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TMI Blog1986 (1) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... e was effected on1st March, 1982with the resultant effect that the assessee incurred loss of Rs. 25,126 which he claimed as short-term capital loss. The ITO ignore the loss declared by the assessee and instead worked out a short-terms capital gain of Rs. 7,273 which was taken in computation of assessee s total income. The working of the ITO is as under: Saleprice as shown . Rs. 7,775 Less Purchase price : 32,902 . Value of right : 32,400 . . Rs. 502 . The ITO s reasoning being that each debenture holder had a right to subscribe for shares and to be allotted 6 equity shares of Rs. 10 each for cash at premium of Rs. 7.50 per share and in this view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO Anr. (1964) 52 ITR 399 (Punj), Miss Dhun Dada Bhoy Kapadia (Miss) vs. CIT (1967) 63 ITR 651 (SC). The assessee relied before the lower authorities on the cases reported as CIT vs. Dalmia Investments Co. Ltd. (1964) 52 ITR 567 (SC) and Export Farms (Ramgarh) Ltd. vs. CIT (1983) 35 CTR (Del) 170 : (1983) 143 ITR 749 (Del). 3. The assessee being aggrieved is in appeal and we have heard the parties at length. In fact, the hearing was spread over two days viz.5th Dec., 1985and12th Dec., 1985. 4. M/s. Hindustan Development Corporation Ltd. announced public issue of 75,000-13.5 per cent secured debentures of Rs. 100 each for cash at per on 6th May, 1981 and the highlights of the issue were as under: "Public issue of 75,000-13.5 per ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1982 the offer for exercise of option to purchase shares or else its denouncement by the assessee was open between1st March, 1982to31st March, 1982and debentures were, as such, sold after exercise of the option. It is also an admitted fact that the shares are as yet being held by the assessee. 6. Now in the face of the highlights of the issue reproduced as above and the common ground of the parties that the purchase of debentures end the right to receive equity shares is a composite transaction, i.e., one whole transaction, since the shares are as yet being held by the assessee and have not been sold, it cannot be said that within the meaning of s. 2(47) of the Act r/w ss. 45 and 48 of the enactment, there was any transfer of a capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On this reasoning also no capital gain could be assessed in the hands of the assessee. 8. As regards the reliance of the parties before us, which include the decisions relied upon before the lower authorities along with decision of the Hyderabad Bench of Tribunal as stands reported in Trustee of the H.E.H. The Nizam s Dependents Khanazad s Trust vs. ITO (1983) 5 ITD 536 (Hyd), to say the least, the facts in those cases were entirely different inasmuch as in Miss Dhum Dada Bhoy Kapadia vs. CIT (1967) 63 ITR 651 (SC), the facts were that new shares were offered to the holder of the old shares in a company with the right to the holder of old share to renounce and there the assessee renounced the right and the issue before the Hon ble Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res of Rs. 10 each out of which he sold 4,000 equity shares of30th March, 1964showing surplus and that was the issue before the Hon ble High Court. Here the assessee was not holding the debentures and the shares at the same time as a result of single offer and transaction. The High Court decided the issue in holding that capital asset sold being the equity shares and the date of conversion of debentures into equity shares was the date of purchase of shares. The facts, as such, were entirely different. In CIT vs. Dalmia Investments Co. Ltd. (1964) 52 ITR 567 (SC) bonus shares were issued in respect of ordinary shares held in a company by an assessee who was a dealer in shares and their Lordships held that the cost of bonus shares to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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