic giving and the creation of trusts. In the past, companies engaging in charitable or philanthropic activities would sometimes transfer capital assets, including land or shares, to charitable trusts or nonprofit organizations as part of their corporate social responsibility initiatives or legacy planning. These transfers were often structured as gifts and claimed as exempt under Section 47(iii), especially where the transfer was made without consideration and supported by appropriate documentation and approvals.
The amendment now restricts the benefit of the exemption to individuals and Hindu Undivided Families, thereby excluding corporate entities from this relief. Consequently, if a company now transfers a capital asset to a charitable trust without receiving consideration, such a transaction will be regarded as a taxable transfer, and capital gains tax will be applicable on the deemed consideration. This will reduce the attractiveness of such philanthropic transactions and may lead companies to explore alternate mechanisms for supporting charitable institutions, such as monetary donations, which are eligible for deductions under Section 80G, rather than transferring assets directly.
In addition, companies that were planning to settle assets into a trust structure for the benefit of employees, family members, or other stakeholders must now re-examine their strategies. The creation of irrevocable trusts involving the transfer of capital assets may not qualify for exemption from capital gains tax unless the transferor is an individual or HUF. While certain specific exemptions are still available under other clauses of Section 47, such as in the case of business reorganization, these are often subject to detailed conditions and limitations.
Therefore, the amendment not only affects commercial restructuring but also reshapes the landscape for corporate philanthropy and the use of trusts for succession and wealth planning. Legal and tax advisors must now take into account this restriction when structuring trust deeds, settlement instruments, and philanthropic initiatives involving corporate entities.
Comparative Perspective from Other Jurisdictions
It is also useful to understand how other jurisdictions approach the concept of gifts made by corporate entities and their treatment under capital gains taxation. In several common law countries, such as the United Kingdom, Canada, and Australia, corporate gifts are generally treated as disposals for capital gains tax purposes, and the market value of the asset at the time of disposal is considered the deemed consideration. These jurisdictions do not generally recognize corporate gifts as exempt from taxation merely because they are made without consideration. Instead, they rely on detailed anti-avoidance provisions and fair market value rules to ensure that such transfers do not escape taxation.
For instance, in the UK, under the Capital Gains Tax Act 1992, any disposal of an asset, including by way of gift, is treated as a taxable event, and the asset is deemed to be disposed of at its market value. Similarly, in Canada, the Income Tax Act provides that when a taxpayer gives away property, they are deemed to have received proceeds equal to the fair market value of the property. This ensures that the unrealized gains embedded in the asset are subject to tax at the time of transfer.
India’s earlier approach under Section 47(iii) was relatively generous in allowing an exemption for gifts, including those made by corporate entities. However, this generous interpretation opened the door to tax planning and potential abuse. The recent amendment aligns India’s tax regime more closely with global practices by limiting the exemption to human actors and taxing non-arm’s length transactions on the basis of fair market value.
By narrowing the scope of exempt transfers and introducing more stringent requirements, the Indian tax law now reflects a more structured and internationally consistent approach. This harmonization with international standards also strengthens the Indian tax system’s integrity and reduces opportunities for base erosion and profit shifting through intra-group transfers masked as gifts.
Corporate Governance and Internal Approvals
With the increased tax scrutiny on corporate asset transfers, it becomes essential for companies to strengthen their corporate governance mechanisms and internal control systems. Any decision to transfer a capital asset without consideration must now be carefully documented, justified, and approved through formal board resolutions and minutes. The documentation must demonstrate a commercial rationale for the transfer and disclose the tax implications and how they are proposed to be addressed.
Given that such transactions will now be treated as taxable disposals, companies must ensure compliance with all procedural requirements, including timely reporting in financial statements, disclosures under the Companies Act, 2013, and filings with the Registrar of Companies where applicable. The decision to treat the transaction as a gift must be supported by legal opinions and valuation reports to withstand scrutiny in case of a tax audit or inquiry.
In addition, the board of directors must be informed of the tax cost and liability that may arise from such transfers and should evaluate whether alternate modes of transfer, such as sale at market value, restructuring under a sanctioned scheme, or transfer through amalgamation, would be more efficient from a tax and compliance perspective. The amendment has shifted the legal and financial responsibility of such transactions onto the decision-making bodies of the company, requiring a more diligent and cautious approach.
Failure to appropriately document and report these transactions may also attract penalties and allegations of misstatement or concealment of income under the Income Tax Act. Further, such transactions could trigger adverse remarks during statutory audits, internal audits, or reviews conducted by regulatory authorities. Hence, corporate governance and transparency in asset transfers have become even more crucial in the post-amendment regime.
Sector-Specific Impacts and Industry Reactions
The impact of the amendment varies across sectors and industries. In the infrastructure and energy sectors, for example, large corporate groups often create special-purpose vehicles (SPVs) and transfer land, licenses, or other project assets among them based on operational needs. Similarly, in the financial services industry, group-level reorganizations involving the transfer of shares or loan portfolios to subsidiaries are common. Many of these transactions were structured as non-cash transfers or gifts to avoid unnecessary cash flow disruptions.
With the new restriction on Section 47(iii), companies in such sectors will now need to realign their transaction models and restructure their internal flows. Industries that operate on thin margins or capital-intensive models may find it difficult to accommodate the additional tax burden. Similarly, startup founders and investors who often use holding companies to manage equity and capital flows across different entities in the ecosystem will need to reassess their structuring and exit strategies.
The real estate sector, too, will face challenges. Transfer of land or property by holding companies to joint ventures or newly formed subsidiaries was a common practice, especially for unlocking value or for regulatory approvals. These would now be regarded as taxable transfers, and the resulting capital gains would add to project costs, potentially affecting affordability and pricing in the real estate market.
Industry associations, tax forums, and professional bodies have raised concerns about the broad nature of the amendment and its potential to hamper genuine business reorganizations. Representations have been made to allow conditional exemptions for specific categories of transactions or to provide a grandfathering clause for arrangements already initiated before the amendment. While the government has so far maintained a strict stance, future clarifications or circulars may provide some relief or guidance to ease the transition for affected sectors.
Implications for Tax Planning and Business Structuring
The amendment to Section 47(iii) significantly alters how companies may approach tax planning, especially regarding the transfer of capital assets without consideration. Before the amendment, companies could engage in intragroup transfers of assets through gifting mechanisms without triggering capital gains tax, as such transactions were covered under the exemption provided in Section 47(iii). This enabled smooth corporate restructuring and the efficient transfer of assets within a group. However, post-amendment, companies are required to reassess their tax planning strategies. With gifts now potentially attracting capital gains tax due to their exclusion from the exemption, companies must evaluate whether alternative methods such as slump sales, mergers, or demergers would offer more tax-efficient outcomes. These transactions, although more complex and requiring compliance with regulatory processes, might be better suited for asset transfers in the current tax regime. Further, companies may now need to obtain professional tax opinions before engaging in any transactions that resemble gifts, to ensure that the tax implications are fully understood and properly managed. This adds to compliance costs and increases the need for documentation and justification of asset transfers.
Challenges in Valuation and Disputes
A significant practical challenge arising from the amendment is the valuation of assets transferred as gifts. Since such transfers are now considered for capital gains tax purposes, determining the fair market value becomes essential. Disputes may arise between taxpayers and tax authorities regarding the correct valuation of gifted assets, particularly when the assets are intangible or have fluctuating market values. Companies may also encounter issues with timing mismatches in accounting and tax recognition. For instance, while an asset may be derecognized in the books as a gift with no income recognition, the tax authorities may insist on applying deemed consideration based on fair market value, thus creating a difference between book profits and taxable income. This divergence can impact MAT (Minimum Alternate Tax) calculations and affect financial planning. Moreover, the burden of proof for demonstrating the bona fide nature of such gifts and establishing valuation methods will rest heavily on companies. Any ambiguity or inconsistency in documentation could lead to prolonged litigation and additional tax liability.
Impact on Group Reorganizations and Philanthropic Transfers
Group reorganizations often involve the transfer of assets among group entities to realign business strategies or streamline operations. Earlier, such transfers could be structured as gifts to avoid immediate tax implications. However, with the removal of the exemption for companies, the flexibility in executing such reorganizations has been curtailed. This may deter companies from executing certain internal transfers or delay group restructurings due to tax inefficiencies. Philanthropic gestures, such as the gifting of land, equipment, or intellectual property by companies to charitable institutions, may also face hurdles. Although such transfers are made for social good, the removal of tax exemption could disincentivize such acts. Companies may be reluctant to incur capital gains tax liabilities on assets that are not providing any economic return. As a result, this could have a chilling effect on corporate social responsibility initiatives that involve the gifting of capital assets. While donations in cash or kind may still qualify for deductions under other provisions of the IT Act, the capital gains implications for asset transfers could outweigh the benefits in many cases.
Legal Interpretations and Possible Litigation
Given the amendment’s broad implications and the removal of a long-standing exemption, legal challenges are likely. Companies may argue that the retrospective application of tax to gifts contradicts the principle of taxing only transactions that result in actual gains. Moreover, there may be contention over whether the transfer of assets without consideration truly constitutes a transfer liable to capital gains tax under the definition in Section 2(47) of the IT Act. Some legal scholars may interpret the amendment as conflicting with judicial precedents that have emphasized the requirement of monetary consideration for computing capital gains. In such cases, companies may challenge the applicability of the amended Section 47(iii) in courts, especially where the transfer was made before the amendment’s effective date but assessed thereafter. These litigations could lead to further clarification by the judiciary on the interpretation of “gift” and the requirement of consideration in capital gains taxation. Additionally, the question of whether the amendment is constitutionally valid may also be raised, particularly if it is applied in a manner that affects transactions retrospectively or arbitrarily discriminates between different classes of taxpayers.
Conclusion
The amendment to Section 47(iii) of the Income Tax Act marks a significant shift in the tax treatment of gifts by companies. While individuals and certain entities can still avail of the exemption, companies are now explicitly excluded, thereby subjecting such transactions to potential capital gains taxation. This change impacts business structuring, tax planning, corporate philanthropy, and intragroup asset transfers. It introduces complexities related to valuation, documentation, and compliance, and may lead to increased litigation. Companies must now reassess their strategies and ensure that any transfer of assets without consideration is evaluated from a tax efficiency and compliance standpoint. While the amendment aims to curb misuse of the gift exemption for tax avoidance, it also places a greater burden on legitimate business operations. A balanced interpretation by tax authorities and the judiciary will be crucial in ensuring that the provision achieves its intended purpose without stifling genuine corporate activities.