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Capital Asset

Capital Asset

Capital Asset is defined to include:

  1. Any kind of property held by an assesse, whether or not connected with business or profession of the assesse.
  2. Any securities held by a FII which has invested in such securities in accordance with the regulations made under the SEBI Act, 1992. However, the following items are excluded from the definition of “capital asset” :
    1. any stock-in-trade (other than securities referred to in (b) above), consumable stores or raw materials held for the purposes of his business or profession ;
    2. personal effects, that is, movable property (including wearing apparel and furniture) held for personal use by the taxpayer or any member of his family dependent on him, but excludes-
      1. jewellery;
      2. archaeological collections;
      3. drawings;
      4. paintings;
      5. sculptures; or
      6. any work of art.
        Jewellery” includes –
      1. ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stones, and whether or not worked or sewn into any wearing apparel; precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel;
    3. Agricultural Land in India, not being a land situated:
      1. ithin jurisdiction of municipality, notified area committee, town area committee, cantonment board and which has a population of not less than 10,000;
      2. Within range of following distance measured aerially from the local limits of any municipality or cantonment board:
        1. not being more than 2 KMs, if population of such area is more than 10,000 but not exceeding 1 lakh;
        2. not being more than 6 KMs , if population of such area is more than 1 lakh but not exceeding 10 lakhs; or
        3. not being more than 8 KMs , if population of such area is more than 10 lakhs.Population is to be considered according to the figures of last preceding census of which relevant figures have been published before the first day of the year.
    4. 61/2 per cent Gold Bonds,1977 or 7 per cent Gold Bonds, 1980 or National Defence Gold Bonds, 1980 issued by the Central Government;
    5. Special Bearer Bonds, 1991;
    6. Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999. Following points should be kept in mind:
      • The property being capital asset may or may not be connected with the business or profession of the taxpayer. E.g. Bus used to carry passenger by a person engaged in the business of passenger transport will be his capita asset.
      • Any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 will always be treated as capital asset, hence, such securities cannot be treated as stock-in-trade.

Though there is no definition of “property” in the Income-tax Act, it has been judicially held that a property is a bundle of rights which the owner can lawfully exercise to the exclusion of all others and is entitled to use and enjoy as he pleases provided he does not infringe any law of the State. It can be either corporeal or incorporeal. Once something is determined as property it becomes a capital asset unless it figures in the exceptions mentioned above.

Capital Asset

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