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TMI Blog1986 (7) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee, an Indian company, is assessed as agent of an English company J.P. Coats Ltd. for the assessment year 1978-79. During the accounting year ending on 31-12-1978, the assessee sold 9,60,617 shares in Madura Coats Ltd., an Indian company, for a sum of Rs. 75,32,828. The assessee claimed before the ITO that the expenses in connection with the sale was of an amount of Rs. 96,061 so that the net sale price was Rs. 74,36,767. For the purpose of capital gains tax, the assessee claimed that the acquisition cost of those shares was Rs. 53,76,862, which he claimed on the basis of option available to the assessee under section 55 of the Income-tax Act, 1961 ('the Act') since the fair market value of those shares as on 1-1-1964 was Rs. 53,76,862; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, 49 and 55 of the Act, held that the assessee had the option to value the cost of shares as on 1-1-1964. 3. Being aggrieved, the revenue came in appeal before us. The submission of the learned departmental representative, Shri Subramanian, was that when those shares were not in existence at all on 1-1-1964, the assessee cannot opt the value of those shares as on 1-1-1964 as the cost of those shares. He drew our attention to the provisions of sections 47(vi) and (vii), 49(1)(viii)(e), 55(2) and 55(2)(ii). He also relied on the decision of the Gujarat High Court in Bardolia Textile Mills v. ITO [1985] 151 ITR 389 (FB) and CIT v. Gupta Sons (P.) Ltd. [1984] 146 ITR 506 (MP). On the other hand, the learned representative for the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with effect from 1-7-1974 and sold thereafter by the assessee, has the assessee the option available for determining the cost of those new shares as on 1-1-1964. In other words, whether the assessee can ask the value of those shares as a cost for capital gain tax on the basis of the fair market value as on 1-1-1964. Provisions of section 47(vi) and (vii) provide, any transfer, in a scheme of amalgamation, of a capital asset by the amalgamating company to the amalgamated company, if the amalgamated company is an Indian company, should not be taken as a transfer. Similarly, any transfer by a shareholder, in a scheme of amalgamation of a capital asset being share or shares held by him in the amalgamating company, if, (a) the transfer is made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of acquisition of the asset for the purpose of option of section 55, that is, given in sub-section (2) of section 55. Sub-section (2) provides that for the purpose of sections 48 and 49 of the Act, 'cost of acquisition' in relation to a capital asset, (i) where the capital asset became the property of the assessee before 1-1-1964, means the cost of acquisition of the asset to the assessee or the fair market value of the asset on 1-1-1964 at the option of the assessee. The shares were not acquired before 1-1-1964. Therefore, clause (i) of sub-section (2) is of no help to the assessee. Clause (ii) of sub-section (2) of section 55 provides that where the capital asset became the property of the assessee by any of the modes specified in sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn that the context calls for a different meaning to be given to the term used in the same section, one would be justified in assuming that the term has been used so as to have the same meaning. The assessee's counsel, Shri Bhakta, relied on the decision of their Lordships of the Bombay High Court in the case of Harish Mahindra. In that case, the assessee acquired share of Rs. 500 before 1-1-1954; thereafter he sub-divided it into shares of Rs. 10 each and, thereafter, those divided shares were sold. The issue before their Lordships was in the selling of sub-divided shares, whether the assessee had any option to adopt the fair market value of shares as on 1-1-1954 as the cost of acquisition. Their Lordships held the assets are the same; and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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