9911796707
TMI Blog1999 (10) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... clusive of cost of Right purchased of ₹ 5,17,575 of ₹ 18,05,075. Pursuant to the terms of the issue of the said debentures, the assessee was allotted 10,300 fully paid-up equity shares of the face value of ₹ 12.50 each. The assessee has sold on different dates during the year of account relevant for the assessment year 1984-85 the said debentures with residual rights, i.e., rights after the allotment of the shares on 30-6-1983, for ₹ 9,25,309 in the aggregate. The assessee has sold the equity shares received against the convertible debentures for ₹ 10,17,125. 4. In the return of income, the result of the sale of the debentures was disclosed as a loss of ₹ 6,99,258 and the result of the sale of the shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntures has been worked out on the basis of the difference of the sale proceeds of the debentures and their cost of acquisition after reducing the cost allocable to the convertible portion of the debentures. While working out the short term capital loss on the sale of equity shares, it took as the cost of acquisition of shares not the cost of the debentures allocable to the convertible portion, which is ₹ 1,80,508 but the depreciation in the value of the debentures consequent to their conversion into equity shares. For adopting the depreciation in the value of the debentures as the cost of acquisition of the shares, acquired on conversion, the assessee relied upon the ratio of the decision of the Apex Court in the case of Miss Dhun Dad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original and total cost of debentures cum equity (regarding convertible) including premium totalling to ₹ 125 per convertible share. Dhun Kapadia decision did not consider these overall situations and absurdity that cost of total is more than what is actual cost including the premium. Other ways more damaging to appellant will be to take cost at ₹ 12.50 per equity share (i.e. 10%) which is as per Controller of Capital Issue at issue of convertible debentures, or ₹ 86 which was equity price a little later in Oct./Nov. 1983. There is no justification for claiming ₹ 99 and claiming for debentures original full cost, thus claiming a total loss of ₹ 7 lakhs against actual profit of ₹ 1,37,000 on the same co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be ignored simply because a particular plea was not raised before it and accordingly was not considered. 6. The learned Departmental Representative on the other hand invited our attention to the provisions of section 49(2A) of the Income-tax Act which has been introduced by the Finance (No. 2) Act, 1991, with retrospective effect from 1-4-62, which reads as follows :- Where the capital asset, being a share or debenture in a company, became the property of the assessee in consideration of a transfer referred to in clause (x) of section 47, the cost of acquisition of the asset to the assessee shall be deemed to be that part of the cost of debenture, debenture stock or deposit certificates in relation to which such asset is acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... einabove. This provision is applicable in transactions of the type under consideration in terms of section 47(x). The relevant terms of the letter of offer of debentures dated 10-2-1983 issued by the company, Maheshwari Mills Ltd., had the following clauses :- 3. Principal terms of the debentures The Debentures now being issued are subject to the Memorandum and Articles of Association of the Company, the terms of this Letter of offer and the Application Form : (i) Value: The Debentures have a face value of ₹ 125 each comprising a convertible part of ₹ 12.50 and non-convertible part of ₹ 112.50 issued in two parts, Part A of ₹ 12.50 and Part B of ₹ 112.50. (ii) Conversion terms : (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
