capital gains

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R.S.Vishnu Kumar (Querist)

28 May 2009 a share holder of a company who holds majority of shares in a company wants to transfer 50 % of the shares held by to another person. Does this transfer attract the provisions of Capital gains? (the above mentioned shares are equity shares)

CA Devanshi Gandhi (Ajani)

CA Devanshi Gandhi (Ajani) (Expert)

28 May 2009 yes

taxindiaconnect

taxindiaconnect (Expert)

28 May 2009 Thus a sale of a capital assets is treated as transfer for the purpose of section 45 of IT Act which deals with the gain / loss on transfer of a capital assert. A question arises that whether a share is capital assets or not. One can find the definition of the capital assets in section 2(14) of the Act which provides that the 14) "capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, Then there are certain exclusions provided in the section. A careful reading suggests that the list of exclsuinon does not contain shares in a company. Hence the shares in a company are capital assets for the purposed of section 2(47).
Thus the provisions of section 45 for capital gains are applicable to sale of shares in your question. A capital assets may be long term capital assets or short term capital assets with ht meaning of section 2(42A) and section 2(29). Accordingly the capital gain tax will be levied on the basis of the kind of capital assets you are transferring. The rate of tax for short term capital gain / long term capital gains have been provided in section 111/ 112 of the IT Act.
Thus I agree with the expert on this.

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