Fifth provisio of Section 48 takes care of non allowability of STT while computing Capital Gains which is producted below;
Section 48 Mode of Computation
Provided also that no deduction shall be allowed in computing the income chargeable under the head “Capital gains†in respect of any sum paid on account of securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004.]
It is to be noted that STT paid at the time of acquisition of shares can be taken/capitalised as/in cost for acquisition as there are no such provisio/restriction in section 49 or 55 of IT Act.
13 October 2009
Since STT is specifically excluded from calculating capital gains tax how can it be capitalized at the time of purchase.My opinion is it should not be capitalized. If there is any section/ circular please mention that.
Section 48 lays down provision for mode of computation
48. The income chargeable under the head “Capital gains†shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :—
(i) expenditure incurred wholly and exclusively in connection with such transfer;
(ii) the COST OF ACQUISITION of the asset and the cost of any improvement thereto:
fifth provisio which is produced above restricts the admisibility STT on deduction part.
Now one can say, admisiblity of STT as deduction is only for "deduction of expenses on transfer" and as cost of acquisition/improvement is dealt in section 55 the said provisio does not apply to STT paid at the time of acquisition.
At the same time, one can also argue that "deduction at the time of computing of capital gains" includes "cost of acquisition/transfer" and so STT is not to added to COA/T by virtue of same provisio.
One may have to enter into litigation or Higher Authority needs to clarify on this issue "What includes deduction".
For conservation, it is advisable not to include the STT in COA.
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