TMI Blog2007 (5) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced on the decision of the hon ble Supreme Court in the case of Ahmed G Ariff v. CWT [1970] 76 ITR 471, and also the decision of the hon ble Karnataka High Court in the case of Syndicate Bank Ltd. v. Addl. CIT [1985] 155 ITR 681. It was also contended that on extinguishment of right in 1,60,000 warrants transfer has taken place and for this reliance was placed on the definition of transfer given in section 2(47). The Commissioner of Income- tax (Appeals) after discussing the submissions of the assessee, took the view that the warrants fall under the category of capital assets as they are a valuable right and in the present instance had clearly demarcated market value/price. It was also held that the assessee had spent Rs. 2.70 per warrant but in respect of other plea of the assessee that the extinguishment of the warrant will tantamount to be transfer, the Commissioner of Income-tax (Appeals) did not agree with the assessee. The Commissioner of Income-tax (Appeals) held that no capital loss is allowable to the assessee by observing as under : 3.6. Accordingly if an asset is irretrievably lost it cannot be said that the assessee suffered long-term or short-term loss. The Calc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he capital asset to be transferred. Since the assessee did not exercise the option of subscription of equity shares against warrants there was extinguishment of rights in the asset, viz. warrants. Our attention was invited towards the decision of the hon ble Supreme Court in the case of CIT v. Mrs. Grace Collis [2001] 248 ITR 323 and on the basis of this decision it was pointed out that the hon ble Supreme Court in this decision at page 330 did not approve the decision in the case of Vania Silk Mills P. Ltd. v. CIT [1991] 191 ITR 647 (SC) that the extinguishment of any rights therein should be on account of transfer. The hon ble Supreme Court held extinguishment of any rights therein cannot be extended to mean the extinguishment of rights independent of or otherwise than on account of transfer. Since the rights of the assessee in the capital assets got extinguished when the assessee did not exercise the option to subscription for the equity shares, there is a transfer within the meaning of section 2(47). Reliance was also placed on the decision of the hon ble Supreme Court in the case Kartikeya V Sarabhai v. CIT [1997] 228 ITR 163 for the proposition of law that section 2(47) pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the computation provisions cannot supersede the charging provision. The word transfer has been defined under section 2(47) which lays down as under : (47) transfer', in relation to a capital asset, include, (i) the sale, exchange or relinquishment of the asset ; or (ii) the extinguishment of any rights therein ; or (iii) the compulsory acquisition thereof under any law ; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ; or (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. 9. From this definition it is apparently clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration received or accruing as a result of the trans fer of the capital asset the following amounts, namely : (i) expenditure incurred wholly and exclusively in connection with such transfer ; (ii) the cost of acquisition of the asset and the cost of any improvement thereto : 11. From the reading of the aforesaid section, it is apparent that for computation of capital gains, full value of the consideration received or accrued on transfer of capital asset is to be ascertained and from this value of the consideration, the amounts as enumerated under section 48(i) and (ii) which consists of expenditure incurred in connection with such transfer and the cost of acquisition and the cost of improvement of capital asset has to be deducted. The charging section and computation provision together constitutes an integral code as has been held by the hon'ble Supreme Court in the case of CIT v. B. C. Srinivasa Setty [1981] 128 ITR 294. If computation provision cannot apply at all the case will not fall within the charging provision cost of acquisition and cost of improvement are defined under section 55(1) for the purposes of section 48 but no such definition has been give ..... X X X X Extracts X X X X X X X X Extracts X X X X
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