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Capital Gain

C.Balaji (Learner) (1867 Points)

30 June 2010

Dear Friends....

Is Redemption treated as Transfer?? If yes under what??

Does Capital Gain arise from Redemption of Shares / Debentures???

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11 Replies

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 30 June 2010

I think section 46A will apply in this case. Capital gains on purchase by company of its own shares or other specified securities. 46A. Where a shareholder or a holder of other specified securities receives any consideration from any company for purchase of its own shares or other specified securities held by such shareholder or holder of other specified securities, then, subject to the provisions of section 48, the difference between the cost of acquisition and the value of consideration received by the shareholder or the holder of other specified securities, as the case may be, shall be deemed to be the capital gains arising to such shareholder or the holder of other specified securities, as the case may be, in the year in which such shares or other specified securities were purchased by the company.

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CA Anshu Agarwal (B€ @LW@¥$ ]-[@Pp¥) (1832 Points)
Replied 30 June 2010

yes redemption shall be trasfer u/s 2(47) as redemption amounts to relinquishment of asset.

hence capital gains also arise on redemption of shares/ debenture.

CA Anshu Agarwal (B€ @LW@¥$ ]-[@Pp¥) (1832 Points)
Replied 30 June 2010

section 46A shall apply in case of buy back of shares.

in case of redemption of shares/ debenture there is no specific section, but it is covered u/s 2(47): definition of transfer.

CA Anshu Agarwal (B€ @LW@¥$ ]-[@Pp¥) (1832 Points)
Replied 30 June 2010

in case buy back of shares:

the sale consideration shall be equal to value of assets (whether cash or other) received less deemed dividend u/s 2(22)(d)

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CA B Anand (CHARTERED ACCOUNTANT) (198 Points)
Replied 01 July 2010

I THINK IT WILL BE TREATED AS TRANSFER .

REASON: JUS AS MR. AGARAWAL SAID., ITS A RELINQUISHMENT OF A RIGHT.

IN SIMPLE WORDS, "THE REASON IS SURRENDER OF SHARES FOR A CONSIDERATION".

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C.Balaji (Learner) (1867 Points)
Replied 01 July 2010

Thanks for the replies.... one more doubt... Does STT attract on it??? Long Term Capital Gain on Redemption of shares- exempt from tax???

Amir (Learner) (4016 Points)
Replied 02 July 2010

Originally posted by : C.Balaji
	Thanks for the replies.... one more doubt... Does STT attract on it??? Long Term Capital Gain on Redemption of shares- exempt from tax???

No, STT is applicable in case of shares only If it is traded on Stock Exchange

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CA Anshu Agarwal (B€ @LW@¥$ ]-[@Pp¥) (1832 Points)
Replied 02 July 2010

Originally posted by : Amir
	Originally posted by : C.Balaji Thanks for the replies.... one more doubt... Does STT attract on it??? Long Term Capital Gain on Redemption of shares- exempt from tax??? No, STT is applicable in case of shares only If it is traded on Stock Exchange

I AGREE

CA.Swathi Jain (CA ) (155 Points)
Replied 04 July 2010

The definition of transfer u/s 2(47) is an inclusive definition . Transfer includes Sale, exchange, Relinquishment of rights. Redemption of shares is relinquishment of rights and the capital gain is the excess realisation over the cost of acquisition. This view is confirmed by the Supreme court in the case of ANARKALI SARABHAI VS CIT(1997) 224 ITR 422.

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