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:

1. Capital gains refer to the profit realized from the sale or transfer of a capital asset, where the selling price is higher than the purchase price (or acquisition cost). The gain arises due to an appreciation in the value of the asset over time. 2. Statement 1 is incorrect. An increase in the sales of a product relates to business revenue or turnover. Profits arising from such sales are typically considered business income, not capital gains. 3. Statement 2 is correct. When there is a natural increase in the value of a property owned (like land or a building), this appreciation represents a potential capital gain. The gain is said to 'arise' or accrue as the value increases, although it becomes taxable only when the property is sold. 4. Statement 3 is correct. When you purchase a painting (which is a capital asset) and its value grows due to increase in its popularity or scarcity, this appreciation constitutes a potential capital gain. Again, the gain arises as the value increases and is typically realized upon sale.