Forefeiture of share application money

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swasti (Querist)

05 June 2016 Sec 56(2)(ix) of the Income Tax Act 1961 taxes the advance amount forfeited against sale of a capital asset. Does capital asset include Shares also? Whether forfeiture of share application money as per current income tax law is a capital or revenue receipt? Is there any definition of capital asset provided in Income Tax Law?

CA SUNIL K GARG

CA SUNIL K GARG (Expert)

06 June 2016 As per my opinion, amount of share application money is a capital receipt but not amount received against capital assets. So it is not covered under section 56(2)(ix) of the Income Tax Act, 2016. Section 56(2)(ix) says about money forfeited against capital assets.

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swasti

swasti (Querist)

08 June 2016 Thanks Sir. But isn't share a capital asset? Is there any definition of capital asset in Income Tax Act?

CA SUNIL K GARG

CA SUNIL K GARG (Expert)

08 June 2016 share is capital asset, bur share application money is capital receipt till allottmnet

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