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TMI Blog2016 (2) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... es of BSE Limited so allotted on 10-10-2005. The assessee company shall not be entitled for claiming benefit of cost inflation indexation from the period 10-07-2000 i.e. date of acquisition of membership of BSE till 10-10-2005 i.e. when the 10000 equity shares are allotted by BSE Limited along with trading rights in BSE Limited, in lieu of membership of BSE. The assessee company on demutualization or corporatization of BSE Limited is holding 10000 equity shares of BSE Limited and trading right both as assets w.e.f 10-10-2005 . The assessee company shall be entitled to claim benefit of cost inflation index on the sale of 4562 equity shares so sold in the previous year relevant to assessment year 2008-09, from the assessment year 2006-07 till the current assessment year i.e. 2008-09. We order accordingly - Decided against assessee - I .T.A. No. 2640/Mum/2012 - - - Dated:- 10-2-2016 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : None For The Revenue : Shri Rakesh Ranjan,DR ORDER PER RAMIT KOCHAR, ACCOUNTANT MEMBER : This appeal, filed by the assessee company, being ITA No. 2640/Mum/2012, is directed against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deduction on the same asset, under the two different provisions of the Act. The AO allowed the written down value of the BSE card as the cost, and indexation on account of cost inflation was also allowed from the financial year 2005-06 when demutualization and corporatization of BSE took place and accordingly long term capital gains arising from sale of 4562 shares of BSE was computed at ₹ 1,45,80,661/- chargeable to tax under the Act vide assessment orders dated 16.11.2010 passed u/s 143(3) of the Act . 4. Aggrieved by the assessment orders dated 16.11.2010 passed u/s 143(3) of the Act by the AO, the assessee company filed first appeal with the CIT(A). The assessee company submitted that Long Term Capital Gain is to be computed as per Section 55(2)(ab) of the Act which unconditionally mandate to take the cost of acquisition of the original membership of the exchange as the cost of the shares allotted pursuant to a scheme for demutualization or corporatization of BSE. The assessee company submitted that the assessee company acquired BSE membership card/trading rights on 20-07-2000 for ₹ 2,41,00,000/- which shall be allowed as cost of acquisition of the 10000 shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decide the appeal as despite several opportunities , the assessee company did not appear before the Tribunal when appeal was called for hearing. We have observed that the assessee company is a member of Bombay Stock Exchange and is engaged in the business of share broking. It is stated that the assessee company acquired the membership of Bombay Stock Exchange(BSE) on 20-07-2000 for ₹ 2,41,00,000/- and it claimed depreciation u/s 32 of the Act on the membership of BSE by treating it as part of block of asset being intangible asset u/s 32(1)(ii) of the Act which was allowed by the Revenue. The BSE was Association of Person (AOP), controlled and managed by trading members who held membership cards prior to demutualization and corporatization of BSE in the year 2005. Securities and Exchange Board of India(SEBI), a Government regulatory body directed that all the exchanges in the country should be demutualised and they should be managed by a company where share-holding is held by public at large and not merely by stock brokers and traders who hold trading rights. BSE, therefore, implemented demutualization process whereby first it converted itself into a company and subsequently a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SE i.e. 10-10-2005 when the assessee company got 10000 shares in BSE Limited and trading rights in BSE Ltd., shall be allowed as cost of acquisition of shares in view of provisions of Section 55(2)(ab) of the Act and period of holding for the indexation purposes shall also be reckoned from the date of demutualization or corporatization of BSE on 10-10-2005 and not from the date of acquisition of original membership of BSE by the assessee company on 20-07-2000, as the said original membership of BSE being intangible asset formed part of block of assets on which the assessee company has claimed depreciation u/s 32 of the Act and in view of provisions of Section 50 of the Act , written down value of the block of assets as at the beginning of previous year , inter-alia, corresponding to the proportionate shares sold shall be reduced from the full value of consideration received by the assessee company on sale/transfer of 4562 equity shares of BSE Limited. At this stage it will be relevant to refer to the provisions of the relevant Section s of the Act as under: 2. In this Act, unless the context otherwise requires,- .. .. (42A) [ short-term capital asset means a ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be deemed to be the capital gains arising from the transfer of short-term capital assets; (2) where any block of assets ceases to exist as such, for the reason that all the assets in that block are transferred during the previous year, the cost of acquisition of the block of assets shall be the written down value of the block of assets at the beginning of the previous year, as increased by the actual cost of any asset falling within that block of assets, acquired by the assessee during the previous year and the income received or accruing as a result of such transfer or transfers shall be deemed to be the capital gains arising from the transfer of short-term capital assets.] Meaning of adjusted , cost of improvement and cost of acquisition . 55. (1) For the purposes of [sections 48 and 49],- .. .. (2) [For the purposes of sections 48 and 49, cost of acquisition ,- . [(ab) in relation to a capital asset, being equity share or shares allotted to a shareholder of a recognised stock exchange in India under a scheme for [demutualisation or] corporatisation approved by the Securities and Exchange Board of India established under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such consideration received or accruing as a result of the transfer of any other capital asset falling with in the block of asset during the previous year , exceeds the aggregate of the (i) expenditure incurred wholly and exclusively in connection with such transfer (ii) the written down value of the block of asset at the beginning of the previous year; and (iii) the actual cost of any asset acquired during the previous year, such excess shall be deemed to be the capital gains arising from the transfer of short-term capital assets .While Section 50(2) of the Act provides that when block of asset ceases to exist as such, for the reasons that all the assets in that block are transferred during the previous year , the cost of acquisition of the block of asset shall be written down value of the block of asset at the beginning of the previous year, as increased by the actual cost of any asset falling within that block of assets, acquired during the previous year and the income received or accruing as a result of such transfer or transfers shall be deemed to be the capital gains arising from the transfer of short-term capital assets. Whereas Section 55(2)(ab) of the Act stipulates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be taken to be written down value of asset as at the beginning of the previous year. The Section 50 of the Act starts with a non-obstante clause and stipulate that notwithstanding anything contained in Section 2(42A) of the Act, the provisions of Section 48 and 49 of the Act shall be applied subject to the modifications as stipulated which , inter-alia, provides that cost of acquisitions shall be deemed to be written down value of the block of asset as at the beginning of the previous year and actual cost of any asset falling with the block of asset acquired during the previous year , for the purposes of computing capital gains which shall be deemed to be arising from the transfer of short-term capital assets . Thus, Section 50 of the Act clearly stipulate that the original cost of acquisition of the depreciable assets shall not be taken as cost of acquisition for the purposes of computing capital gains under the Act but the written down value as at the beginning of the previous year shall be deemed to be cost of acquisition of the depreciable asset . Further, benefit of indexation of cost of acquisition shall also not be available as provided u/s 48 of the Act because Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r who has been allotted equity share or shares under such scheme of demutualization or corporatization , shall be deemed to be nil, by virtue of provisions of Section55(2)(ab) of the Act. While by virtue of Special provisions as contained in Section 50 of the Act , Section 48 and 49 of the Act shall be applicable subject to such modification as stipulated by Section 50 of the Act, which inter-alia provides , that cost of acquisition shall be taken to be written down value as at the beginning of the previous year and it is well settled proposition that special provisions shall prevail on the general provisions because if a special provision is made on a certain matter, that matter is excluded from the general provision. Section 55(2)(ab) of the Act while referring to cost of acquisition of original membership of the exchange has to subjugate itself and cost of acquisition referred therein Section 55(2)(ab) of the Act for the purposes of Section 48 and 49 of the Act being cost of acquisition of original membership will mean thereby cost of acquisitions for the purposes of Section 48 and 49 as modified by Section 50 of the Act which shall be taken to be written down value as at the be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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