9911796707
TMI Blog2013 (5) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... served that the assessee had purchased the warrants by paying 10% of the pre-determined price of the shares. There was an option for the assessee to get the said warrants converted into shares by paying 90% of the amount within the stipulated period, the non-payment of which would have resulted in forfeiture of the money. While computing the income of the assessee, the AO has wrongly and illegally interpreted proviso (iv) to section 48 of the I.T. Act. A bare perusal of the said proviso reveals that the same is attracted in case the shares, debentures or warrants are transferred by the assessee to some other person without receiving any consideration in terms of money and in that event market value of the asset on the date of such transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer within the meaning of Section 2(47)(i) and income earned on such transfer is covered as per the provisions of Section 48 of the I.T.Act. 2. The brief facts of the case are that the assessee filed its return of income declaring total income at Rs. 59,98,660. During the assessment proceedings u/s. 143(3) of the I.T.Act the AO noticed that during the F.Y. 2006-07 the assessee company was allotted 7,00,000 warrants of Rs.100 each. The warrant holder in terms of the said allotment was asked to pay 10% of the cost of the said warrant i.e. Rs.70 lacs. During the year under consideration, the said warrants were converted into equity shares on the total payment of the remaining cost price of Rs.6,30,00,000. The AO found that the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is complete force in the appellant s submission. The appellant company did not extinguish its any right over the warrant. The said warrant was allotted on application to the appellant company. There was an option available with the appellant company which embedded in the warrant itself for the appellant company to make an application for allotment of share after making necessary compliance as stipulated in the Conditions and Covenants of Warrants specified in the said warrant. Thus the appellant company had an option for making application for allotment of equity share as per terms and conditions laid down specifically stated in the Covenants as placed in the offer of the issuing company. I find that the A.O. has wrongly used the deemin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o made by the A.O. of Rs.9,45,00,000 is deleted. Thus, the appellant this ground of appeal is allowed. 3.11 Besides this, even I find that the alternative argument of the A.O. of taxability of the said benefit in the hands of the appellant company u/s. 28(iv) of the Act is misplaced and it is held in the preceding para that the appellant company was not at all benefited of any kind of receipt either convertible in the form of money or any kind then the question of taxability of such non-existing thing u/s. 28(iv) of the Act does not arise. Accordingly, I consider it proper an appropriate to hold that the A.O. was not justified even while proposing to tax the appellant company u/s. 28(iv) of the Act alternatively. Then this proposition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a higher price. The shares have been retained by the assessee and the gain or fall in the market value of the said shares does not itself constitute any transfer under the Act. The purchase of shares at a specified rate, which were booked by paying 10% amount in advance neither amounts to any transfer of shares or warrant by the assessee nor does it invite any tax liability under the Act. While computing the income of the assessee, the AO has wrongly and illegally interpreted proviso (iv) to section 48 of the I.T. Act. A bare perusal of the said proviso reveals that the same is attracted in case the shares, debentures or warrants are transferred by the assessee to some other person without receiving any consideration in terms of money an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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