Conversion of Debentures into Shares :

Any transfer by way of conversion of bonds or debentures, debenture stock or deposit certificates in any form, of a company into shares or debentures of that company is not regarded as transfer under section 47(x). Hence, if any amount is paid in cash etc., the entire transaction will attract capital gains tax.

Section 49(2A) states that where the capital asset, being a share or debenture in a company became the property of the assessee in consideration of a transfer referred to in section 47(x), the cost of acquisition of the asset to the assessee shall be deemed to be that part of the cost of debenture, debenture-stock or deposit certificates in relation to which such asset is acquired by the assessee.