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2019 (8) TMI 1770 - AT - Income TaxCalculation of the long term capital gain - Cost of shares allotted to members of Bombay Stock Exchange (BSE) pursuant to its corporatisation/de-mutualisation - Cost of acquisition of shares of BSE Ltd. sold by the assessee in a situation wherein assessee had claimed depreciation on the cost of membership card. Is the cost of acquisition to be computed as per Section 50 of the Act or Section 55(2)(ab) - what should be the period of holding of shares of BSE Ltd.; will it be computed from date of acquisition of membership card or from date of allotment of shares in BSE Ltd? - Whether indexation benefit on sale of such share would be available from the date of corporatisation/de-mutualisation of BSE or from the date of acquisition of original membership of BSE ? - HELD THAT:- Section 55(2)(ab) of the Act and held that cost of trading rights will be NIL as per Section 55(2)(ab) of the Act, whereas for cost of shares, it applied Section 50 of the Act. We find that such a partial application of Section 55(2)(ab) of the Act is not correct application of Section 55(2)(ab) of the Act and, as such, the same is not a good precedent. As regards the reliance placed by the learned DR on the decision of M/s Pavak Securities Pvt. Ltd. vs. ITO [2013 (9) TMI 608 - ITAT MUMBAI] the same is distinguishable on facts as in that case, assessee had not argued and claimed that it was eligible to claim entire cost of acquisition of membership card while computing Long Term Capital Gains - assessee itself chose to claim only the WDV as the cost of acquisition of membership card. Such an action on the part of the assessee in that case cannot be said to be a valid binding precedent and thus, the same cannot help the cause of Revenue in the present case. As hold that the cost of acquisition of shares of BSE Ltd. shall be the original cost of acquisition of membership card in terms of Section 55(2)(ab) of the Act even though assessee has claimed depreciation on the cost of membership card in the earlier years. As regards the period of holding of shares of BSE Ltd., we find that as per clause (ha) inserted in Explanation 1 to Section 2(42A) of the Act by the Finance Act, 2003, period for which the person was a member of the recognised stock exchange in India immediately prior to such demutualisation or corporatisation shall also be included in period of holding of shares. In terms of the clear and unambiguous language of the section, I hold that the period of holding of shares of BSE Ltd. shall be reckoned from the date of original membership of BSE and not from date of allotment of shares in BSE Ltd. We agree with the view taken by the learned Judicial Member that the cost of shares will be original cost of the membership card in terms of Section 55(2)(ab) of the Act. The decision arrived at by learned Judicial Member is the appropriate view, and we concur with the view adopted by the learned Judicial Member on this issue. Decided in favour of the assessee.
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