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Capital Gain LT or ST

C.Balaji (Learner) (1867 Points)

11 February 2010

Dear friends...

Shares purchased in a co. by A on 1.4.2004.... On 1.4.2007 the co. issued bonus shares to A....A sold the bonus shares on 1.7.2007....

Whether it is long term or short term????

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7 Replies

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 11 February 2010

Bonus shares short term as held for less than 12 months.

If the company had split the shares then it would have long term

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Amir (Learner) (4016 Points)
Replied 11 February 2010

Dear Balaji,

I hope this is not another one from ur magic box............:))

Look there is Board Circular on his, if u shares are in Demat Form & the Bonus shares have been credited to the same Demat A/c in which original shares are lying, then calculation has to be made on FIFO Basis & u cannot say that u have sold Bonus shares First.. Therefore it will be treated as Long term on the believe that original shares were sold...

However if Shares are in physical form or Bonus shares have been creited to a separate Demat a/c i:e u can easily distinguish then it will be treated as Short Term...

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 11 February 2010

I have expressed my view as balaji has specifically mentioned bonus shares were sold. If shares sold normally then what amir says is correct

Ameet (L) (1678 Points)
Replied 12 February 2010

By applying FIFO Basis as per circular, Bonus Share transfer will be consider for STCG

C.Balaji (Learner) (1867 Points)
Replied 13 February 2010

Here s the Case law....

Commissioner of Income tax vs. Chunilal Khushaldas [1974] 093 ITR 0369. (Gujarat High Court)

Held by the High court that Bonus share sold on 1.6.2007 were Current Asset within the meaning of sec 2 (42A) as they were not held by the assessee for more than 12 months....so STCG???