Correct Option (b):
Capital gains refer to the profit realized from the sale of a capital asset that has appreciated in value. The circumstances under which capital gains may arise are:
- When there is a natural increase in the value of the property owned: Property is considered a capital asset. If its value increases over time and it is subsequently sold, the profit earned from such a transaction is a capital gain.
- When you purchase a painting and there is a growth in its value due to an increase in its popularity: A painting, when held as an investment, is a capital asset. If its value appreciates due to factors like increased popularity and it is sold for a price higher than the purchase price, the profit constitutes a capital gain.
Incorrect Options:
- When there is an increase in the sales of a product: An increase in product sales generates business revenue or operational income, not capital gains. Capital gains are distinct from business profits and arise specifically from the appreciation and disposal of capital assets, not from the volume of product sales.
Therefore, options (a), (c), and (d) are incorrect as they either include or solely rely on statement 1, which does not describe a circumstance for capital gains.