Capital Gains

(AY 2015-16)

Key Words / Outline

Issues Covered:

Scope of Capital Gain : u/s 31

Definition of Capital Asset [u/s 2(15)]
Definition of Transfer [u/s 2(66)]
Definition of Fair Market Value [u/s 2(30)]
Computation of Capital Gains-u/s-32(1)
Cost of acquisition: u/s 32(2)
Exempted Capital Gains

 Capital Gains:

Sections

Regulatory Framework

31, 32
Subsections of sec. 2: (15), (66), (30)

Rules
Schedules
Sixth Schedule: Part A Para-18, 43
Sixth Schedule: Part B ---

Scope of Capital Gain : u/s 31

Capital gains arise from transfer of capital assets.

Statutory Definitions
Definition of Capital Asset [u/s 2(15)]:
Capital asset means property of any kind held by an assessee, whether or not
connected with his business or profession, but does not include-(a)
any stock-in-trade (not being stocks and shares), consumable stores or
raw materials held for the purposes of his business or profession;
(b)
personal effects, that is to say, movable property (including wearing
apparel, jewellery, furniture, fixture, equipment and vehicles), which are held
exclusively for personal use by, and are not used for purposes of the business
or profession of the assessee or any member of his family dependent on him ;
and
(c)
agricultural land in Bangladesh, not being land situate
(i) in any area which is comprised within the jurisdiction of
municipality (whether known as a municipality, municipal corporation,
town, or by any other name) or a cantonment Board and which has a
population of not less than ten thousand according to the last
preceding census of which the relevant figures have been published
before the first day of the income year ; or
(ii) in any area within such distance not being more than five miles from
the local limits of any municipality or cantonment board referred to in
paragraph (i), as the Government may having regard to the extent of,
and scope for, urbanisation of that area and other relevant
considerations, specify in this behalf by notification in the official
Gazette.

Statutory Definitions
Definition of Transfer [u/s 2(66)]:
Transfer includes sale, exchange, relinquishment of the asset, or the
extinguishment of any right therein, but does not include
(a)
any transfer of the capital asset under a gift, bequest, will or an
irrevocable trust,
(b)
any distribution of the assets of a company to its shareholders on its
liquidation; and
(c)
any distribution of capital assets on the dissolution of a firm or other
AOP (association of persons). or on the partition of a HUF (Hindu undivided
family).
Definition of Fair Market Value [u/s 2(30)]:
Arms length transaction vs. Related party transaction
Fair market value means, in relation to capital asset(a)
the price which such asset would ordinarily fetch on sale in the open market
on the relevant day, and, where such price is not ascertainable, the price which the
Deputy Commissioner of Taxes may, with the approval in writing of the Inspecting Joint
Commissioner, determine;
(b)
the residual value received from the lessee in case of an asset leased by a
financial institution having license from the Bangladesh Bank on termination of lease
agreement on maturity or otherwise subject to the condition that such residual value
plus amount realised during the currency of the lease agreement towards the cost of
the asset is not less than the cost of acquisition to the lessor financial institution.

Statutory Definitions
Definition of Fair Market Value [u/s 2(30)]: Cond
Where in the opinion of the Deputy Commissioner of Taxes the fair
market value (FMV) of a capital asset transferred by an assessee as on
the date of transfer exceeds the full value of the consideration declared
by the assessee by at least 15%, then following provisions are
applicable:
Sec.

Fair market value (FMV)

Provisions applicable
exceeds the declared full value of
the consideration by
32(3) At least 15%
FMV shall be determined with the
previous approval of the Inspecting
Joint Commissioner
32(4) More than 25%
Government may offer to buy the said
asset in such manner as may be
prescribed (provision of rule 42)

Computation of Capital Gains-u/s-32(1)

Full value of the consideration receivable or received or
Fair Market Value of the capital assets transferred,

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whichever is higher
Less: (a) Expenditure incurred solely in connection with the transfer
of capital asset,
(b) Cost of acquisition of the capital asset including capital
expenditure incurred for any improvement thereto.
(c)
Any allowance which is admissible under any provisions of
section 23 (allowable deductions from Interest on Securities),
section 29 (allowable deductions from Income from Business or
Profession) and section 34 (allowable deductions from Income
From Other Sources)

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Capital Gains taxable in the year of transfer of the capital assets

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Cost of acquisition: u/s 32(2)

Sec.
32(2)(i)
32(2)(ii)
& First
proviso to
sec. 32(2)
(ii)

Situation
The asset is acquired by purchase.
The asset is acquired:
(i)under a deed of gifts, bequest or
will, or
(ii)under a transfer on revocable or
irrevocable trust or
(iii)on any distribution of capital
assets on the liquidation of a
company, or
(iv)on any distribution of capital
assets on the dissolution of a firm or
other AOP (association of persons) or
the partition of a HUF (Hindu
undivided family).

Cost of acquisition
Actual cost of acquisition
Actual cost of acquisition to previous owner
less
amount of depreciation, if any, allowed
to the previous owner
Where the actual cost of acquisition to the
previous owner cannot be ascertained, the fair
market value at the date on which the capital asset
became the property of the previous owner.
Where the capital asset is an asset in respect of
which the assessee has obtained depreciation
allowance in any year, the cost of acquisition of
the capital asset to the assessee shall be its written
down value increased or diminished, as the case
may be, by any adjustment made under section
19(16) or (17) or section 27(1)(j) or section 29(1)
(xi).

Second
Where the capital asset became the
Fair market value of the property prevailing at the
proviso to property of the assessee by
time the assessee became the owner of such
sec. 32(2) succession, inheritance or devolution property
(ii)

Exempted Capital Gains

Questions??