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2013 (11) TMI 1638 - AT - Income TaxWorking out capital gain on sale of shares of BSE - whether WDV of BSE Card in the books of accounts of assessee or original cost of acquisition of BSE Card is to be considered towards cost of shares allotted to the members? - Held that - There is no dispute to the fact that the assessee availed depreciation on the BSE card till BSE was corporatized and accordingly WDV of the BSE card is the cost of membership in the books of accounts of the assessee has to be treated as cost of acquisition towards 10000 shares; were allotted to assessee at the rate of Rs. 1 per share. Hence we are of the considered view that LTCG in respect of shares has to be considered after assigning the WDV of BSE card to the cost of 10000 shares allotted to the assessee. It is ascertained that the assessee in the assessment year under consideration has sold 9123 shares. Therefore proportionate cost of WDV of BSE card has to be assigned to the said shares while computing the LTCG. We are of the considered view that the AO has rightly computed LTCG by considering the cost of shares taking into account the WDV of the stock exchange card.
Issues involved:
1. Determination of the original cost of acquisition of Bombay Stock Exchange (BSE) Card or Written Down Value (WDV) of BSE Card for calculating capital gain on the sale of shares acquired under a demutualization scheme. Analysis: The appellate tribunal ITAT Mumbai heard an appeal by the department against the order of the ld. CIT(A) for the assessment year 2008-09. The main issue revolved around whether the original cost of acquisition of BSE Card or the WDV of BSE Card should be considered for computing capital gain on the sale of shares acquired under a demutualization scheme of the Bombay Stock Exchange. The assessee, a BSE member, had claimed depreciation on the stock exchange card before the demutualization. The department argued that considering the original cost of the BSE card as the cost of acquisition of shares would amount to double deduction on the same asset, thus advocating for the use of WDV. The AO calculated the LTCG based on WDV and added it to the assessee's total income, leading to an appeal by the assessee. The ld. CIT(A) accepted the assessee's contention to use the original cost of acquisition of the BSE card for calculating capital gain, citing section 55(2)(ab) of the Income Tax Act, 1961. During the hearing, the ld. DR relied on a previous Mumbai Bench Tribunal order to support the department's stance, while the ld. AR supported the ld. CIT(A)'s decision, emphasizing the entitlement to claim depreciation on the BSE Card. The tribunal noted that the assessee had availed depreciation on the BSE card until demutualization, and the WDV of the card should be considered as the cost of membership shares allotted. Referring to relevant provisions, the tribunal held that the WDV of the BSE card should be assigned to the cost of shares, as done in a previous case, ultimately confirming the AO's computation of LTCG based on the WDV. In line with previous tribunal decisions, the tribunal upheld the AO's action, reversing the ld. CIT(A)'s order and allowing the department's appeal. The appeal of the department was consequently allowed, affirming the AO's approach in calculating the LTCG based on the WDV of the stock exchange card.
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