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TMI Blog2021 (9) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... Convertible Bonds (FCCBs) of certain Indian Companies. Such FCCBs/GDRs were subsequently converted to equity shares. During the year under consideration, the assessee sold such equity shares for a consideration of Rs. 19,42,466/-. The Assessing Officer (AO) having received information that the assessee has neither filed any return of income nor offered the capital gain to tax, reopened the assessment under section 147 of the Act. In response to the notice issued under section 148 of the Act, the assessee submitted that it has not earned any income from India, hence, not required to file any return of income. However, subsequently, after communication of reasons recorded for reopening of assessment, assessee filed return of income on 07.09.2018 declaring loss of Rs. 12,88,155/-. In course of assessment proceedings, the AO called for the details of FCCBs/GDRs of the Indian Companies purchased by the assessee and their conversion into equity shares. In response, the assessee furnished the details of purchase of FCCBs/GDRs and their conversion to equity shares. On perusing the details filed and the computation of capital gain, the AO observed that the cost of acquisition has been adopt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isition of shares on conversion of FCCBs would be the conversion price determined on the basis of price of the shares at the BSE or NSE on the date of conversion of FCCBs into shares. He submitted, the assessee has computed capital gain following the method prescribed in clause 7(3) and 7(4) and has adopted the cost of share as available in public domain. Further, he submitted, since the GDRs/FCCBs were issued in terms of 1993 scheme, section 49(2A), introduced to the Act w.e.f 1.4.2008, would not be applicable. In support of such contention, he relied upon the following decisions: 1. Kingfisher Capital CLO Ltd. vs. CIT (2019) 413 ITR 1 (Bom) 2. DIT vs. Intel Capital (Cayman) Corpn. (2020) 429 ITR 45 (Kar.) 6. Thus, he submitted, the issue is squarely covered by the decision of the Hon'ble jurisdictional High Court. 7. Though, learned Departmental Representative fairly agreed that the issue is covered by the decision of the Hon'ble jurisdictional High Court, however, he relied upon the observations of the AO and DRP. 8. We have considered rival submissions in the light of decisions relied upon and perused the materials on record. The core issue arising for consideration is, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Indian company issued in accordance with such Scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf. Section 49(2A), to which we have already made detailed reference above, deals with a capital asset being a share or debenture of a company becoming the property of the assessee in consideration of a transfer referred to in clause (x) or (xa) of section 47 and section 47(x) under a transfer by way of conversion of bonds or debentures and (xa) by way of conversion of bonds referred to in clause (a) of sub- section (1) of section 115AC into shares or debentures of any company. The assessee may maintain that there is nothing in the Act which enables the authorities to deal with a situation and it is only clause 7 dealing with transfer and redemption and particularly subclause (4) thereof, as spelt out in the Scheme, which will apply. We are of the clear opinion that it is the conversion of foreign currency convertible bonds that the cost of acquisition in the hands of non-resident Indian investors would be the conversion price determined on the basis of the price of the shares as in this case, the National Stock Exchange, on the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee shall be deemed to be that part of the cost of debenture, debenture-stock or deposit certificates in relation to which such asset is acquired by the assessee." 80 A bare perusal of the unamended provision denotes that insofar as on introduction of clause (xa) of section 47 effective from 1st April, 2008 by the 2008 Finance Act, this sub- section (2A) of section 49 was also amended. Simultaneously, with the introduction of clause (xa) in section 47, this amendment has been effected. Therefore, though section 47 opens with the words "nothing contained in section 45 shall apply to the following provisions", section 49 provides for determination of cost with reference to certain modes of acquisition. Earlier, where the capital asset being a share or debenture in a company, became a property of an assessee in consideration of a transfer referred to in section 47, the determination of the cost of that acquisition was provided for. By the substituted sub-section (2A) of section 49, the cost of acquisition of the asset of the assesee shall be deemed to be that part of the cost of debenture, debenture-stock bond or deposit certificate in relation to which such asset is acquired by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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