2019 (11) TMI 359 - AT - Income Tax

Capital gain computation - cost of acquisition of shares of BSE Ltd. - whether shall be the original cost of acquisition of membership card in terms of Section 55(2)(ab) even though assessee has claimed depreciation on the cost of membership card in the earlier years? - HELD THAT - Since, majority view now is that the cost of acquisition of shares of BSE Ltd. shall be the original cost of acquisition of Membership called in term of section 55(2)(ab) of the Act and period of holding of shares of BSE Ltd will be period for which the person was a member of the recognised stock exchange in India immediately prior to such de-mutualisation or corporatisation shall also be included in the period of holding of shares i.e. period of shares of BSE Ltd shall be reckoned from the date of original members of the BSE and not from the date of allotment of shares in BSE Ltd. This conformity order is accordingly passed.

Summary

Issues: Interpretation of cost of acquisition of shares of BSE Ltd. and period of holding of shares.

Interpretation of Cost of Acquisition of Shares:
The judgment addressed the issue of determining the cost of acquisition of shares of BSE Ltd. The third member concurred with the view taken by the judicial member, emphasizing that the cost of acquisition should be the original cost of acquisition of the membership card as per Section 55(2)(ab) of the Act. It was noted that even if the assessee had claimed depreciation on the cost of the membership card in previous years, the original cost of acquisition should be considered for shares of BSE Ltd.

Interpretation of Period of Holding of Shares:
Regarding the period of holding of shares of BSE Ltd., the judgment analyzed the impact of clause (ha) inserted in Explanation 1 to Section 2(42A) of the Act by the Finance Act, 2003. It was established that the period for which the person was a member of the recognized stock exchange in India immediately before demutualization or corporatization should be included in the period of holding of shares. The judgment clarified that the period of holding of shares of BSE Ltd. should be calculated from the date of original membership of BSE, not from the date of allotment of shares in BSE Ltd.

Conclusion:
The majority view of the Tribunal was that the cost of acquisition of shares of BSE Ltd. should be the original cost of acquisition of the membership card as per Section 55(2)(ab) of the Act. Additionally, it was determined that the period of holding of shares should be reckoned from the date of original membership of BSE, considering the period for which the person was a member of the recognized stock exchange in India before demutualization or corporatization. Consequently, the appeal of the assessee was allowed, and the conformity order reflecting the Tribunal's decision was passed on 18.10.2019.