TMI Blog2010 (1) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... cast an effect on the short term capital gains of the assessee showing and the forfeiture of this amount in the manner indicated by the assessee was a tax-evasion tactic, prohibited by law. – CIT(A) and ITAT has decided in favor of assessee – held that - the forfeiture of the convertible warrant has resulted in extinguishment of the right of the assessee to obtain a share in BLB Limited. It is not a case where the asset itself has been extinguished or destroyed. A share in a company is nothing but a share in the ownership of the company. While the right of the assessee to share in the ownership of the company (BLB Limited) stands extinguished on account of the forfeiture, the company, with all its assets, continues to exist. The forfeitur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in". It was submitted on behalf of the assessee that the company had debited the loss to its capital account and not to the profit and loss account and consequently, there was no effect on the profit and loss account of the assessee company. The Assessing Officer, however, observed that the same had cast an effect on the short term capital gains of the assessee showing and the forfeiture of this amount in the manner indicated by the assessee was a tax-evasion tactic, prohibited by law. 3. Since the assessee was the Promoter Director in M/s BLB Limited, the Assessing Officer taxed the same in the hands of the assessee on protective basis and observed that the said amount could be taxed in the case of M/s BLB Limited. 4. Being aggrieved, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofits or gains arising from the transfer of a capital asset .." 6. The learned counsel for the Revenue submitted that the profits or gains and the loss must arise from the transfer of a capital asset. Her emphasis was on the word "transfer", used in the aforesaid expression. She then referred to Section 2(47) (ii) of the said Act which defines "transfer", in relation to a capital asset to inter alia ,include the extinguishment of any rights therein. It was submitted that the forfeiture of the said amount of Rs.59,50,000/- does not amount to extinguishment of any rights in the transfer of capital assets. She submitted that the extinguishment of the right must be in relation to the transfer of a capital asset and for this preposition she p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls (supra) has been over-ruled by the Supreme Court in a Larger Bench decision in the case of Commissioner of Income Tax vs. Grace Collis:248 ITR 320 (SC) . Our attention was invited to the following passage: "We have given careful thought to the definition of "transfer" in section 2(47) and to the decision of this court in Vania Silk Mills Pvt. Ltd. ' s case [1991] 191 ITR 647. In our view, the definition clearly contemplates the extinguishment of rights in a capital asset distinct and independent of such extinguishment consequent upon the transfer thereof. We do not approve, respectfully, of the limitation of the expression "extinguishment of any rights therein" to such extinguishment on account of transfers or to the view that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not deserve admission as no substantial question of law arises for our consideration. This is so on two grounds. First of all, the question of whether forfeiture amounted to transfer, was not at all raised before the authorities below and in view of the decision of this Court in Indocount Finance Limited (supra) , we cannot permit the Revenue to take up this issue for the first time before this Court. 13. More importantly, the second issue as to whether the forfeiture of the convertible warrant amounted to a transfer within the meaning of Section 2(47) of the said Act has now been made clear by the Supreme Court in the case of Grace Collis (supra) as also by the Karnataka High Court in BPL Sanyo Finance Limited (supra) . We ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
