Note 1: For computing net worth, the aggregate value of total assets in the case of depreciable assets shall be the written down value of the block of assets as per section 43(6)
1 Answer: (d) taxable as capital gain
1 Answer: (d) taxable as capital gain
on 15.7.2015 at a premium of ₹40 per share. Instead of taking up the right, he renounced it in favour of B at a price of ₹10 per share. What is the capital gain chargeable in the hands of A. What will be the cost of the shares in the hands of B?
Answer:
Capital gain in the hand of A Section ₹
Sale consideration (₹10 x 1,000) 10,000
Less Cost of acquisition of right entitlement S.55(2)(aa)(ii) Nil
Short term Capital gain 10,000
The cost of shares in the hands of ‘B’ will be the aggregate of –
Cost of acquisition of right shares Section ₹
Price paid to A for acquiring the right ₹10,000
Add Amount paid to X & Co. Ltd. towards 1000 shares (1000 x 50) 55 ₹50,000
₹60,000
[CA IPCC M13, 8 Marks]
Question: Ms. Neelima had purchased 500 equity shares in A Ltd. at a cost of ₹30 per share (brokerage 1%) in February 1979.
She got 50 bonus shares in September 1980.
She again got 550 bonus shares by virtue of her holding on March, 1985.
Fair market value of the shares of A Ltd. on April, 1981 is ₹50.
In January 2016, she transferred all her shares @ ₹240 per share (brokerage 2%)
Compute the capital gains taxable in the hands of Ms. Neelima for the Assessment Year 2016-17 assuming.
(A) A Ltd. is an unlisted company and securities transaction tax was not applicable at the time of sale.
(B) A Ltd. is a listed company and the shares are sold in a recognised stock exchange and securities transaction tax was paid at the time of sale.
In case A Ltd. is an unlisted company and STT was not applicable at the time of sale
Answer: Computation of capital gains of Ms. Neelima for the A.Y. 2016-17
(A) ₹
500 equity shares Original Share Feb 1979
Bonus Share Sep, 1980
Bonus Share Mar, 85
Cost of acquisition WEH (Cost
or FMV 1981)
WEH (Cost or FMV 1981)
Nil
Sale proceeds (500 x ₹240) 1,20,000 12,000 1,32,000
Less Brokerage paid (2% of ₹120000) 2,400 240 2,640
Net sale consideration 1,17,600 11,760 1,29,360
Less Indexed cost of acquisition 2,70,2501 27,0252 NIL
Long term capital gain (loss) (1,52,650) (15,265) 1,29,360
Total Long term capital gain (loss) 22,880
(B) In case the company is listed & shares are sold in recognised stock exchange where STT is paid, capital gain is exempt from tax. So capital loss computed shall be ignored.
[CA INTER N98, N01, M98 & N09, 5, 5, 6 & 3 Marks][CMA RTP D11]
Question: Write short note on reference to valuation officer u/s 55A under head capital gain?
Answer: For the purpose of ascertaining the fair market value of a capital asset, the assessing officer may refer the valuation of capital asset to valuation of capital asset to valuation officer in the following cases:
1. If the report of the registered valuer is attached - If the value of the asset claimed by the assessee, is as per the estimate made by a registered valuer and assessing officer is of opinion that the value so claimed is less than its fair market value.
2. If the report of the registered valuer is not attached - If assessing officer is of the opinion that the market value of the asset exceeds the value of the asset as claimed by the assessee and the difference is more than 15% of the value claimed by assessee or more than 25,000/- of the value so claimed.
3. The assessing officer is of opinion that, having regard to the nature of asset and other relevant circumstances, is necessary to make the reference.
[CA INTER N07, 9 Marks]
Question: Mr. Thomas inherited a house in Jaipur under will of his father in May, 2008. The house was purchased by his father in January 1980 for ₹2,50,000. He invested an amount of ₹7,00,000 in construction of one more floor in this house in June 2010. The house was sold by him in November 2015 for ₹37,50,000.
The valuation adopted by the registration authorities for charge of stamp duty was ₹47,25,000 which was not contested by the buyer, but as per assessee’s request, the Assessing officer made a reference to Valuation office. The value determined by the Valuation officer was ₹47,50,000. Brokerage @ 1% sale consideration was paid by Mr. Thomas to Mr. Sunil. The market value of house as on 01.04.1981 was
₹2,70,000.
You are required to compute the amount of capital gain chargeable to tax for A.Y. 2016-17.
Answer: Computation of capital Gain in the Hands of Mr. Thomas for the AY. 2016-17.
1 * +
2 * +
Particulars Amounts (₹ ) Sales consideration (Being value determined by the Stamp Duty Authority) 47,25,000 Less Indexed cost of acquisitions: ( ) 29,18,700 Less Indexed cost of improvement: ( ) 10,64,276
Less Cost of transfer (i.e. 1% of ₹37,50,000) 37,500
Long Term Capital Gains 7,04,524
Question: Write short note on capital gains of non-residents and the method of conversion under Rule 115A under head capital gain?
Answer: In case of a non-resident assessee, the capital gains arising from the transfer of shares or debentures in an India company, shall be computed by converting
1. The cost of acquisition of the asset.
2. The expenditure incurred wholly and exclusively in connection with such transfer and
3. Sale consideration received or accruing as a result of transfer of capital asset into the same foreign currency as was initially utilized in the purchase of such shares or debentures. The capital gain so computed in the foreign currency shall be reconverted into Indian Currency.
Indexation is not applicable
The method of conversion under Rule 115A is a follows:
(a) The Cost of Acquisition shall be converted at the average of the Telegraphic Transfer Buying Rate (TIBR) and the Telegraphic Transfer Selling Rate (TTSR) as on the date of acquisition of shares / debentures.
(b) The expenditure in connection with the transfer shall be converted at the average of TTBR and TTSR as on the date of transfer of shares / debentures.
(c) The sale consideration shall be converted at the average of TTBR and TTSR as on the date of transfer of shares / debentures.
(d) The capital gain computed in the foreign currency shall be converted into Indian currency by applying TTBR as on the date of transfer of shares / debentures.
Question: Write short note on tax on STCG from listed equity shares u/s 111A u/h capital gain?
Answer: Short Term Capital Gain from transfer of equity shares or units or equity oriented mutual fund shall be taxable @ 15% if:
They are sold through recognized stock exchange.
Security transaction tax is chargeable on such transaction.
Transfer took place on or after 01.10.2004
No Deduction under VI-A shall be allowed from such income.
If normal income is less than basic exemption deficiency shall be allowed from short term capital gain.