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TMI Blog2020 (3) TMI 591X X X X Extracts X X X X X X X X Extracts X X X X ..... ear has shown long term capital gain of Rs. 1,79,77,183/- on sale of shares of BSE Ltd. The assessee sold 6386 of shares of BSE Ltd. for a consideration of Rs. 3,32,07,200/- and after claiming the index cost of acquisition of Rs. 1,52,30,017/- from the sales consideration ,the long term capital gain was computed at Rs. 1,79,77,183/-. The assessee was a holder of BSE membership card which was purchased in May 2000 for a value of Rs. 2,50,90,000/- and thereafter the assessee claimed the depreciation on the said card from A.Y. 2001-02 to A.Y. 2005-06. In August 2005 the BSE underwent demonization and corporatization. Under the said scheme, the BSE card holders were allotted equity shares of Rs. 1/- each. The assessee opted for the scheme and was accordingly allotted 10,000 shares of Rs. 10,000/-. Out of the said shares assessee sold 6,386/- shares back to BSE on 17.05.2007 and on the sale of these shares , assessee computed long term capital gain of Rs. 1,79,77,183/-. While computing the long term capital gain the assessee took the cost of acquisition of shares at Rs. 2,60,90,000/- which was calculated by adding together the original cost of acquisition of BSE membership card i.e. Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e observe that the identical issue has been decided by the co-ordinate bench 3rd Member wherein it has been held that the cost of acquisition of the shares of BSE shares shall be the original cost of acquisition to the members of card in terms of section 55(2)(ab) of the Act even though the assessee has claimed depreciation on the cost of membership card in the earlier year. The operative part of the decision is reproduced as under: "24. I have heard the rival submissions and considered the material on record. Ostensibly, the facts have been succinctly noted in the earlier paras, and there is no dispute on facts. The controversy before me is whether the cost of shares allotted to members of BSE pursuant to its corporatisation/ de-mutualisation should be computed as per Section 50 or 55(2)(ab) of the Act in a situation where the assessee had already claimed depreciation on the BSE membership card and whether the indexation benefit will be available to the assessee from the date of acquisition of BSE membership card or from the date of allotment of shares in BSE Ltd. To recapitulate, and as discussed in earlier part of the order, the assessee acquired BSE membership card for Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: "[Special provision for computation of capital gains in case of depreciable assets. 50. Notwithstanding anything contained in clause (42A) of section 2, where the capital asset is an asset forming part of a block of assets in respect of which depreciation has been allowed under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), the provisions of sections 48 and 49 shall be subject to the following modifications :" (underlined for emphasis by me) As is evident from a perusal of Section 50 of the Act, in order to get governed by the provisions of Section 50 of the Act, twin conditions need to be satisfied; namely, the capital asset must be an asset forming part of block of assets; and, depreciation must have been allowed on the said assets under the Act. 26. I shall now test whether the above twin conditions are fulfilled in the present case or not. Firstly, I shall make it clear that the asset which is being transferred and on which capital gains is being computed is the share of BSE Ltd. Neither the Assessing Officer nor the learned Accountant Member has given a finding that the shares of BSE Ltd. was ever forming part of block of assets of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a plain reading of the section, there is no ambiguity, a facet, which even the learned Accountant Member agrees to. The interpretation accepted by the learned Accountant Member will require one to go beyond the language employed in the section, even when there is no ambiguity in the text of Section 55 of the Act. The above aspect also gets support when one is to consider the provisions of Section 50 and 55(2)(ab) of the Act, as the following discussion would show. I further find that provisions of Section 50 of the Act are general in nature and does not provide for any case specific situation. The provisions of Section 55(2)(ab) of the Act were subsequently brought into statute book and specifically provides for cost of acquisition of the shares allotted to the members of the BSE pursuant to the Corporatization and Demutualization. Thus, Section 55(2)(ab) of the Act is a specific provisions dealing with the present situation. It is well-settled law that a specific provision shall prevail over the general provision. Therefore, I find that provisions of Section 55(2)(ab) of the Act, being specific in nature, shall prevail over Section 50 of the Act, which is general in nature. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the way the learned DR has canvassed, it will surely make the provisions of Section 55(2)(ab) of the Act redundant and infructuous, an approach which ought to be avoided, especially when the language of Section 55(2)(ab) of the Act is unambiguous and clear. 29. At this stage, it would also be important to refer the cases, which arose in a situation wherein the cost of purchase of fixed assets by the Charitable Trusts was allowed as application of income in the year of purchase and on the same cost of purchase, the Trusts were allowed depreciation in subsequent year, leading to making of a charge of double deduction by the Assessing Officer. The matter travelled upto the Hon'ble Supreme Court in the case of Rajasthan and Gujarati Charitable Foundation (supra) and the Trust's claim of both application of income and depreciation was upheld by the Hon'ble Supreme Court, though it had imprints of a double deduction. It also pertinent to refer to the decision of the Hon'ble Bombay High Court in the case of A.L.A. Chemicals (P.) Ltd. (supra) wherein the facts were that the assessee-company claimed deduction under Section 35 of the Act in respect of capital expenditure incurred on scie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dditional deduction which is calculated as a percentage of the capital employed by the assessee in certain undertakings as set out in section 80J. Section 80J(1A)(II) prescribes the manner of ascertaining the value of such capital assets. The assets which are to be taken into account for computation of capital are also specified in that section. These include under sub-clause (i) of section 80J(1A)(II) assets entitled to depreciation. In that case their written down value has to be taken into account. It also includes assets which are acquired by purchase and which are not entitled to depreciation, such as, assets in the present case. In the case of such assets, we have to take into account the actual cost of such assets to the assessee. Since the assets are acquired by the assessee by purchase, the actual cost would certainly include at least the price of those assets to the assessee, though it may also include something more as we have pointed out earlier. This section also includes in addition assets which may be acquired by an assessee otherwise than by purchase which are not entitled to depreciation. These may be assets which may be gifted to the assessee. Their actual cost to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was to the effect that Section 50 will apply only to cases where the depreciation had been obtained by "the assessee". The assessee before the Hon'ble Madras High Court was the new partnership firm formed after dissolution of the old firm. The case of the Revenue was that the WDV as on the date of dissolution of the firm was to be adopted for the purposes of calculation of Capital Gain, which was resisted by the assessee therein. The claim of the Revenue, based on Section 50 of the Act, was negatived by the Hon'ble High Court on the ground that the assessee-firm had not obtained depreciation after the asset became property of the newly constituted firm, which was the assessee therein. Applying the same analogy, it is quite pertinent to find herein that the asset, which is the subject-matter of consideration, has not suffered depreciation and therefore Section 50 of the Act cannot be applied. The claim of depreciation on the old asset is of no relevance to address the present controversy. In fact, at this stage, I may refer to the observation of the learned Accountant Member at para 7.6 of his order. As per the learned Accountant Member, adoption of Section 55(2)(ab) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecurities (P.) Ltd. vs. ACIT 66 taxmann.com 258, I find that in that case none appeared on behalf of the assessee therein and as such, arguments of the losing party were not articulated before the bench. In this regard, it is pertinent to refer to the reliance placed by the learned Representative for the assessee on the book of P. J. Fitzgerald, M.A. named "Salmond on Jurisprudence" to argue that when the matter is not argued or is not fully argued, the same cannot be taken as valid precedent as in that case, the court did not have the occasion to consider the arguments of the losing party. The relevant extract from the said book is reproduced hereunder: "We now turn to the wider question whether a precedent is deprived of its authoritative force by the fact that it was not argued or not fully argued, by the losing party. If one looks at this question merely with the eye of common sense, the answer to it is clear. One of the chief reasons for the doctrine of precedents that a matter has once been fully argued and decided should not be allowed to be reopened. Where a judgment is given without the losing party having been represented there is no assurance that all the relevant cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of shares will be original cost of the membership card in terms of Section 55(2)(ab) of the Act. 37. In view of the foregoing discussion, the questions put forth before me are answered in the positive and in favour of the assessee. The decision arrived at by learned Judicial Member is the appropriate view, and I concur with the view adopted by the learned Judicial Member on this issue. 38. The Registry of the Tribunal is directed to list this appeal before the Division Bench for passing an order in accordance with the majority view. 8. Since the facts involved in the present case are identical to ones as decided by the co-ordinate bench of the Tribunal (supra), we are therefore respectfully following the ratio laid down in the said decision, set aside the order of Ld. CIT(A) and allow the ground raised by the assessee. The AO is directed accordingly. 9. The issue raised in 2nd ground of appeal is against the order of Ld. CIT(A) confirming the disallowance made by the AO of loss of Rs. 16,24,254/- as claimed by the assessee being loss on mark to market basis in respect of trading in derivatives. 10. The facts in brief are that the AO during the course of assessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we observe that in this case the assessee has treated the derivatives as stocks during the year as the assessee is a share broker in BSE. The assessee has computed mark to market loss at Rs. 16,24,254/- as on 31.03.2008 with reference to the prevailing rate of foreign exchange in respect of those contracts which were not settled at the end of the year and thus recognized the said loss according to the accounting standard- 30 issued by ICAI. The AO has disallowed the said loss as contingent and being unascertained as the settlement of the derivative contracts have not taken place. However, it is undisputed that assessee is dealing in derivatives which has to be valued on prevailing foreign exchange rate at the year end in view of the mercantile system being followed by the assessee. In our opinion the said loss is allowable as the issue is squarely covered by the decision of the Hon'ble Supreme Court in the case of CIT vs. Woodward Governor India (P.) Ltd. (supra) and also in the case of Edelweiss Capital 8 taxmann.com 187 and Motilal Oswal Securities Ltd. vs. DCIT ITA No.7328/M/2011. Taking the facts of the case in entirety and also following the ratio laid down in the above dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing the same set aside the order of Ld. CIT(A) and direct the AO to delete the addition. 17. In the result, the appeal of the assessee is allowed. ITA No.1701/M/2013 (Revenue's appeal) 18. The only issue raised by the Revenue is against the order of Ld. CIT(A) computing the long term capital gain on sale of BSE equity shares by taking the depreciative value of BSE card as on 31.03.2005 as cost of acquisition of BSE equity shares and adopting indexation from F.Y. 2005-06. 19. We have already decided identical issue in ITA No.1588/M/2012 in assessee's appeal wherein we have decided the issues in favour of the assessee. Consequently the Revenue's appeal becomes infructuous and is dismissed. CO No.77/M/2014 20. The only issue raised in CO is against the confirmation of disallowance of Rs. 95,867/- by Ld. CIT(A) as made by the AO under section 14A read with rule 8D. In the assessment proceedings, the AO noted that the assessee has earned exempt income of Rs. 2,46,345/- and made a suo-moto disallowance of Rs. 5000/- under section 14A. Accordingly, asked the assessee to furnish the working of the disallowance as per rule 8D. Accordingly, the assessee furnished the calculation how ..... X X X X Extracts X X X X X X X X Extracts X X X X
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