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CAPITAL GAINS
Capital gains means gains arising to an assessee on transfer of a capital asset. This clearly implies that to bring income taxable under the head capital gains, both the elements namely “Capital asset” & “transfer” has to be present in the given transaction.
As such, we should seek absolute clarity with respect to these two terms. Sec. 2(14) of the I. Tax Act deals with the definition of the term “Capital Asset”. It is an inclusive definition. Capital asset includes property of any kind whether movable or immovable, fixed or circulating, tangible or intangible however it does not include :
a) any stock-in-trade, consumable stores or raw material held for the purpose of business or profession.
b) “Personal effects” of the assessee i.e. things or articles held by the assessee for his or his family member‟s personal use which popularly includes wearing apparel, furniture, utensils, motor car etc. However, jewellery & archaeological treasures & collections, paintings, sculptures are excluded from the scope of personal effects – meaning thereby they are to be held as capital assets for the purpose of capital gains.
c) Agricultural land situated in area other than (i) any area within the jurisdiction of a municipality or cantonment board having population of 10,000 or more or (ii) in any notified area
d) 6 ½ % Gold Bonds -1977, 7% Gold Bonds – 1980, National Defence Gold Bonds
–1980 issued by Central Govt.
e) Special bearer bonds-1991
f) Gold Deposit Bonds issued under Gold Deposit Scheme –1999.
Sec. 2(47) deals with the term “Transfer”. The meaning of the term transfer is to be ascertained from the view-point of “Transfer of capital asset” & not as understood in general sense. It is also an inclusive definition. Transfer, in relation to capital asset includes sale, exchange, relinquishment of the asset, extinguishments of any right in the asset or compulsory acquisition of any asset by operation of any law.
Further, transfer
Capital gains means gains arising to an assessee on transfer of a capital asset. This clearly implies that to bring income taxable under the head capital gains, both the elements namely “Capital asset” & “transfer” has to be present in the given transaction.
As such, we should seek absolute clarity with respect to these two terms. Sec. 2(14) of the I. Tax Act deals with the definition of the term “Capital Asset”. It is an inclusive definition. Capital asset includes property of any kind whether movable or immovable, fixed or circulating, tangible or intangible however it does not include :
a) any stock-in-trade, consumable stores or raw material held for the purpose of business or profession.
b) “Personal effects” of the assessee i.e. things or articles held by the assessee for his or his family member‟s personal use which popularly includes wearing apparel, furniture, utensils, motor car etc. However, jewellery & archaeological treasures & collections, paintings, sculptures are excluded from the scope of personal effects – meaning thereby they are to be held as capital assets for the purpose of capital gains.
c) Agricultural land situated in area other than (i) any area within the jurisdiction of a municipality or cantonment board having population of 10,000 or more or (ii) in any notified area
d) 6 ½ % Gold Bonds -1977, 7% Gold Bonds – 1980, National Defence Gold Bonds
–1980 issued by Central Govt.
e) Special bearer bonds-1991
f) Gold Deposit Bonds issued under Gold Deposit Scheme –1999.
Sec. 2(47) deals with the term “Transfer”. The meaning of the term transfer is to be ascertained from the view-point of “Transfer of capital asset” & not as understood in general sense. It is also an inclusive definition. Transfer, in relation to capital asset includes sale, exchange, relinquishment of the asset, extinguishments of any right in the asset or compulsory acquisition of any asset by operation of any law.
Further, transfer