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TMI Blog1993 (8) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... tal gains on sale of rights of Rs. 23,75,230, and at the same time disallowing the assessee's claim for short-term capital loss of Rs. 47,40,400. Thereafter, the CIT(A) allowed the assessee's claim for loss under the head capital gains of Rs. 47,40,400, with result that there was a net loss under the head short-term capital gains of Rs. 23,64,770 (Rs. 47,40,400 minus Rs. 23,75,230). The Department has filed appeal in ITA No. 6525/Bom/90 against the order of the CIT(A). Both appeals are being disposed of by this common order for the sake of convenience. 2. The Department's appeal will be taken up first. The Assessing Officer has observed in the assessment order that the assessee was holding 94,800 shares of Maheshwari Mills Ltd., on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire amount realised on sale of right to subscribe for debentures was a profit in the course of its business and not a capital gain. As the assessee's business was of a investment company, he disallowed the claim of notional loss made by the assessee. 4. The CIT(A) went into the matter in greater details. He noted that M/s Maheshwari Mills Ltd. had issued convertible debentures of Rs. 125 each with the shareholders whose names appeared on the register of Members as on 30th Jan., 1983. For this purpose the share transfer register of M/s Maheshwari Mill Ltd. had been closed from 28th Jan., 1983 to 31st Jan., 1983. The shares of M/s Maheshwari Mills Ltd., were quoted on the Ahmedabad Stock Exchange. The transactions upto 27th Jan., 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused "daily official list" of the share prices issued by the Ahmedabad Stock Exchange, as well as the register of shares transfers of M/s Maheshwari Mills Ltd. He made some further enquiries also and the Ahmedabad Stock Exchange confirmed the last rate for ex-right and first rate for ex-right as given by the assessee. The register of shares transfers showed that the shares stated to have been purchased at the rate of Rs. 195 had been sent for transfer. He was, therefore, satisfied that the relevant rates quoted on the Stock Exchange at Ahmedabad were genuine rates. 8. On the above finding of facts and applying the ratio of the two decisions narrated above, the CIT(A) held that the assessee company was fully justified in claiming that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se were reannounced for a consideration of Rs. 6,69,500 received by the assessee company. The Tribunal held, following the judgment of the Supreme Court in the case of Miss Dhun Dadabhoy Kapadia, that the capital gains should be worked out after setting off a notional loss of Rs. 10,30,000 on account of depreciation and the shareholdings of the assessee company due to the issue of rights. 11. The learned counsel for the assessee further submitted that the ratio of the judgment of the Supreme Court in the case of B.C. Srinavasa Shetty was not applicable to the present case since this was a case where the cost of the rights renounced by the assessee could not be very well ascertained. Reliance was placed on the decision of the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invested money in acquisition of this new right. A concomitant of the acquisition of the new right was the depreciation in value of the old shares, and the depreciation may, in a commercial sense, be deemed to be the value of the right which she subsequently transferred. The capital gain made by her would, therefore, be represented only by the difference between the money realised on transfer of the right, and the amount which she lost in the form of depreciation of her original shares in order to acquire that right." 12. In view of the above, we hold that the cost of the rights can be ascertained in the present case, and, therefore, the judgment in the case of B.C. Srinivasa Shetty is not applicable to the facts. It will also be worthw ..... X X X X Extracts X X X X X X X X Extracts X X X X
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