9911796707
TMI Blog2001 (10) TMI 247X X X X Extracts X X X X X X X X Extracts X X X X ..... provides that any transfer by way of conversion of (bonds or) debentures, debenture-stock or deposit certificates in any form, of a company into shares or debentures of that company, will not be regarded as transfer for purpose of s. 45 of the Act. This provision was inserted by the Finance (No. 2) Act, 1991 with retrospective effect from 1st April, 1962. The acquisition of shares by the assessee as a result of conversion of fully convertible/partly convertible debentures is, therefore, not regarded as transfer for purpose of levy of capital gains. The learned counsel then drew our attention to s. 49(2A) of the Act which provides that where the capital asset, being a share or debenture in a company, became the property of the assessee in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the Addl. CIT(A) are reproduced below: "Appellant during financial year 1990-91 ending 31st March, 1991, has sold 1,290 ordinary shares of the Tata Iron & Steel Co. Ltd. among other scrips sold and capital gain duly computed in the statement of income as under: On sale of 1290 ordinary shares of the Tata Iron & Steel Co. Ltd. Sale proceeds Sale proceeds 160 x 155.25 24840 1130 x 159.00 179670 1290 2,04,510 Less : Cost of purchase 940 x 10 9,400 350 x 60 21,000 30,400 1,74,110 The above capital gain was treated as long-term capital gain and had appended Note No. 6 to the statement of income which reads as under: The assessee desires to place the following facts fully and truly in connection with her claim for exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares of the company into stock, the cost of acquisition would be calculated with reference to the cost of acquisition of the shares or stock from which such asset is derived. Therefore, it is clear that, by virtue of fiction enacted in the aforesaid sections, the cost of debentures is deemed to be the cost of acquisition of the right shares and, therefore, for the purpose of acquisition of capital gains, the cost of acquisition to be effected from full value of consideration would be the cost of acquisition of debentures. The assessee respectfully claims that the surplus of Rs. 3,41,445 realised on sale of aforesaid shares amounting to Rs. 3,88,195 is duly exempt from capital gains in view of the investment made in specified assets und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certificates in any form, of a company into shares or debentures of that company: Sec. 49(2A) of the Act is also reproduced below: 49(2A) Where the capital assets, being a share or debenture in a company, became the property of the assessee in consideration of a transfer referred to in cl. (x) of s. 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 certificate in relation to which such asset is acquired by the assessee. 8. A plain reading of the aforesaid provisions clearly indicates that the conversion of convertible debentures into shares is not regarded as transfer for purpose of computation of income from capital gains. Sec. 49(2A) clarifi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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