Capital gains
E.—Capital gains
Capital gains.
45. 72[(1)] Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 73[53, 54, 54B, 74[* * *] 75[76[54D, 77[54E, 54F and 54G]]]], be chargeable to income- tax under the head "Capital gains", and shall be deemed to be the income of the previous year in which the transfer took place.
78[(2) Notwithstanding anything contained in sub-section (1), the profits or gains arising from the transfer by way of conversion by the owner of a capital asset into, or its treatment by him as stock-in-trade of a business carried on by him shall be chargeable to income-tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by him and, for the purposes of sections 48, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset.]
79[(3) The profits or gains arising from the transfer of a capital asset by a person to a firm or other association of persons or body of individuals (not being a company or a co-operative society) in which he is or becomes a partner or member, by way of capital contribution or otherwise, shall be chargeable to tax as his income of the previous year in which such transfer takes place and, for the purposes of sections 48, the amount recorded in the books of account of the firm, association or body as the value of the capital asset shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset.
(4) The profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm or other association of persons or body of individuals (not being a company or a co-operative society) or otherwise, shall be chargeable to tax as the income of the firm, association or body, of the previous year in which the said transfer takes place and, for the purposes of sections 48, the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer.]
80[(5) Notwithstanding anything contained in sub-section (1), where the capital gain arises from the transfer of a capital asset, being a transfer by way of compulsory acquisition under any law, or a transfer the consideration for which was determined or approved by the Central Government or the Reserve Bank of India, and the compensation or the consideration for such transfer is enhanced or further enhanced by any court, Tribunal or other authority, the capital gain shall be dealt with in the following manner, namely:—
(a) the capital gain computed with reference to the compensation awarded in the first instance or, as the case may be, the consideration determined or approved in the first instance by the Central Government or the Reserve Bank of India shall be chargeable as income under the head "Capital gains" of the previous year in which the transfer took place; and
(b) the amount by which the compensation or consideration is enhanced or further enhanced by the court, tribunal or other authority shall be deemed to be income chargeable under the head "Capital gains" of the previous year in which such amount is received by the assessee.
Explanation : For the purposes of this sub-section,—
(i) in relation to the amount referred to in clause (b), the cost of acquisition and the cost of improvement shall be taken to be nil;
(ii) the provisions of this sub-section shall apply also in a case where the transfer took place prior to the 1st day of April, 1988 ;
(iii) where by reason of the death of the person who made the transfer, or for any other reason, the enhanced compensation or consideration is received by any other person, the amount referred to in clause (b) shall be deemed to be the income, chargeable to tax under the head "Capital gains", of such other person.]
72. Inserted by the Finance Act, 1964, w.e.f. 1-4-1964. "(1)"deemed to have been omitted with the omission of sub-sections (2) to (4) by the Finance Act, 1966, w.e.f. 1-4-1966 and deemed to have been inserted with the insertion of sub-section (2) by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985.,
73. "53,54 and 54B" substituted for "53 and 54" by the Finance Act, 1970, w.e.f. 1-4-1970; "53, 54, 54B and 54C" substituted for "53, 54 and 54B" by the Finance Act, 1972, w.e.f. 1-4-1973 and "53, 54, 54B, 54C and 54D" substituted for "53, 54, 54B and 54C" by the Finance Act, 1973, w.e.f. 1-4-1974.
74. "54C" omitted by the Finance Act, 1976, w.e.f. 1-4-1976.
75. Substituted for "and 54D" by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
76. Substituted for "54D and 54E" by the Finance Act, 1982, w.e.f. 1-4-1983.
77. Substituted for "54E and 54F" by the Finance Act, 1987, w.e.f. 1-4-1988.
78. Inserted by the Taxation Laws (Amendment) Act, 1984,w.e.f. 1-4-1985. Original sub-section (2) was inserted by the Finance Act, 1964, w.e.f. 1-4-1964 and later on omitted by the Finance Act, 1966, w.e.f. 1-4-1966.
79. Inserted by the Finance Act, 1987, w.e.f. 1-4-1988. Original sub-sections (3) and (4) were inserted by the Finance Act, 1964, w.e.f. 1-4-1964 and later on omitted by the Finance Act, 1966, w.e.f. 1-4-1966.
80. Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[As amended by the Finance Act, 1989 and the Direct Tax Laws (Amendment) Act, 1989]