CAPITAL GAINS

SPECIAL CASES

CAPITAL GAINS IN CASE OF INSURANCE CLAIMS

SECTION 45(1A)
INSURANCE
CASH
COMPANY

FULL VALUE OF CONSIDERATION

CASH RECEIVED
OR FMV OF
ASSETS
PERIOD OF HOLDING
DATE OF PURCHASE TO DATE OF
DESTRUCTION OF ASSETS
YEAR OF TAXABILITY
YEAR IN WHICH INSURANCE
CLAIM IS RECEIVED
ILLUSTRATION
ASSETS PURCHASED
96-97
DESTROYED IN
06-07
CLAIM RECD
11-12
INDEXATION- INDEX OF 06-07/INDEX OF 96-97
THIS SECTION APPLIES ONLY TO LOSS OF ASSETS. CLAIMS RECD FOR LOSS OF RM
WOULD CONSIDERED AS REVENUE RECEIPT TAXABLE UNDER PGBP.

CONVERSION OF CAPITAL ASSETS INTO STOCK- IN TRADE

(sec- 45(2)

Shares (assets)
(acquired on 01.08.2001 @ rs. 10000)
Converts into Stock on 01.07.2003 ( FMV 12000)
Sells such shares on 05.04.2012 @ Rs. 15000
Business Income ( in year of sale)- Sale value FMV on date of
conversion
(15000-12000=3000)
Capital Gains POH01.08.2001-01.07.2003
FVCFMV on date of conversion
Indexation Year of conversion
Year of Acquisition
CG = (12000-10869) = 4131

12000

CONVERSION OF STOCK INTO CAPITAL ASSETS

Land ( stock) as on 2001 ( Rs. 10,00,000)
Converted to Capital Asset in 2006
(FMV- 15,00,000)
Sells it in 2008
(for Rs. 20,00,000)
Business Income ( 2006) 5,00,000
Capital Gains

POH- 2001-08

COA- 15,00,000

FVC- 20,00,000

Year of Taxability- 2008

15,00,000-10,00,000=

TRANSFER OF ASSETS BETWEEN FIRM & PARTNERS

PARTNER
FIRM
FVC=
AMOUNT RECORDED IN BOOKS & CHARGEABLE TO FIRM

FIRM
PARTNER
FVC=
FAIR MARKET VALUE ON DATE OF TRANSFER
IN CASE OF A FIRM TRANSFERING ITS ASSETS ON
DISSOLUTION THEN SUCH TRANSFER CHARGEABLE
u/s 54 IN HANDS OF THE FIRM.
FVC= FMV ON DATE OF TRANSFER

COMPULSORY ACQUISITION BY GOVERNMENT

COMPENSATION
INITIAL COMPENSATION

INITIAL COMPENSATION

ENHANCED COMPENSATION

Taxable when first received

Taxable as and when
received
POH Date of PurchaseSame as Initial
Compensation.
Date when govt. acquired
the asset.
COA- Cost at which the asset was
COA- NIL

INTEREST:
Taxable in the hands of receipient and taxable under other
sources.
Standard deduction of 50% is allowed u/s 57(iv).
LEGAL EXPENSES:
Deductible if incurred for enhanced compensation.
Not admissible if incurred for enhanced compensation.

CAPITAL GAIN IN RESPECT OF SHARES AND SECURITIES

BUY BACK OF SHARES BY THE COMPANY

Taxable in the hands of shareholders
COA- Cost at which the shares were acquired
FVC- Money received in lieu of shares
POH- Date of purchase of shares- Date of buyback
BONUS SHARES
COA- NIL
FVC- FMV as on date of receipt. If receipt before
01/04/1981 then
FMV as on 01/04/1981.
RIGHT SHARES & RIGHT ENTITLEMENT
In the case of right entitlement ( taxable in the
hands of person who acquired the entitlement and
subsequently renounces it for a price)
COA- NIL
FVC- the value for which such entitlement was sold to
other person

In the case of Right Shares

For ORIGINAL SHAREHOLDER

For THE PERSON WHO

BOUGHT SUCH RIGHTS
FROM THE ORIGINAL
SHAREHOLDER

COA- Amount paid to the company

the
company + amount paid for

COA- Amount paid to

right
entitlement.

SLUMP SALE
Definition- Sale of one or more business undertaking for a
lump sum consideration without putting value individually
to assets and liability.
Capital Gain- FVC- Net worth
Net Worth- Ignore revaluation
WDV of assets after charging depreciation
shall be considered
Value of Capital assets whose deduction
taken u/s 35AD- NIL
LTCG- If undertaking held for more than 36 months.
STCG - If undertaking held for less than 36 months.

SALE OF LAND & BUILDING OR BOTH

FVC Actual Consideration or Value adopted by the
official(higher of two)
Valuation by Stamp Duty Authority

Assessee accepts the value

accepts the value
FVC- As adopted by the stamp
court
valuer

Assessee does not

Value as declared by the

In the case of land & building fvc is higher of sale value or

stamp duty value. If stamp duty value exceeds fmv then fmv
is fvc.

GOODWILL / TRADEMARK / ETC.

Cost of acquisition for following is NIL Goodwill of business
Trademark
Brand name of business
Patents
Tenancy rights
Stage carriage permits
Loom hours
Cost of improvement of goodwill of business, patents is NIL
Goodwill of profession is not taxable