Page 363 - DCOM301_INCOME_TAX_LAWS_I

Income Tax Laws – I

Notes 2(45) of the Act. The above view is the only view which emerges from authoritative
pronouncements of different High Courts and the Supreme Court. Having regard to
the observation of different Courts, I agree with my learned brother that there is
good ground for not following the decision of Delhi Bench of ITAT.
10. For the above reasons I agree with my learned brother and hold that short term
capital gain is not entitled to concessional rate applicable under section 115-E of the
I.T. Act. I also agree with the other part of the proposed order of my learned brother.
The appeal of the assessee is dismissed.
Questions
1. Study and analyse the case.

2. Write down the case facts.
3. What do you infer from it?
Source: http://www.indiankanoon.org/doc/11120/

12.8 Summary

Under the Income Tax Act, any profits or gains arising from the transfer of a capital asset
effected in the previous year, shall be chargeable to income tax under the head ‘capital
gains’ and shall deemed to be the income of the previous year in which the transfer took
place unless such capital gain is exempted under the prescribed exemptions.
‘Capital gains’ means any profit or gains arising from transfer of a capital asset. If any
Capital Asset is sold or transferred, the profits arising out of such sale are taxable as capital
gains in the year in which the transfer takes place. Capital gains are the difference between
the price at which the capital asset was acquired and the price at which the same asset was
sold. In technical terms, capital gain is the difference between the cost of acquisition and
the fair market value on the date of sale or transfer of asset.

Under the existing provisions of Section 2(14), a ‘capital asset’ means, property of any kind
held for personal use by the assessee, whether or not connected with his business or
profession, personal effects held for personal use by the assessee or any number of his
family dependent on him are excluded from the ambit of the definition of capital asset.
The only asset that is in the nature of personal effects, but is included in the definition of
capital asset is jewellery and ornaments.

However, with effect from assessment year 2008–09, archaeological collections, drawings,
paintings, sculptures or any work of art have also been excluded from the meaning of
personal effects and transfer of such personal effects will also attract capital gains tax.
Capital Assets are of two types i.e., long term and short term. A capital asset held for 36
months or less before it is sold or transferred.is called as a short-term capital asset and if
the period exceeds 36 months, the asset is known as a long-term capital asset. In case of
shares, debentures and mutual fund units the period of holding required is only 12 months.

Transfer of a short term capital asset gives rise to “Short Term Capital Gains” (STCG) and
transfer of a long capital asset gives rise to “Long Term Capital Gains” ( LTCG). Different
rates of tax apply for gains on transfer of the long term and short-term capital assets. Gains
on short-term capital asset are taxed as regular income.

The word transfer under income tax act is defined under section 2(47). As per section 2 (47)
Transfer, in relation to a capital asset, includes sale, exchange or relinquishment of the
asset or extinguishments of any right therein or the compulsory acquisition thereof under
any law.

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