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Issues:
1. Whether the transaction involving receipt of cash by the assessee in lieu of shares held in an amalgamated company falls within the ambit of section 47(vii) of the Income Tax Act, 1961? 2. Whether the transaction amounts to a transfer in terms of section 2(47) of the Act, leading to liability for capital gains tax? Analysis: 1. The case involved the assessee purchasing shares of Bank of Baroda, which were later amalgamated with another company. The assessee opted to receive cash in lieu of shares, leading to a dispute regarding the applicability of section 47(vii) of the Act. The Appellate Assistant Commissioner allowed the appeal, but the Tribunal reversed the decision. The court was tasked to determine if the transaction qualified for exemption under section 47(vii). The revenue argued that the assessee, by choosing cash over shares, forfeited the benefit of the exemption. Section 47(vii) exempts transfers in a scheme of amalgamation if certain conditions are met. The court analyzed the provisions of the Act and the nature of the transaction to decide on the applicability of the exemption. 2. The crux of the issue revolved around whether the transaction constituted a transfer under section 2(47) of the Act, thereby attracting capital gains tax liability. The court referred to the definition of "transfer" under the Act, which includes various modes such as sale, exchange, or relinquishment of the asset. Citing the Supreme Court's decision in Kartikeya V. Sarabhai v. CIT, the court emphasized that relinquishment or extinguishment of rights in a capital asset amounts to a transfer. In a similar case discussed in the judgment, the reduction of share capital resulted in capital gains tax liability. Applying these principles, the court concluded that the receipt of cash by the assessee led to the extinguishment of rights in the shares, constituting a transfer under section 2(47) and triggering capital gains tax liability. In summary, the court held in favor of the revenue, ruling that the transaction involving the receipt of cash by the assessee in lieu of shares constituted a transfer under the Act, making the assessee liable for capital gains tax. The judgment provided a detailed analysis of the provisions of the Act, relevant case law, and the nature of the transaction to arrive at a conclusive decision.
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