Its very urgent

This query is : Resolved

sayeeda (Querist)
Follow

02 June 2009 Hi
I have applied for shares and paid the share application money. The money which has been paid by me has been treated as advance. This advance is morethan a old now. Can i sell this advances on discount rates. Is there any restriction or prohibition by any law for the same.

Thanks in anticipation of reply.

taxindiaconnect

taxindiaconnect (Expert)
Follow

02 June 2009 Section 2(47) of the income tax Act defines the transfer for the purpose of section 45 of the Act which deals with the capital gains on the transfer of capital assets. The relevant portion of the section 2(47) is reproduced hereunder
1 [[ "transfer", in relation to a capital asset, includes,-
(i) the sale, exchange or relinquishment of the asset;or
(ii) ------------------- the extinguishment of any rights therein; or
(iii) --------------------------------------------------------------“

Thus a sale of a capital assets is treated as transfer for the purpose of section 45 of IT Act which deals with the gain / loss on transfer of a capital assert.
A question arises that whether a share advance is capital assets or not. One can find the definition of the capital assets in section 2(14) of the Act which provides that the 14) "capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, Then there are certain exclusions provided in the section. A careful reading suggests that the list of exclsuinon does not contain shares in a company. Hence the shares in a company are capital assets for the purposed of section 2(47).
Thus the provisions of section 45 for capital gains are applicable to sale of shares in your question. A capital assets may be long term capital assets or short term capital assets with ht meaning of section 2(42A) and section 2(29). Accordingly the capital gain tax will be levied on the basis of the kind of capital assets you are transferring. The rate of tax for short term capital gain / long term capital gains have been provided in section 111/ 112 of the IT Act.

Since as per above the advance would be treated a capital assets You can sell these advance=ne on discount or premium. I do not see any problem. You need to contact your company for transfer of title of the advance. Any gain or loss will be either a capital loss / gain short term of long term depending upon the period of Holding.