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TMI Blog2001 (6) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... y (totalling to Rs. 165) per debenture. On allotment, however, the assessee was required to pay Rs. 50 against Part A and Rs. 185 against Part B, the aggregate amount thus payable on allotment being Rs. 235. The letter of offer of the above-mentioned PCDs itself provided for arrangement of sale of the non-convertible portion (Part B) of the debenture. BILT had already made arrangement with Citi Bank in accordance with which Citi Bank purchased the Part B portion of the face value of Rs. 300 @ Rs. 235 per debenture resulting thereby no payment being required by the applicants for the PCDs on allotment and surrender of the Part B portion in favour of the Citi Bank. The assessee-company accepted the above offer, paid @ Rs. 165 per debenture on application and surrendered the Part B portion to the Citi Bank thereby securing the payment on allotment in respect of Part A portion. The assessee thus claimed the loss in respect of the transactions in the non-convertible portion of the aforesaid debentures (Part B) as follows: ------------------------------------------------------------------------------------- No. of Cost per Total cost Sale price per debentures debentures (including Price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermore being constructive payment towards the price of shares to be ultimately obtained by the assessee after conversion of Part A of the debentures into shares. 3. The assessee appealed against the above order of the Assessing Officer before the CIT(A). The CIT(A) noted that the assessee had not traded in the shares of BILT for the last 5-6 years which clearly showed that it had no intention for trading in such shares. He has thus been of the opinion that the transactions were made by the assessee with the sole motive of making investment in convertible potion of the debentures, and that the assessee had no intention to retain the non-convertible portion at any point of time. The CIT(A) furthermore states in this connection that by retaining the convertible portion (Part A) of the debentures, the assessee was able to participate in the phenomenal growth of BILT. The CIT(A) also noted that the assessee alongwith the other members of Thapar Group were having controlling shares in the BILT and that the right issues had been offered to the assessee as existing shareholders only. The CIT(A) has further been of the opinion that even under the arrangement with Citi Bank, the purchase of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the original shares in BILT as well as in other companies were always held by the assessee as stock-in-trade. It has also been contended by making a reference to the assessment orders, alongwith details of computation of income for the past years that in all such past years, the results of transactions in shares, etc. have been considered on revenue account and never as capital gains or capital loss. 6. On the other hand, the learned DR strongly argues that a right to contribute to the capital of a company itself is a capital asset. In this connection, the learned DR has relied on the following judgments: (1) Karam Chand Thapar & Bros. (P.) Ltd. v. CIT [1971] 82 ITR 899 (SC) (2) CIT v. R.M. Amin [1977] 106 ITR 368 (SC) (3) Hari Bros. (P.) Ltd. v. ITO [1964] 52 ITR 399 (Punj.). It has been argued by the ld. DR thereafter that in reality there has been renunciation on the part of the assessee of the right to acquire the Part B portion of the PCDs. It has also been argued that the assessee alongwith the other members of Thapar Group were having control over the BILT and hence the shares of BILT should be considered to be lying in the investment portfolio of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned for Part A and Part B portions and both the parts can be segregated from each other (in the present case the same has actually been done by selling off Part B portion and retaining the Part A portion of the assessee), the acquisition and subsequent treatment thereto by way of sale or retention, whatever the case may be, of Part A and Part B are required to be considered separately. So far as Part B portions are concerned, the facts clearly show that the assessee, even at the very outset, intended not to retain the said portions but to dispose of the same immediately on acquisition of those portions. Hence, so far as the Part B portions are concerned, it has got to be admitted that the activity of the assessee in relation to the transactions in Part B portions was of trading nature. It is a fact that the results of the transactions were pre-determined and the assessee was also motivated by the idea of obtaining the Part A portions which in their turn would yield shares of BILT to the assessee. But that by itself cannot lead to the conclusion that Part A and Part B portions should be taken together and the loss incurred by the assessee in the transactions in respect of Part B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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