Your Taxes

I had bought 100 shares of Dishman Pharma on October 8, 2012 and again 200 shares on July 29, 2013 through the stock exchange. The company issued bonus shares in the ratio 1:1 on May 13, 2016 (record date May 3, 2016). Thus, I was holding 600 shares. I have been allotted 600 shares of Disman Carbogen Amcis (formerly known as Carbogen Amcis (India)), being shareholder of Disman Pharma as on record date of March 31, 2017 pursuant to the scheme of arrangement. I now do not hold any shares in Dishman Pharma. I sold them (600 shares issued in lieu of 600 held by me in Dishman Pharma) on December 18, 2017. Is there any capital gains tax involved in these moves?

Cyril Dsouza

Transfer of shares in the amalgamating company (Dishman Pharma) pursuant to a scheme of amalgamation in-lieu of shares of the amalgamated company (Disman Carbogen Amcis) is not subject to capital gains taxation. In this case, the amalgamated company (Disman Cabogen Amcis) is listed on a recognised stock exchange in India. Listed shares will be recognised as a long term capital asset if they are held for over 12 months immediately preceding the date of sale. Though in the instant case you have held the shares of Disman Carbogen Amcis for less than 12 months, for the purpose of capital gains computation, the period of holding the shares in Dishman Pharma should also be included.

As a result, these shares would be regarded as long term capital asset. Gains from long term capital asset being listed shares would be exempt from tax as per the provisions of section 10(38) of the Act if you have suffered Securities Transaction Tax (‘STT’) at the time of purchase and sale of shares. Though you might not have incurred STT at the time of issue of bonus shares, the Government has provided specific exemption from this requirement for shares acquired through bonus issue. Hence, there would not be any capital gains incidence.

I purchased my flat in 1996 for ₹5 lakh and sold it in December 2017. For cost inflation index (CII), base period has changed from 1981-82 to 2001-02. Please inform me how to compute cost of flat or fair market value of my flat in 2001-02 -by a valuer or by computing CII cost of flat in 2001-02 based on previous base period?

D Chanda

For the purpose of computing long term capital gains on sale of asset acquired prior to April 1, 2001, income tax regulations provide an option to consider either the cost of the property or the fair market value (FMV) of the asset as on April 1, 2001.

FMV means the price that the asset would ordinarily fetch on sale in the open market on the relevant date. The Act does not provide any specific methodology for arriving at the FMV of the asset. The sale value of similar flats by the local development authorities, housing boards, nationalised banks etc or stamp duty value or valuation undertaken by a registered valuer may provide appropriate basis for determining the FMV of the property on April 1, 2001.

The writer is Partner, Deloitte India.. Send your queries to taxtalk@thehindu.co.in

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