15/02/2019
Transfer of capital asset :-
Transfer, in relation to a capital asset, includes sale, exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law [sec. 2(47)]
• Reduction of share capital by company by reducing face value of its shares and paying off balance to Shareholder would result in extinguishment of proportionate right in shares held by shareholder so that amount paid by Company to shareholder on reduction of share capital would be exigible to capital gains tax in hands of shareholder -Kartikeya V. Sarabhai v. CIT [1997] 94 Taxman 164/228 ITR 163 (SC).
• Where assessee had purchased preference shares at less than face value and on redemption of shares by company, assessee received more than what she had paid for shares, redemption of preference shares amounts to "sale, exchange or relinquishment of asset" within the meaning of section 2(47)(i)Anarkali Sarabhai v. CIT [1997] 90 Taxman 509/224 ITR 422 (SC).
• The transaction of lending shares of some distinctive numbers and receiving back shares of some other numbers is not “exchange” of assets within the meaning of “transfer" as defined in section 2( 4 7). The meaning of the word “exchange” necessarily involves exchange of two different assets. The asset received back in the aforesaid type of transaction is not different from what was lent so long as it represents the same fraction of the ownership of the company. Hence, the transaction of lending of shares or any other security under the securities lending scheme would not result in "transfer" for the purpose of invoking the provisions relating to capital gains-Circular No. 751, dated February 10, 1997.
• Fixed Maturity Plans (FMPs) are closed ended mutual funds having a fixed maturity date wherein the duration of investment is decided upfront. To enable the FMPs to qualify as a long-term capital asset, some Asset Management Companies (AMCs) administering mutual funds have offered extension of the duration of the FMPs to a date beyond 36 months from the date of the original investment by providing to the investor an option of roll-over of FMPs in accordance with the provisions of Regulation 33(4) of the SEBI (Mutual Funds) Regulations, 1996. The Board has clarified that the roll over in accordance with the aforesaid regulation will not amount to transfer as the scheme remains the same. No capital gains will arise at the time of exercise of the option by the investor to continue in the same scheme. The capital gains will, however, arise at the time of redemption of the units or opting out of the scheme, as the case may be Circular No. 6/2015, dated April 9, 2015.)
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