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TMI Blog2013 (5) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... of treating as Long Term Capital Gain, the difference between value of share on the date of its allotment by the company and the price of warrant paid as per letter of allotment of warrant issued by the company, Garware Offshore Services Ltd. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.9,45,00,000/- without appreciating the fact that relinquishment /exchange of warrant into equity is a transfer within the meaning of Section 2(47)(i) and income earned on such transfer is covered as per the provisions of Section 48 of the I.T.Act." 2. The brief facts of the case are that the assessee filed its return of income declaring total income at Rs. 59,98,660. Durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y paying 10% of the cost price and then converted those warrants into equity shares on a particular date when the price was Rs.231.35. Thus, the assessee derived a benefit of Rs.9.45 crores. However, the AO computed the said income under the head "Capital gains". In appeal, the learned CIT(A) deleted the addition observing as under: "3.10 I have considered the A.O's order as well as appellant AR's submissions. Having considered both, I am of the considered view that there is complete force in the appellant's submission. The appellant company did not extinguish its any right over the warrant. The said warrant was allotted on application to the appellant company. There was an option available with the appellant company which emb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y as specifically mentioned by the appellant's AR in his submissions. In view of the aforesaid discussion and also taking note of the decision of the Apex Court, I am of the considered view that the AO was not justified in her action while making the aforesaid addition in the case of the appellant company as capital gain. I thereby hold that the addition so made by the AO is not justified and it was contrary to the provisions of law in the Income-tax Act. Accordingly, the addition so made by the A.O. of Rs.9,45,00,000 is deleted. Thus, the appellant this ground of appeal is allowed. 3.11 Besides this, even I find that the alternative argument of the A.O. of taxability of the said benefit in the hands of the appellant company u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tipulated period, the non-payment of which would have resulted in forfeiture of the money. So the money paid for the warrants was just an advance payment for the purchase of shares and the assessee exercised his rights within the stipulated time and got the shares allotted by paying the remaining 90% amount at the predetermined value of the shares. It can be said to be an investment in shares. The capital gain would have arisen if the assessee would have sold the said shares in the market at a higher price. The shares have been retained by the assessee and the gain or fall in the market value of the said shares does not itself constitute any transfer under the Act. The purchase of shares at a specified rate, which were booked by paying 10% ..... X X X X Extracts X X X X X X X X Extracts X X X X
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