A.C.I.T. RG.4(2), MUMBAI V. TECHNO SHARES & STOCKS LTD., MUMBAI

ITA 2258/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84204 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 10-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 04-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Capital asset; Depreciation; Cost of acquisition

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, M UMBAI BEFORE HONBLE S/SHRI VIJAY PAL RAO (JM) , AND B.R.BASKARAN (AM) , . . , ./I.T.A. NO2258/MUM/2012 ( / ASSESSMENT YEAR : 2008-09) ASSTT. COMMISSIONER OF INCOME TAX 4(2), ROOM NO.642, 6TH FLOOR, AAYAKAR BHAVAN,M.K.ROAD, MUMBAI-400020 / VS. M/S TECHNO SHARES AND STOCKS LTD., 1, GROUND FLOOR,VIKAS BUILDING, 11, BANK STREET, FORT, MUMBAI-400023. ( / APPELLANT) .. ( / RESPONDENT) ./ ./ PAN/GIRNO.:AACT4465G ! / APPELLANT BY : SHRI NEIL PHILIP ' ! /RESPONDENT BY NONE # ' $% / DATE OF HEARING : 10.11.2014 &' ' $% /DATE OF PRONOUNCEMENT : 14.11.2014. / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 13.1.2012 PASSED BY LD CIT(A)-8, MUMBAI AND IT RELA TES TO THE ASSESSMENT YEAR 2008-09. NONE APPEARED ON BEHALF OF THE ASSESSEE E VEN THOUGH THE NOTICE OF HEARING WAS SERVED UPON THE ASSESSEE. HENCE, WE PRO CEED TO DISPOSE OF THE APPEAL EX-PARTE, WITHOUT PRESENCE OF THE ASSESSEE. 2. GROUNDS URGED BY THE REVENUE READ AS UNDER : 1.(A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING ORIGINAL COST OF BSE CARD AS COST OF ACQUISITION FOR PURPOSES OF COMPUTING CAPITAL GAIN ON BSE SHARES; (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN IGNORING THAT THE ASS ESSEE HAS ALREADY CLAIMED DEPRECIATION ON BSE CARD ALLOWING ORIGINA L COST OF BSE CARD AS ITA NO.2258/M/2012 2 COST OF ACQUISITION AMOUNTS TO GIVING DOUBLE DEDUC TION ON SAME ASSET UNDER TWO DIFFERENT PROVISIONS OF THE ACT; C)` WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN IGNORING DOUBLE DEDUC TION ON SAME ASSET UNDER TWO DIFFERENT PROVISIONS, IS AGAINST THE PRIN CIPLES LAID DOWN IN IT ACT FOR COMPUTING INCOME OF THE ASSESSEE; 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE IMPUGNED ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW TO BE SE T ASIDE AND THAT OF THE AO BE RESTORED 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE HAD ACQUIRED MEMBERSHIP OF BOMBAY STOCK EXCHANGE FOR A TOTAL CONSIDERATION OF RS.94,50,000/-. THE ASSESSEE HAD CLAIMED DEPRECIAT ION ON THE MEMBERSHIP RIGHT AND THE SAME WAS APPROVED BY THE HONBLE SUPR EME COURT IN THE ASSESSEES OWN CASE REPORTED IN 327 ITR 323 (SC). THEREAFTER, PURSUANT TO THE SCHEME FRAMED BY SEBI, ALL THE STOCK EXCHANGES IN THE COUNTRY WAS CONVERTED INTO TO LIMITED COMPANIES. ACCORDINGLY, BOMBAY S TOCK EXCHANGE WAS CONVERTED INTO BOMBAY STOCK EXCHANGE LTD. PURSUANT THERETO, THE ASSESSEE WAS ALLOTTED 10,000 SHARES IN THE NEWLY FORMED COMP ANY AND ALSO THE TRADING RIGHT. CONSEQUENTLY, CERTAIN AMENDMENTS WERE ALSO BROUGHT INTO THE INCOME TAX ACT IN SECTION 47 AND ALSO IN SECTION 55(2)(AB) OF THE ACT. THE SAID PROVISIONS READ AS UNDER : 6.2.2 FURTHER SECTION 47(XIII) READ AS FOLLOWS : 47. NOTHING CONTAINED IN SECTION 45 SHALL APPLY TO THE FOLLOWING TRANSFERS : (I).. (XIIIA) ANY TRANSFER OF A CAPITAL ASSET BEING A MEM BERSHIP RIGHT HELD BY A MEMBER OF A RECOGNIZED STOCK EXCHANGE IN INDIA FOR ACQUISITION OF SHARES AND TRADING OR CLEARING RIGHTS ACQUIRED BY SUCH MEM BER IN THAT RECOGNIZED STOCK EXCHANGE IN ACCORDANCE WITH A SCHEME FOR DEMU TUALIZATION OR CORPORATION WHICH IS APPROVED BY THE SECURITIES AN D EXCHANGE BOARD OF INDIA ESTABLISHED UNDER SECTION 3 OF THE SECURITIE S AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992);]. 6.2.3 SECTION 55(2)(AB) READS AS FOLLOWS : 55(2) FOR THE PURPOSE OF SECTION 48 AND 49 COST O F ACQUISITION- ITA NO.2258/M/2012 3 (AB) IN RELATION TO A CAPITAL ASSET, BEING SHARE OR SHARES ALLOTTED TO SHAREHOLDER OF A RECOGNIZED STOCK EXCHANGE IN INDI A UNDER A SCHEME FOR (DEMUTUALIZATION OR ) CORPORATION APPROVED BY THE SECURITIES AND EXCHANGE BOARD OF INDIA ESTABLISHED UNDER SECTION 3 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992) SHALL BE THE COST OF ACQUISITION OF HIS ORIGINAL MEMBERSHIP OF THE EXCHA NGE: PROVIDED THAT THE COST OF A CAPITAL ASSET, BEING A TRADING OR CLEARING RIGHT OF THE RECOGNIZED STOCK EXCHANGE ACQUIRED BY A SHAR EHOLDER WHO HAS BEEN ALLOTTED EQUITY SHARE OR SHARES UNDER SUCH SCH EME OF DEMUTUALIZATION OR CORPORATION, SHALL BE DEEMED TO THE NIL. 4. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E SOLD 4562 SHARES HELD BY HIM IN BOMBAY STOCK EXCHANGE LIMITED. WHILE COM PUTING THE CAPITAL GAIN THE ASSESSEE DEDUCTED PROPORTIONATE ORIGINAL COST O F ACQUISITION OF MEMBERSHIP OF ERSTWHILE BSE PERTAINING TO 4562 SHARES. THE AO HOWEVER TOOK THE VIEW THAT THE WRITTEN DOWN VALUE OF MEMBERSHIP CARD AS ON 1.4 .2007 SHOULD BE TAKEN AS THE COST OF ACQUISITION FOR WORKING OUT THE CAPITA L GAINS. ACCORDINGLY, THE AO RECOMPUTED THE CAPITAL GAINS. 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) NO TICED THAT THE PROVISIONS OF SECTION 55(2)(AB) EXTRACTED ABOVE SHALL BE APPLICA BLE TO THE INSTANT CASE, ACCORDING TO WHICH THE COST OF ACQUISITION IN RELAT ION TO CAPITAL ASSET BEING SHARES ALLOTTED TO SHAREHOLDERS OF THE BSE SHALL BE COST O F ACQUISITION OF HIS ORIGINAL MEMBERSHIP OF EXCHANGE. HOWEVER, THE LD. CIT(A) TOOK THE VIEW THAT THE PROVISIONS OF SECTION 50 AND SECTION 55(2)(AB) SHO ULD BE READ IN A HARMONIOUS MANNER. ACCORDINGLY, HE TOOK THE VIEW THAT WDV OF THE MEMBERSHIP CARD AS ON 1.4.2005 SHOULD BE TAKEN AS COST OF ACQUISITION AS AGAINST THE WDV AS ON 1.4.2007 AS ADOPTED BY THE AO, SINCE THE ASSESSEE DID NOT CLAIM ANY DEPRECIATION ON THE MEMBERSHIP CARD FROM ASSESSMENT YEAR 2006-07 ONWARDS ON ACCOUNT OF CONVERGENCE OF BSE INTO BSE LTD. THE RELEVANT OBSERVATIONS MADE BY LD. CIT(A) ARE EXTRACTED BELOW : 6.2 IN VIEW OF THE ABOVE, I AM OF THE CONSIDERED O PINION, THAT AS THE APPELLANT HAS BEEN ALLOWED DEPRECIATION ON THE MEMB ERSHIP RIGHT OF THE BSE(AOP) FROM WHICH SUCH SHARES HAVE EMERGED, SUCH ALLOWANCE OF DEPRECIATION SHOULD BE REDUCED FROM THE COST OF ACQ UISITION OF THE SHARES OF BSE LTD WHILE CALCULATING THE LONG TERM CAPITA L GAINS ON SALE OF SUCH SHARES AS THE SHARES OF BSE LTD ARE LONG TERM CAPI TAL A ASSET WITHIN THE MEANING OF SECTION 2(42)(HA). ON THE SAME ANALOGY THAT THE ASSESSEE IS ITA NO.2258/M/2012 4 NOT ENTITLED TO TAKE THE BENEFIT OF DOUBT DEDUCTION , THE BENEFIT OF INDEXATION U/S 48 SHOULD ALSO BE AVAILABLE ONLY FROM THE ASSES SMENT YEAR IN WHICH STATUS OF BSE CHANGED FROM AOP TO COMPANY I;E. FR OM AY 2006-07 I.E. THE WDV AS ON 1.4.2005 SHOULD BE TAKEN AS COST OF A CQUISITION AS AGAINST WDV AS ON 1.4.2007 AS ADOPTED BY THE AO AS NO DEP RECIATION HAS BEEN CLAIMED OR ALLOWED UPON THE CONVERGENCE OF MEMBERSH IP RIGHT INTO THE SHARES OF THE BSE LTD W.E.F. AY 2006-07 AND THE AP PELLANT SHALL BE ENTITLED TO BENEFIT OF INDEXATION ON THE WDV AS ON 1.4.2005. THIS GROUND OF APPEAL IS ACCORDINGLY PARTLY ALLOWED. AGGRIEVED, BY THE DECISION OF THE LD.CIT(A) THE REV ENUE HAS FILED THIS APPEAL BEFORE US. 6. HEARD THE LD. DR AND PERUSED THE RECORD. WE NOT ICE THAT THE LD. CIT(A) HAS GIVEN A FINDING THAT THE ASSESSEE STOPPED CLAIM ING DEPRECIATION WITH EFFECT FROM AY 2006-07 ON CONVERSION OF MEMBERSHIP RIGHT IN TO SHARES OF BSE LTD. SO, THE LD. CIT(A) HAS HELD THAT THE WDV AS ON 1.4 .2005 SHOULD BE TAKEN AS COST OF ACQUISITION FOR COMPUTING CAPITAL GAIN ARISING ON SALE OF SHARES OF BSE LTD. HOWEVER, THE GROUNDS URGED BY THE REVENUE SAYS THAT THE LD CIT(A) HAS DIRECTED THE TO ALLOW THE ORIGINAL COST OF BSE CARD, WHICH I S TOTALLY WRONG. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE QUESTION OF DOUBLE DEDUCTION AS ALLEGED BY THE REVENUE IN THE GROUNDS OF APPEAL DOE S NOT ARISE. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 14TH NOV, 2014. &' # () * + 14TH NOV , 2014 ' ' , - SD SD ( / VIJAY PAL RAO ) ( . . ,/ B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ( # MUMBAI: 14TH NOV,2014. . . ./ SRL , SR. PS ITA NO.2258/M/2012 5 !'#$ %$&' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. # 0$ ( ) / THE CIT(A)- CONCERNED 4. # 0$ / CIT CONCERNED 5. 6. 1, $ 2 , % 2 , ( # / DR, ITAT, MUMBAI CONCERNED ,3 4 / GUARD FILE. 5 # / BY ORDER, TRUE COPY 6 (ASSTT. REGISTRAR) % 2 , ( # /ITAT, MUMBAI