Question

The expression ‘Capital asset’ given under Section 2(14) of the Income Tax Act, 1961, does not include:

• A. Raw materials held for the purposes of business or profession of an assessee
• B. Securities held by a Foreign Institutional Investor, who has invested in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992
• C. Precious stones sewn into a wearing apparel
• D. Agricultural land in India, situated within the jurisdiction of a municipality

Hint:

Stock-in-trade is excluded from “capital asset” under the Income Tax Act.

Answer 1

The Correct Option is A

Step 1: Meaning of capital asset.
Section 2(14) defines “capital asset” broadly but expressly excludes certain categories.
Step 2: Stock-in-trade exclusion.
Raw materials held for business or profession constitute stock-in-trade and are specifically excluded from the definition of capital asset.
Step 3: Inclusion of other items.
Securities held by FIIs, precious stones embedded in apparel, and urban agricultural land are included within the scope of capital assets.
Step 4: Conclusion.
Therefore, the correct answer is (A).