2023 (1) TMI 728 - HC - Income Tax

Taxable capital gain on sale of detachable warrants - Whether detachable warrants attached with Part 'C' of debentures of Deepak Fertilizers and Petrochemicals Ltd. had no conceivable cost of acquisition? - HELD THAT - In the case on hand, it was observed clearly by C.I.T. (Appeals) and the view of it was affirmed by learned Tribunal is on the basis that the appellant itself has clearly stated that it was agreeable to accept the valuation of Assessing Officer at Rs.2.175/- only and it is under such circumstances the Assessing Officer was directed to accept the said valuation and calculate the capital gain accordingly. As such, when the assessee itself has accepted the cost as indicated above, we are of the view that both the authorities have rightly come to the conclusion since the same is based upon the appellant s representation itself. Under the circumstances whether matter was required to be remanded back or not was an issue and not required to be gone into since there appears to be a clear stand of the appellant itself, which has led the authority below to proceed and pass an order now under challenge. Present appellant has tried to rely upon the decision delivered by the Hon ble Apex Court in B.C.Srinivasa case 1981 (2) TMI 1 - SUPREME COURT there was a reference with regard to a goodwill, which was a selfgenerating asset as distinct from the detachable warrant. Hence, the said issue also having been examined by the learned Tribunal before passing the order. We see no error committed by the Tribunal. Conclusions arrived at by the Tribunal as also by the C.I.T. (Appeals) do not require any interference. Undisputedly, according to the appellant itself some value has to be ascribed to the detachable warrants and when such cost was accepted rather agreed to an extent of Rs. 2.175/- which led the C.I.T. (Appeals) to pass the order has been rightly affirmed by the Tribunal - substantial question of law in favour of revenue against assessee.

Summary

Issues involved:
Challenge to decision under Section 260A of the Income Tax Act, 1961 regarding assessment year 1993-94.

Detailed Analysis:

1. Background of the Appeal:
The appellant, a company, held shares of another company and sold detachable warrants attached to debentures in 1992. The Assessing Officer treated the entire sale price as long-term capital gain. The appellant appealed against this decision.

2. Tribunal's Decision:
The Tribunal partly allowed the appeal but affirmed the view of the C.I.T. (Appeals) regarding the valuation of the detachable warrants. The appellant challenged this decision under Section 260A of the IT Act.

3. Appellant's Arguments:
The appellant contended that the detachable warrants had no cost of acquisition and should not be taxed. They argued that the Tribunal erred in affirming the C.I.T. (Appeals) view without proper consideration.

4. Revenue's Arguments:
The Revenue argued that the Tribunal correctly considered the sale of detachable warrants as a capital receipt and determined a cost attributable to the warrants. They relied on precedents to support their position.

5. Court's Analysis:
The Court examined whether the detachable warrants had a cost of acquisition and should be taxed as capital gain. It considered the previous decisions and the appellant's acceptance of a specific valuation for the warrants.

6. Court's Decision:
The Court found that the C.I.T. (Appeals) and the Tribunal had correctly determined a cost for the detachable warrants based on the appellant's acceptance. The Court dismissed the appeal in favor of the Revenue, affirming the Tribunal's decision and the valuation of the detachable warrants.

7. Conclusion:
The Court upheld the Tribunal's decision, emphasizing the appellant's agreement to a specific valuation for the detachable warrants. The judgment favored the Revenue, concluding that the detachable warrants were subject to capital gain tax based on the accepted valuation.