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TMI Blog2012 (4) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... peals are allowed - IT Appeal Nos. 170 & 171 (Mds.) of 2012 - - - Dated:- 28-2-2012 - Abraham P. George, Vikas Awasthy, JJ. N. Devanathan for the Appellant. Anirudh Rai and K.E.B. Rengarajan for the Respondent. ORDER Abraham P. George, Accountant Member These are appeals filed by different assessees which are directed against a consolidated order dated 1.12.2011 of Commissioner of Income Tax (Appeals)-IV, Chennai, for the impugned assessment year. 2. Short facts apropos are that assessees, non-residents, had filed their return on 29.8.2008 declaring an income of Rs. 2,05,93,100/- and Rs. 1,05,00,000/- respectively. The source of income declared by the assessees were capital gains on sale of shares of a company called M/s Breeze Hotels Ltd. Assessees had computed tax on such capital gains based on the concessional rate given in Section 115E of Income-tax Act, 1962 (in short 'the Act'). During the course of assessment proceedings, A.O. noted that capital gains arose out of sale of 14,06,090 shares in the case of assessee Smt. Deivanayagam Maruthini and 7,00,000 shares in the case of the assessee Shri Eassuwaran Deivanayagam of M/s Breeze Hotel Ltd. and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... using convertible foreign exchange and the said specified asset as per sub-section (f) of the same Section included shares with an Indian company. Learned A.R. submitted that there was no dispute that assessees had acquired the original shares on which bonus shares were received by them, using convertible foreign exchange. Hence, according to him, bonus shares issued on such shares also had to be necessarily considered as per specified asset only. Strong reliance was again placed on the decision of Mumbai Bench in the case of Sanjay Gala ( supra ). According to him, the said decision though in relation to Section 115F, both Sections 115E and 115F fell under Chapter XII-A and only difference was that Section 115E dealt with rate of tax, whereas Section 115F dealt with exemption on capital gains on transfer of foreign exchange asset when investments as specified therein were made. 5. Per contra, learned D.R. strongly supported the orders of authorities below. 6. We have perused the orders and heard the rival submissions. The question before us is whether concessional rate mentioned in Section 115E could be applied to long term capital gains derived by the assessee on sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings certificates being hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,- ( a ) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; ( b ) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the new asset bears to the net consideration shall not be charged under section 45. Explanation.- For the purposes of this sub-section, - ( i ) "cost", in relation to any new asset, being a deposit 7 [***] referred to in sub-clause ( iii ), or specified under sub-clause ( v ), of clause ( f ) of section 115C, means the amount of such deposit; ( ii ) "net consideration", in relation to the transfer of the original asset, means the full value of the consideration received or accruing as a result of the transfer of such asset as reduced by any expenditure incurred wholly and exclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision, it is clear that foreign exchange asset for the purpose of section 115F is the one which assessee has acquired in convertible foreign exchange. In the present case, the assessee subscribed to shares in convertible foreign exchange and acquired the foreign exchange asset. In so far as this aspect is concerned, there is no dispute from the revenue authorities. The only dispute is with regard to the bonus shares received by the assessee. The objection of the revenue authorities is that the assessee has received the bonus shares without investing any convertible foreign exchange. We are of the view that the assessee acquired the original shares by investing in convertible foreign exchange and, therefore, it cannot be said that the bonus shares are acquired in isolation without taking into consideration the original shares acquired by the assessee. The Hon'ble Supreme Court and various High Courts have considered the issue with regard to value of the bonus shares and held that "the method of spreading over on both the bonus and the original shares the cost of acquisition of the original shares would appear to be the proper method of determining the value of the asset. For, there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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