Determine the capital gains/loss on transfer of listed equity shares (STT paid both at the time of acquisition and transfer of shares) and units of…

(a) First alternative For the purpose of computation of long-term capital gains chargeable to tax under section 112A, the cost of acquisition in relation to the long-term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust acquired before 1 st February, 2018 shall be the higher of (a) cost of acquisition of such asset, i.e., actual cost; and (b) lower of (i) the fair market value of such asset as on 31.1.2018; and (ii) the full value of consideration received or accruing as a result of the transfer of the capital asset. (i) The fair market value of listed equity shares as on 31.1.2018 is the highest price quoted on the recognized stock exchange as on that date. Accordingly, long-term capital gain on transfer of STT paid listed equity shares by Mr. Shagun would be determined as follows: The FMV of shares of A Ltd. would be - 700, being the highest price quoted on National Stock Exchange on 31.1.2018. The cost of acquisition of each equity share in A Ltd. would be - 700, being higher of actual cost i.e.,400 and - 700 [being the lower of FMV of 700as on 31.1.2018 (i.e., the highest trading price) and actual sale consideration of 1,200]. Thus, the long-term capital gain would be - 1,50,000 i.e., (₹ 1,200 - 700) x 300 shares. The long-term capital gain of 50,000 (i.e., the amount in excess of 1,00,000) would be subject to tax@10% under section 112A (plus cess@4%), without benefit of indexation. The tax on capital gain @10.4% would be - 5,200 (₹ 50,000 x 10.4%) (ii) In the case of units listed on recognised stock exchange on the date of transfer, the FMV as on 31.1.2018 would be the highest trading price on recognised stock exchange as on 31.1.2018 (if units are listed on that date), else, it would be the net asset value as on 31.1.2018 (where units are unlisted on that date). Accordingly, the FMV of units of Fund A as on 31.1.2018 would be - 750 (being the highest trading price on 31.1.2018, since the units of Fund A are listed on that date). The cost of acquisition of a unit of Fund A would be - 750, being higher of actual cost i.e.,550 and - 750 (being the lower of FMV of 750as on 31.1.2018 and actual sale consideration of 900). Thus, the long-term capital gains on sale of units of Fund A would be - 30,000 (₹ 900 - 750) x 200 units. Since the long term capital gains on sale of units of Fund A is 30,000, which is less than - 1,00,000, the said sum is not chargeable to tax under section 112A.