Accounting & Taxation Issues relating to Capital Market Transactions

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TAXATION OF CASH MARKET TRANSACTIONS (DELIVERY BASED AS INVESTMENT) (A) Profit or gains on transfer of a capital asset u/s 45(1). (B) Profit or gains on conversion of capital asset into stock in trade u/s 45(2). (C) Profit or gains on transfer made by the depository U/s 45 (2A). (D) Short/long term capital asset U/s 2(42A)/2 (29A). (E) Exemption to long term capital gain U/s 10(38). (F) Tax on short term capital gain U/s 111A. (G) Right and bonus shares. (H) Interest on borrowed money. (I) Security transaction tax – No rebate u/s 88E. (J) Carry forward & set off of losses u/s 70,71,74. (K) Dividend income is exempt u/s 10(34). (L) Transactions not regarded as transfer u/s 47. (M) Special provision with respect to capital gains in the case of a NON RESIDENT U/S 48 RULE 115A. (N) Cost with reference to certain modes of acquisition. (O) “Adjusted”, “cost of improvement” and “cost of Acquisition” for the purpose of sections 48 & 49 u/s 55. (P) Off Market Transactions. (Q) Section 115 AC, 115 ACA and 115AD.
(A) PROFIT OR GAINS ON TRANSFER OF A CAPITAL ASSET SEC. 45(1). ‣ Profit or gains should arise from the transfer of an asset. ‣ Such asset should be a capital asset. ‣ Transfer should be effected in the previous year. Date of transaction is not the date of transfer. ‣ Liability to capital gain arises only when the assessee acquire the right to receive the profits or gains arising from such transfer. (B) PROFIT OR GAINS ON CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE U/S 45(2). ‣ Taxable in previous year in which such stock in trade is sold or transferred and not in the year in which the conversion takes place. ‣ Full value of consideration for this purpose is the fair market value of the asset on the date of such conversion. ‣ For the purpose of indexation, the year of conversion is taken to be the year of transfer of the capital asset. ‣ The period of holding the asset runs from the date of acquisition of the asset to the date of such conversion. Note : Whether capital gain arises or not on conversion of stock in trade into a capital asset is a disputable point. However, in Asstt. CIT Bright Star Investment (P) Ltd. (2008) 24 SOT 288 (MVm). It was held that “in absence of specific provision in sec. 45(2) to deal with a situation where shares were converted from stock-in-trade into investment and later on investment was sold at profit, profit earned on sale was assessable as LTCG, it was not proper to compute business income till date of conversion of shares into investment and then to compute long term capital gain till date of sale of investment (Asstt. Year 2000-01).
Page 1 and 2: ACCOUNTING & TAXATION ISSUES RELATI
Page 3 and 4: ACCOUNTING FOR CASH MARKET TRANSACT
Page 5 and 6: (A). Derivative Transactions to be
Page 7 and 8: (ii) Rates of STT ‣ STT will be l
Page 9 and 10: (i) (ii) it shall be set off agains
Page 11 and 12: ‣ If there is a loss in daily job
Page 13 and 14: (G) SET OFF WITH COMMODITY TRANSACT
Page 15 and 16: (C ) ALL USUAL BUSINESS EXPENDITURE
Page 17: (c ) the dividend or income on such
Page 21 and 22: ‣ Exemption is available to resid
Page 23 and 24: (J)CARRY FORWARD & SET OFF OF LOSSE
Page 25 and 26: (N) COST WITH REFERENCE TO CERTAIN
Page 27: Following are transfer : (i) (ii) R

Accounting & Taxation Issues relating to Capital Market Transactions

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