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2007 (5) TMI 555 - AT - Income TaxComputation of capital gains - extinguishment of warrants - “Short-term capital loss” - whether there is a loss incurred by the assessee on the transfer of a capital asset - HELD THAT:- In our opinion, there is an extinguishment of right in the warrant. It is not a case of extinguishment of the assets itself. The warrant is a capital asset. It may not have any value subsequent to the extinguishment of the rights available to the assessee for subscription to the equity shares. The hon’ble Supreme Court in the case of CIT v. Mrs. Grace Collis [2001 (2) TMI 9 - SUPREME COURT] has held that the expression “transfer” included the extinguishment of rights in assets independent. We have also gone through the decision of the hon’ble Supreme Court in the case of Kartikeya V Sarabhai [1997 (9) TMI 2 - SUPREME COURT]. In this decision, the hon’ble Supreme Court has held that this is only one of the modes of transfer envisaged by section 2(47). The relinquishment of the assets or extinguishment of any rights in it which may not amount to a sale can also be considered as a transfer. Therefore, on this issue, we do not agree with the finding of the CIT (Appeals) that there is no transfer in the case of the assessee and accordingly we reverse the finding of the CIT (Appeals) on this issue and hold that in the case of the assessee there is a transfer when the rights of the assessee to subscribe for the shares got extinguished. In view of the provisions of section 48 there must be full value of consideration out of which the expenditure and the cost of acquisition has to be deducted for computing the capital gains. In the absence of any value being assigned to the consideration received on the transfer of warrants, in our opinion, the capital loss cannot be computed in the case of the assessee. We are therefore of the view that in the case of the assessee the capital loss cannot be computed u/s 45 read with section 48 and therefore the assessee will not be entitled for claiming the deduction under the head “Short-term capital loss” as the computation provisions relating to the short-term capital gain fail. In the result, the appeal of the assessee is dismissed.
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