The Capital Assets can transfer by two ways. i.e. Sale and Exchange. The details of transfer of Capital Assets are as follows:
By Way of Sale :
Transfer includes sales of a capital assets. The sale may be voluntary or involuntary, for example sale at the instance of decree holder under court orders also results in transfer of property.
Redemption of preference shares held by the assessee amounts to purchase by the company and sale of assets by the assessee. Gains on redemption is taxable [Seth jwaladas Mathuradas mohan trust vs. CIT 1987 165 ITR 620.
Foreign currency is like any other commodity when it is converted into rupees it is virtually a sale of the commodity for a price. Therefore tax is leviable on capital gain made on the conversion of sale of foreign currency held as a capital asset [Kirloskar vs. CIT 117 ITR 82.
By Way of Exchange :
Transfer includes exchange. When two persons mutually transfers the ownership of one thing for the ownership of another but none of the things is money, the transaction is called exchange under section 118 of the transfer of property act 1982). The word exchange is not limited to immovable property. It also includes barter of chattels. Thus conversation of preference shares into ordinary shares is an exchange. Similarly where assets are transferred to a company in lieu of allotment of shares it is a case of an exchange and not sale.
The meaning of the word exchange necessarily involves exchange of two different assets. Shares are fungible assets. That is one share of a company is good replacement for another share of the same company. The market does not lay any emphasis on the distinctive numbers. Therefore, when the lender of shares under securities lending scheme of SEBI gets back equitant number of shares of the company with different distinctive numbers, it is not a case of exchange of assets (circular no. 751 dated 10-02-1997).
By Way of Sale :
Transfer includes sales of a capital assets. The sale may be voluntary or involuntary, for example sale at the instance of decree holder under court orders also results in transfer of property.
Redemption of preference shares held by the assessee amounts to purchase by the company and sale of assets by the assessee. Gains on redemption is taxable [Seth jwaladas Mathuradas mohan trust vs. CIT 1987 165 ITR 620.
Foreign currency is like any other commodity when it is converted into rupees it is virtually a sale of the commodity for a price. Therefore tax is leviable on capital gain made on the conversion of sale of foreign currency held as a capital asset [Kirloskar vs. CIT 117 ITR 82.
By Way of Exchange :
Transfer includes exchange. When two persons mutually transfers the ownership of one thing for the ownership of another but none of the things is money, the transaction is called exchange under section 118 of the transfer of property act 1982). The word exchange is not limited to immovable property. It also includes barter of chattels. Thus conversation of preference shares into ordinary shares is an exchange. Similarly where assets are transferred to a company in lieu of allotment of shares it is a case of an exchange and not sale.
The meaning of the word exchange necessarily involves exchange of two different assets. Shares are fungible assets. That is one share of a company is good replacement for another share of the same company. The market does not lay any emphasis on the distinctive numbers. Therefore, when the lender of shares under securities lending scheme of SEBI gets back equitant number of shares of the company with different distinctive numbers, it is not a case of exchange of assets (circular no. 751 dated 10-02-1997).
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