TMI Blog2016 (10) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... ex Court in Malabar Industrial Co. Ltd. v. CIT [2000 (2) TMI 10 - SUPREME Court ] has laid down a four-way test toward an order being erroneous. Succinctly put, these are: incorrect assumption of facts; incorrect application of law; without applying the principles of natural justice; and without application of mind. It is the fourth category which arises in the instant case, and with which we are therefore concerned with. - Decide against assessee - I.T.A. No. 2870/Mum/2014 - - - Dated:- 23-8-2016 - SHRI SANJAY ARORA, AM AND SHRI PAWAN SINGH, JM For The Appellant : Shri Girish Dave and Ms. Kadambari Dave For The Respondent : Shri H. N. Singh ORDER Per Sanjay Arora, A. M.: The instant appeal by the Assessee agitates the revision u/s. 263 of the Income Tax Act, 1961 ( the Act hereinafter) dated 31.3.2014 by the Commissioner of Income Tax-8, Mumbai ( CIT for short) qua its assessment u/s. 143(3) dated 01.12.2011 for the assessment year (A.Y.) 2009-10. 2. The basis of the revision in the present case is the acceptance by the Assessing Officer (A.O.) of the assessee s claim for short term capital gain (STCG) on the nonexercise of the option to subscri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rieved, the assessee is in appeal, raising both jurisdictional as well as legal issues. 3. We have heard the parties, and perused the material on record. 3.1 The assessee s case has two limbs to it. Firstly, that the impugned claim was accepted by the AO in the assessment proceedings after due verification, and that therefore his order cannot be regarded as erroneous and prejudicial to the interest of the Revenue, so as to warrant a revision u/s. 263. On merits, its case is that the share warrant is a capital asset, which stands extinguished on the non-exercise of the option. An extinguishment of a right is a transfer within the meaning of section 2(47) of the Act. The loss arising is thus a short-term capital loss (STCL), as claimed, and as allowed by the AO. Before us, the thrust of the assessee s arguments was on the same lines, i.e., of the share warrant being a capital asset, and its extinguishment, thus, a transfer resulting in a capital gain or, as the case may be, loss. 3.2 We, after giving a careful consideration to the matter, are of the view that the assessee s claim is not maintainable, and for more than one reason. To begin with, we may though clarify that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its lapse. Put differently, is a capital asset only for such period of time, and no further. There is as such no question of it s transfer after 17.7.2009, by which date it could be either exercised or transferred in-as-much as an asset can be transferred only during its subsistence. What we wish to emphasize is the essential difference between the existence of the right or of it being a capital asset by definition over a limited period, i.e., from 18.1.2008 to 17.7.2009, after which it can no longer be regarded as a capital asset due to the limited period for which the right was conferred and its extinguishment per se . The extinguishment of a right in a capital asset, on the other hand, would be where the right gets destroyed or annihilated, as by the act of God or law or by the action of third party. Reference in this context may be made to the definition of the word extinguishment in P. Ramanatha Aiyar s The Law Lexicon 3rd Edition 2012, reads as under: Extinguishment: The extinction or annihilation, of a right, estate, etc., by means of its being merged in, or consolidated with another, generally a greater or more extensive, right or estate. Wherever a right, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , are conscious of the assessee s Gd. No. 1, agitating the jurisdictional aspect. There is no whisper of this aspect, i.e., of the assessee subscribing to the share warrants or of providing for loss by writing off the amount paid, in the assessment order. Even no material was led before us during hearing to show its consideration during the assessment proceedings. The details in its respect called for during the assessment proceedings, which were adverted to during hearing, are towards the payment of the sum as well as the reason for not subscribing to the shares, i.e., qua the quantification and the genuineness of the loss, over which there is no dispute, and neither are the same the subject matter of this appeal, which is qua the nature of the loss arising on the nonexercise or non-trading of the right, if any, arising to the assessee during the current year . The revision stands made by alleging non-verification of the assessee s claim of STCL by the assessing authority qua which we observe no inquiry or application of mind whatsoever by him. That lack of enquiry, where warranted, gives rise to revision is a part of well settled law. The Hon ble Apex Court in Malabar Indu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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