Session 2/3 Day 1. Audio Commentary by Anthony Williams (FPFA,LLB) to be added soon. For 1 on 1 discussion call +92-321-4409009, 0321-4409009, 92-42-35925972

1. Head of Income

2. Concept
 Gain on the
 disposal of capital asset
 is considered as “Capital Gains” and
 Is taxable under the Head “Capital
Gains”
 Q: Is sale of Capital assets taxable ?
 A: No. only gains are taxable and
losses are deductable

3. Overview (pg 180)
 Computational Formulae
Consideration > Cost
 Normal Gain Situation
 Example 11.1
 Zero Gain Situation
 Please answer Q2 (a) (i) March 2007
 Reduced Gain Situation
 Example 11.2

4. Overview (pg 181)
 Capital Loss
Consideration < Cost
 Disallowed Capital Losses (Exceptions)
 Please answer Q6 (a) March 2007

5. Bonus Shares (pg 182)
 What are bonus shares ?
 Please write down the double entry for
them
 Are they income as per IT Ordinance 2001
of shareholders ?
 Problem with valuation of bonus shares
 They are given free of cost to share
holders
 How to calculate cost of bonus shares at
time of disposal of shares ?

6. Example: Valuation of Bonus
Shares
Ex: 10,000 shares of a private company of
face value of Rs.10 each were
purchased @Rs.15 per share. 2000
bonus shares were received and total
12,000 shares were sold @Rs.16 per
share.
Compute the gain / loss arising from the
above transaction ?

7. Rule
 In respect of valuation of bonus shares for
determination of capital gains, it has been
held by Supreme Court that
 The cost of the old shares
 Would be spread over the
 Total number of shares including bonus
shares
Value per share = Cost of Shares / Total No.
of
Share

8. Answer
Particulars Original Shares Bonus Shares Total
Sales
Proceeds@16
160,000 32,000
Cost of
Acquisition
150,000 /
12,000 = 12.5
per share
125,000 25,000
Capital Gain 35,000 7,000 42,000

9. Exemptions
 Gain on sale of shares of Public
Company
 Gain on sale of membership right or
shares of a stock exchange in Pakistan
along with a room in the stock exchange
transferred by an individual to a
company
 Please indentify the above capital
assets in Q3(a) September 2007