Question And Answer
Subject: How to compute Capital gains on bankruptcy of a company ?
Querist: Kamalesh Kumar Zaverilal
Answered by:
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Date: May 15, 2021
Query asked by Kamalesh Kumar Zaverilal

“Transfer”, in relation to a capital asset, includes:

(i) Sale, exchange or relinquishment of the asset;

(ii) Extinguishment of any rights in relation to a capital asset;

(iii) Compulsory acquisition of an asset;

(iv) Conversion of capital asset into stock-in-trade;

(v) Maturity or redemption of a zero coupon bond;

(vi) Allowing possession of immovable properties to the buyer in part performance of the contract;

(vii) Any transaction which has the effect of transferring an (or enabling the enjoyment of) immovable property; or
(viii) Disposing of or parting with an asset or any interest therein or creating any interest in any asset in any manner whatsoever.< Query:  Many companies are referred to the IBC/declared bankrupt.  Can the cost of shares be treated as a capital loss? If yes, in which assessment year and whether indexation benefit can be taken?

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Answer given by

Though many companies are indeed referred to the NCLT under IBC and at times declared bankrupt, the question as to whether the cost of shares can be treated as a capital loss is not a question that can be generally answered without a keen appreciation of the facts in each case and without seeing the final order of the said bankruptcy or resolution. The question of benefits of indexation would also depend upon whether the shares were listed or unlisted. As this question has been answered for educational purposes, you are requested to obtain proper legal advice based upon the facts and circumstances of your case by a tax professional of your choice.

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