2022 (1) TMI 1337 - AT - Income Tax
Short Term Capital Gains - premium received by assessee for transferring Redeemable Cumulative Convertible Preference Share and Fully Compulsory Convertible Preference Shares to equity shares during the year - AO allowed the appeal filed by the assessee on this issue and held that the transfer in respect of preference shares is in the hand of the shareholder - HELD THAT:- As in case Anarkali Sarabhai [1982 (6) TMI 50 - GUJARAT HIGH COURT] redemption of preference shares will result in transfer within the meaning of section 2(47) of the Act was held to be in the hands of the shareholder, which in the present case is M/s Satguru Constructions. The Hon’ble Supreme Court in Anarkali Sarabhai [1997 (1) TMI 5 - SUPREME COURT] upheld the aforesaid findings of the Hon’ble Gujarat High Court. Further, the aforesaid decision of the Hon’ble Gujarat High Court was followed in Kartikeya V. Sarabhai [1981 (8) TMI 36 - GUJARAT HIGH COURT] which was affirmed by the Hon’ble Supreme Court in Kartikeya V. Sarabhai vs CIT, [1997 (9) TMI 2 - SUPREME COURT] relied upon by the learned DR.
In the present case, it is to be appreciated that the conversion of preference shares into equity shares is in the hands of the shareholder, i.e. M/s Satguru Constructions. Thus, gain, if any, arising from such a conversion will only be taxable in the hands of the shareholder. Therefore, in view of the above, we find no infirmity in the findings of the learned CIT(A) on this issue. As a result, ground No. 1 raised by the Revenue is dismissed.