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27 Capital Gain PCC
27 Capital Gain PCC
• Capital assets
2. Indexation on long term capital assets will not be allowed for bonds
and debentures other than capital indexed bonds issued by the Government
Question- short term or long term capital
asset
Y purchases Debentures of a company on Mar 10,
2006.Debentures are listed on Cochin Stock Exchange with effect
from Jan 1, 2008. Y transferred these debentures on Jan 5, 2009.
3,87,861
Option of taking FMV as on 1.4.81 is available if the previous owner
acquired capital asset before 1.4.81
Transactions not regarded as transfer
(contd 2)
Cost=0 Cost=0
A B C D
Gift Gift Sell
If any of the following events occur within 8 years from the date
of transfer, the capital gains so exempted will be chargeable to tax
in the year in which transfer took place
1 lakh
03-04 5 lakhs
H S Without attracting section 47A
1990-91 08-09
sells
Capital gains for S
FVC = 5 Lakhs
(-) COA = 1 Lakh
4 Lakhs
Section 47 read with section 47A
(contd)
1 lakh
03-04 5 lakhs
H S After attracting section 47A
90-91 3 lakhs 08-09
sells
Capital gains for S
Capital gains for H
FVC = 3 Lakhs FVC = 5 Lakhs
COA = 1 Lakh COA = 3 Lakh
2 Lakhs 2 Lakhs
Steps for computing capital gain
• 1) Identify whether the given asset is a capital asset or not as per
section 2(14)
• 2) Identify whether the given transaction is a taxable transfer or
not as per section 2(47) read with section 47.
• 3) Find out whether the CA is LT or ST.
• 4) In certain situations, while counting the POH of capital asset,
we include POH of previous owner also. Section 2(42A)
• 5) In certain situations, while calculating the COA of capital asset,
we consider cost to the previous owner.Section 49.
• 6) However indexation of COA will always start from the current
assessee.
Intangible Assets
Cost of acquisition and cost of improvement in case of certain
intangible assets
Note: If exemption has been claimed u/s 54EC in respect of investment in a new
asset, no deduction shall be allowed u/s 80C with reference to the amount of
investment for which exemption has been claimed.
Transfer of depreciable assets held for more than 36 months – Exemption
u/s 54EC available: Section 50 nowhere mentions that the depreciable assets
are short term capital assets but only states that capital gains arising from
transfer of depreciable asset shall be deemed to be arising out of transfer of
short term capital asset. Section 54EC is independent section and exemption
therein is available if there is a transfer of long term capital asset and
consideration is invested in specified assets within time limit. Therefore,
depreciable assets held for more than 36 months are long-term capital assets
and capital gains arising therefrom will be eligible for the benefit envisaged
u/s 54EC – CIT v. Assam Petroleum Industries P. Ltd. [2003] 131 Taxman
699 (Gau.)