There are 2 types of Capital Assets
1. The tax is calculated
under the head “Capital Gains” based on whether the Capital Assets is
short-term or long-term.
2. Long-term Capital Assets is taxable at a specified rate
(generally lesser than higher applicable rate)
3. Short-term Capital Assets is taxable at a normal rate of tax. Note that, for few short-term Capital Assets, tax rate is prescribed.
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Transfer of Capital Asset
[Sec.2(47)]
What
included in transfer:
1. Sale:
A sale maybe define as a contract founded
on money consideration by which the absolute or general property in the subject
of sale is transferred from the seller to the buyer.
The essentials of a sale
are:
(i)
Mutual Agreement
(ii)
Competent parties
(iii)
Money
Consideration
Transfer of the absolute or general
property from the seller to the buyer, If any of these ingredients be wanting
there is no sale.
2. Exchange:
An exchange involves the transfer of property by one person to another and reciprocally the transfer of property by that other to the first person. There must be a mutual transfer of ownership of one thing for the ownership of another.
3. Relinquishment:
A Relinquishment takes place when the
owner withdrawn himself from the property and abandons his rights thereto. It
presumes that the property continues to exist after the relinquishment.
4. Compulsory
acquisition of an asset:
(i)
When the transfer
of capital asset is by way of compulsory acquisition under any law.
(ii) When capital asset is transferred (not by way of compulsory acquisition) and the consideration is approved or determined by the Central Government or the RBI.
5. Conversion
of Capital Asset into stock-in-trade:
The supreme court in CIT had held that no
transfer was involved where the assesse, holding by way of investment shares in
companies, commenced a business in shares converting the shares into
stock-in-trade of the business and when he subsequently sold these shares at
profit, the assessable profit was the difference between the sale price of the
shares and market price of the shares prevailing on the date when shares were
converted into stock-in-trade of the business in shares.
The appreciation in the value of capital
asset between the date of purchase of shares and date of its conversion into
stock is not chargeable to tax.
6. Redemption of
zero coupon bonds:
From the assessment year 2006-07,
redemption of zero coupon bonds will be treated as “transfer”.
7. Giving possession of immovable
properties under part performance of a contract:
Section 2(47)(v) of the Income Tax Act which dealt
with the expression transfer provided that any transaction involving the
allowing of the possession of any immovable property to be taken or retained in
part performance of a contract referred to in section 53A of the Transfer of
Property Act 1882.
8. Transfer includes, any transaction
which has the effect of transferring an immovable property:
If following conditions are
satisfied, the transaction is treated as “transfer”-
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Condition 1 |
The transferor is a member of
co-operative society/company/AOP |
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Condition 2 |
By virtue of his membership, he has
been allotted an immovable property or he will be allotted an immovable
property. |
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Condition 3 |
The membership right is transferred
which has the effect of transferring or enabling the enjoyment, of the
aforesaid immovable property. |
DISCLAIMER
[The view presented in above blog/ article is from North Pole Management LLP. We believe that the views put forward are is in sync with applicable laws & regulations prevailing at present. Any discrimination, if found by reader can be reached out to the management of the company on the email ID of contact@northpolemanagement.in
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