9911796707
TMI Blog2001 (10) TMI 247X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 consideration of a transfer referred to in cl. (x) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "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 treate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be the cost of acquisition of right shares in case where right shares are sold. Again under s. 55(2)(b)(v) when share or a stock of the company becomes the property of the assessee inter alia, on conversion of any 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. The provisions of s. 47(x) are reproduced below: 47. Nothing contained in s. 45 shall apply to the following transfers: (x) any transfer by way of conversion of (bonds or) debentures, debentures-stock or deposit 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bentures. We accordingly direct the AO to decide the question as to whether the gain derived by the assessee on sale of shares received on conversion of fully/partly convertible debentures in accordance with the aforesaid findings and also decide the question relating to grant of deduction under s. 54E in accordance with the provisions of law. The matter is, therefore, restored back to the AO for deciding the same in accordance with the aforesaid findings and in accordance with the provisions of law. The order passed by the Addl. CIT(A) and the AO relating to levy of interest under s. 234B is also set aside and restored back to the AO for considering the question of levy of interest afresh after providing an opportunity to the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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