TMI Blog2001 (12) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., transferred 32% of the holdings i.e., 19,503 shares on behalf of the assessee to HCL-HP Ltd. The said transfer was made consequent to the arrangement approved by the Hon'ble Delhi High Court. It was explained on behalf of the assessee that in consequence of the agreement entered into by the assessee with HCL-HP Ltd. the shares of HCL Ltd. were to be reduced to the extent of 68% and in lieu thereof each shareholder was allotted shares in HCL-HP Ltd. (new company) to the extent of 32%, It was explained that instead of one old share, each shareholder of HCL Ltd. (existing company) became entitled to two shares, one of HCL and one of HCL-HP Ltd. It was explained that simultaneous to the split of the company there was an interchange in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee's explanation in this regard by holding that section 47(v)(ii) applied only to the case of amalgamation whereas in the facts of the case it was an arrangement and not amalgamation. Accordingly, the Assessing Officer computed capital gain at Rs.1,91,910 by deducting Rs.3,120 being the cost of such shares as computed by the assessee from Rs.1,95,030 being the value of consideration of 19,503 equity shares @ Rs.10 per share. 3. Aggrieved thereby the assessee agitated before the first appellate authority, it was contended on behalf of the assessee that the case of the assessee was not falling within the ambit of word "transfer" as defined in section 2(47) read with section 47. The ld. CIT(A) placing reliance on the decision of Guja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on17-1-1996in the case of Ashish Vaidya, to show that under similar circumstances the CIT(A) while applying the ratio decidendi of the Supreme Court in Vania Silk Mills (P.) Ltd. upheld the assessee's contention and while doing so he had taken into consideration the impugned order passed by CIT(A) in the case of present assessee and had specifically differed from the conclusions arrived at in that order. In the opposition the learned DR strongly relied on the order passed by the CIT(A) in question and submitted that the same was in accordance with law and no interference was called for. 5. We have considered the rival submissions in extenso in the light of material placed before us and precedents relied upon. The only issue that falls for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's favour by relying upon the judgment of the Hon'ble Gujarat High Court in the case of Vania Silk Mills (P.) Ltd. which was subsequently reversed by theApex Court. It is imperative to note that the interpretation of the expression .extinguishment of any rights therein" did not come to an end with the decision of the Supreme Court in Vania Silk Mills (P.) Ltd.'s case. In a recent decision the Hon'ble Supreme Court in the case of CITv. Mrs. Grace Collis [2001] 248 ITR 323 again considered the expression "extinguishment of any rights" and specifically disapproved the observations earlier made in the Supreme Court in Vania Silk Mills (P.) Ltd.'s case by holding that the extinguishment of any rights in capital assets was not confined to the ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Supreme Court in the case of Rasiklal Maneklal (HUF) in his support in which case it was held that no exchange was involved in the transaction where certain shares of amalgamated company were allotted in lieu of assessee's holding of certain shares in amalgamating company. It is to be noted that this decision was delivered in the context of section 12B of the Indian Income-tax Act, 1922 which stated that "the tax shall be payable by an assessee under the head 'Capital Gains' in respect of any profits or gains arising from the sale, exchange, relinquishment or transfer of a capital asset ............." At that time no provision analogous to the "extinguishment of any rights" was there in the section. Such incorporation was specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argeable to tax. The Hon'ble Supreme Court held that the exchange of shares of one company for shares of another company was realisation of shares of first company and the difference between the price of shares of the first company and the second company on the date of exchange was income chargeable. 8. Now we would deal with the contentions raised by the assessee to the effect that the case was covered under section 47(vii). The prescription of this section is that any transfer by a shareholder, in a scheme of amalgamation, of a capital asset being shares held by him in the amalgamating company subject to the fulfilment of certain conditions would not be regarded as transfer. From a bare perusal of this section it becomes amply clear tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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