9911796707
TMI Blog2022 (5) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the order of the Ld. Commissioner of Income Tax (Appeals)-05, dated 25.01.2012 and pertains to the assessment year (A.Y.) 2008-09. 2. Grounds of appeal read as under:- 1. The learned Commissioner of Income-tax (Appeals) erred in law and in facts in not allowing an amount of Rs 1.58 crores , being dues paid to certain creditors of the broking concern as cost of shares while determining capital Gain on sale of said shares received in exchange of membership of the said broking concern. 2. The learned Commissioner of Income-tax (Appeals) erred in law and in facts in not adopting fair market value as on 01-04-1981 of Membership and not allowing an Indexation thereof, 3. Each of the above grounds of appeal are independent and without prejudice to each other, 4. The appellant craves liberty to add, to alter and /or amend any of the grounds of appeal at or before the time of hearing. 3. The assessee in this case received a sum of Rs. 1,42,32,400/- on sale of 2737 shares of Bombay Stock Exchange. However, capital gain was not offered. On Assessing Officer s query it was informed that broking concern of Shri Harkisondas Dalai ie. H.L. incurred huge loses. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been received by him on the basis of his membership to the Stock Exchange. Section 55(ab) reads in relation to a capital asset, being equity share or shares allotted to a share holder of a recognized stock exchange in India under a scheme for (demutualization or) corporatization approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992(15 of 1992), shall be the cost of acquisition of his original membership of the exchange.) Further, section 55(b)(i) provides that where the capital asset became the property of the assessee before 1- April, 1981, its cost would be the cost of acquisition of the asset to the assessee or the fair market value of the asset on 01-04-81 at the option of the assessee. Since, section 55(2)(ab) applies in this case and as the provisions of section 55(2)(b)(i) relate to any other capital asset , the cost of the shares sold by the assessee have to be taken in accordance with' section 55(2)(ab) as the cost at which the membership of the exchange was originally acquired by the assessee and there is no ground to adopt fair market value under section 55(2)(b)(i). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed on the equity shares pursuing to SEBI letter dtd. Feb. 23, 2006), at the time of tendering the letter of transmittal would be eligible to be offered for sale in the offer process. 7. The ld.CIT(A) rejected the assesses submission as under:- It is the argument of the appellant that he paid Rs.1.58 cr. to the creditors in order to be active member of the BSE. On said payment, membership of the Stock Exchange became active and share could be received in favour of the appellant. On these facts, it is contended that payment of Rs.1.58 cr. would be eligible to be considered as cost of shares and would be eligible indexation too. On the specific query, regarding date of payment to the creditors, it is submitted by the AR of the appellant vide letter dated 16.01.2012 that payment was made to respective parties as under :- Details of Payment by to Respective Parties Sr No. Party Details Paid Amount Date I S.S. Miranda 100,000.00 1986 To 1987 2 Swastik safe Deposite + Friend 50,000.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 479,450.00 1983 25 Bills Discounting 300,000.00 1983 26 Asrani 50,000.00 1983 27 Mukund M Shah 1,500,000.00 1983 To 1984 28 Bank of Baroda 200,000.00 2005 29 Paid to various parties my HL Fund 3,000,000.00 1982 To 1983 15,866,461.10 The purpose of payment to the creditors was to become operative member on BSE. At that time, ' no one even thought of corporatization and demutualization of BSE and allotment of any share. Therefore, payment to creditors has nothing to do with cost of shares and allotment of shares. For allotment of shares, the appellant filed application dated 05.08,2005 and it was allotted 10000 shares which are shown as on 30.03.2006. From the above facts, it is seen that payment to the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the Appellant joint as a partner. The business continued to be run by the Appellant's brother. 4. The Appellant started actively participating in the broking concern from 1991, until which time he was managing director of a company by the name of carbon corporation limited. 5. After the death of his brother, i.e. Shri Manharkant Dalai, the Appellant ran the concern as the sole proprietor. 6. In 2006 the Bombay Stock Exchange undertook corporatization and demutualization and as a result each member was allotted shares in lieu of their memberships in view of the same on 30th March 2006 the applicant was allotted 10 thousand shares in the Bombay Stock Exchange limited. 7. An open offer was made wherein the members offered these shares for sale. The Appellant offered 3,000 of his 10,000 shares which had been allotted for sale. Of the 3,000 shares offered 2,737 shares were accepted in the offer for sale and these shares was sold for a price of Rs.5200 per share i.e. for a total consideration of Rs. 1,42,32,400. 10. On this submission learned Counsel reiterated the claim of assessee incurring 1.58 crores in clearing debts as cost for acquiring shares. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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