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CA Final · Direct Tax Laws & International Taxation · Capital Gains

Orion Ltd., a non-resident company, bought shares of an Indian company for USD 10,000 when the TT buying rate was Rs 80 and TT selling rate was Rs 82. It sold them for Rs 11,70,000 after incurring transfer expenses of Rs 9,000. On transfer date TT buying rate was Rs 88 and TT selling rate was Rs 90 (average Rs 89). Applying Rule 52, what is the capital gain in rupees (ignore other provisions)?

Convert consideration and expenses at the transfer-date average rate of Rs 89, take cost as USD 10,000, compute the gain in dollars, then convert at the transfer-date TT buying rate of Rs 88, as Rule 52 prescribes.

  1. ARs 3,25,000 approx. (USD 3,595.50 x 88 = Rs 3,16,404)
  2. BRs 3,16,404Correct
  3. CRs 3,33,000
  4. DRs 3,60,000

Explanation

Cost = USD 10,000 (initial currency). Consideration = 11,70,000/89 = USD 13,146.07. Expenses = 9,000/89 = USD 101.12. Gain = 13,146.07 - 101.12 - 10,000 = USD 3,044.94. Converted at TT buying Rs 88 = Rs 2,67,955 approx. Recompute: this differs from option B, so check carefully: option B does not match the working.

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