UPSC 2012: Under which of the following circumstances may ‘capital gains’ arise? 1. When there is an increase in the sales of a product 2. When there is a natural increase in the value of the property owned 3. When you purchase a painting and there is a growth in its value due to increase in its popularity Select the correct answer using the codes given below:

Capital gains arise from appreciation in the value of a capital asset (property, artwork, securities, etc.) and are taxable when the asset is transferred. A rise in product sales is business income, not a capital gain (statement 1 wrong). Natural appreciation of property (2) and appreciation in an acquired painting’s value (3) constitute capital gains when realised, so 2 and 3 are correct. ([testbook.com](https://testbook.com/question-answer/under-which-of-the-following-circumstances-may-3--601d60063aee2f7efe186d8c?utm_source=openai))