TMI Blog2019 (4) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... may, by notification in the Official Gazette, specify in this behalf. Section 49(2A), to which we have already made detailed reference above, deals with a capital asset being a share or debenture of a company becoming the property of the assessee in consideration of a transfer referred to in clause (x) or (xa) of section 47 and section 47(x) under a transfer by way of conversion of bonds or debentures and (xa) by way of conversion of bonds referred to in clause (a) of subsection (1) of section 115AC into shares or debentures of any company. The assessee may maintain that there is nothing in the Act which enables the authorities to deal with a situation and it is only clause 7 dealing with transfer and redemption and particularly sub-clause (4) thereof, as spelt out in the Scheme, which will apply. We are of the clear opinion that it is the conversion of foreign currency convertible bonds that the cost of acquisition in the hands of non-resident Indian investors would be the conversion price determined on the basis of the price of the shares as in this case, the National Stock Exchange, on the date of conversion of foreign currency convertible bonds into shares. This is the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of that scheme and which was admittedly an earlier scheme. To our mind, therefore, assessee is right in his contention that the revisional authority fell in clear error in taking assistance of the amendments made by the Finance Act, 2008. To our mind, he is right in urging that the cost of acquisition of the shares was to be determined with reference to the date of acquisition of the FCCBs, then, the period for which the shares should be regarded as having been held by the petitioner assessee should also be reckoned to the date of acquisition. He is right in urging that the second respondent failed to consider the scheme and therefore, once these clauses are included in the FCCB Scheme itself, then, they would govern the FCCB related transactions to the extent the corresponding provisions are not made in the Act. The authority was not right in holding that the cost of acquisition of the shares as per clause 7(4) of the FCCB Scheme is not tenable. Thus, the Government of India notified Scheme effected from 1992 held the field and was the applicable one. The FCEB Scheme has equal status but is admittedly a later one. As a result of the above discussion, we are of the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7(4) For the purpose of conversion of Foreign Currency Convertible Bonds, the cost of acquisition in the hands of the non-resident investors would be the conversion price determined on the basis of the price of the shares at the Bombay Stock Exchange, or the National Stock Exchange, on the date of conversion of Foreign Currency Convertible Bonds into shares. 8(3) Conversion of Foreign Currency Convertible Bonds into shares shall not give rise to any capital gain liable to income-tax in India. 8(4) Transfers of Foreign Currency Convertible Bonds made outside India by a non-resident investor to another nonresident investor shall not give rise to any capital gains liable to tax in India. 7. During the Financial Year 2011-12, the petitioner -assessee had entered into transactions pertaining to Foreign Currency Convertible Bonds (for short FCCBs ) issued by Nava Bharat Ventures Limited (for short NBVL ) an Indian company and the equity shares underlying these FCCBs. It had reported short-term capital gain of ₹ 7,36,52,016 on the sale of 83,89,938 equity shares of NBVL which were acquired on conversion of the FCCBs held in NBVL. This short-term capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken by the AO in the assessment order is incorrect. In the return of income filed by the assessee, it had computed the short-term capital gain by considering the closing price of the equity shares of NBVL on the National Stock Exchange on the date of conversion of the FCCBs into NBVL equity shares. That is taken as a cost of acquisition of the shares (Rs.198.85). The assessee relied on clause 7(4) of the FCCB Scheme reproduced above. However, the AO held that the provision of section 49(2A) of the IT Act should be considered for the purpose of computing the cost of acquisition of the shares of NBVL received from the conversion of the FCCBs. On this basis, the AO had considered the cost of acquisition of the equity shares at the price prevailing (Rs.113.9) on the date of issue of the FCCBs (September 2006) and computed the capital gains at ₹ 78.9 crores as against ₹ 7.9 crores computed by the assessee. It is claimed by the first respondent that during the course of the proceedings, these aspects were examined in detail and the Revisional Authority, after considering the amended provisions of section 49(2A), section 47(xa) and section 115AC (1)(a) of the Income-tax Act, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... somewhat details. We reproduce them. 13. Prior to the introduction of the FCCB Scheme, section 115AC was introduced by the Finance Act, 1992 with effect from April 1, 1993, to govern the taxability of income arising from FCCBs and GDRs. Section 115AC along with the footnote at the time of introduction of FCCB Scheme is reproduced below : Tax on income from bonds or Global Depository Receipts purchased in foreign currency or capital gains arising from their transfer. 115AC (1) Where the total income of an assessee, being a non resident, includes - (a) income by way of interest or dividends, on bonds or shares of an Indian company issued in accordance with such scheme as the Central Government may, by notification in the Official Gazette*, specify in this behalf and purchased by him in foreign currency; or *The footnote to section 115AC(1)(a) is reproduced below Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme has been notified Notification No.SO 1032(E), dated 24-12-1993 . 14. The explanatory memorandum dealing with section 115AC at the time of introduction reads as under : The Government has app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sub-section (2) of the new section seeks to provide that in the case of the aforesaid non-resident, no deduction shall be allowed under section 29 to 44C or clause (i) or clause (iii) of section 57 or under Chapter VI-A where the gross total income consists only of income from bonds or shares. However, where the gross total income includes income from shares or bonds, the reduction under Chapter VI-A shall be allowed as if the gross total income does not include the income from units. 15. Section 115AC deals with taxability of only certain types of income that could arise in respect FCCBs and GDRs. a) Interest payments made to non-resident holders of FCCBs would be liable to tax in India at 10 percent. b) Long-term capital gain realized from the transfer of FCBBs or shares to a resident would be liable to tax in India at 10 percent. 16. In light of the amendment to section 115AC of the Act, clause (x) of Section 47 was amended simultaneously to include bonds to address the taxability arising from the conversion into equity shares of the issuing company. Section 47 of the Act, specifies the cases in which transfer of a capital asset is not assessable to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2A) of section 49 reads as under : (2A) Where the capital asset, being a share or debenture of a company, became the property of the assessee in consideration of a transfer referred to in clause (x) or clause (xa) of section 47, the cost of acquisition of the asset to the assessee shall be deemed to be that part of the cost of debenture, debenture stock, bond or deposit certificate in relation to which such asset is acquired by the assessee 21. The notes to clauses dealing with Section 47(xa) and 49(2A) at the time of introduction read as under : 47 (xa) It is proposed to insert a new clause (xa) to provide that any transfer by way of conversion of bonds referred to in clause (a) of sub-section (1) of section 115AC into shares or debentures of any company shall not be considered as transfer. 49(2A) Sub-section (2A) of the said section provides that where the capital asset, being a share or debenture in a company, became the property of the assessee in consideration of a transfer referred to in clause (x) of section 47, the cost of acquisition of the asset to the assessee shall be deemed to be that part of the cost of debenture, debenture-stock or deposit certif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24. Prior to its substitution by the Finance Act, 2008, w.e.f. 1-4-2008, sub-section (2A) of section 49, as inserted by the Finance Act (No.2) Act, 1991, w.e.f. 1-4-1962 did not contain any reference to bonds . Under this circumstance, the cost of acquisition of equity shares upon the conversion of FCCBs was not governed by the provisions of section 49(2A) instead it was always to be determined in accordance with the special provisions of clause 7(4) read with clause 8(3) of the FCCB Scheme. 25. On the basis of the applicable provisions, and the amendment to the footnote of Section 115AC along with the notes to clauses along with the explanatory memorandum to the Finance Act, 2008 it is clear that Section 47(xa) and section 49(2A) was introduced in the Act to govern transactions pertaining to FCEBs and not FCCBs which are anyway governed by the FCCB Scheme from 1993 onwards. 26. The petitioner converted 323 FCCBs (out of 352 FCCBs) into underlying equity shares of NBVL on August 18, 2011. This conversion is exempt from tax in accordance with the clause7(4) read with 8(3) of the FCCB Scheme. Subsequently, the Petitioner sold 83,89,938 equity shares on the NSE in tranches ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etition has been passed on this Revision Application. It is aggrieved and dissatisfied with this order that the petitioner has filed the instant petition. 30. In the meanwhile, the Assessing Officer, acting on the order of the Commissioner, issued a notice of demand under section 156 of the IT Act dated 10th April, 2018. A copy of this order is annexed at Exhibit-H to the petition. A demand in the sum of ₹ 22,40,46,220/- as also the interest under section 234B of the Act came to be included in this demand, but without giving any credit for the taxes already paid. The petitioner was advised to file a rectification application with the second respondent, which it filed on 10th May, 2018. 31. However, in the meanwhile, the instant petition has been filed. 32. On this petition, we have heard Mr. Porus Kaka, learned senior advocate appearing on behalf of the petitioners and Mr. Abhay Ahuja, advocate for the Revenue / respondents. 33. Mr. Porus Kaka explained to us in great detail the Scheme, the transactions and thereafter took us through the relevant Schemes and the provisions of the amended as well as the unamended Act, the salient features of the FCCB and FCEB Schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued by an Issuing Company and subscribed to by a person who is resident outside India, in foreign currency. Mr. Kaka says that this is exchangeable, into equity shares of another company to be called the Offered Company, in any manner, either wholly, or partly or on the basis of any equity related warrants attached to debt instruments. The FCEB may be denominated in any freely convertible foreign currency. Therefore, Mr. Kaka would submit that a whole new regime after the Notification was issued, bringing into effect the FCEB Scheme. It is clear that whenever there are distinct Schemes, those Schemes are notified and it is clear that when FCEB was repealed by Notification F.No.9/1/2013-ECB-Depository Receipts Scheme, 2014 on 21 st October, 2014, the Central Government in clause 11 of this Scheme known as Depository Receipts Scheme, 2014 (for short DRS 2014 ) inserted a repeal and saving clause and clarified the issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme 1993 shall be repealed except to the extent relating to FCCBs. Once this repeal and saving clause is taken into consideration, then, Mr. Kaka would submit the full ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 18th August, 2011 upon conversion of 323 FCCBs. Hence Mr. Kaka would submit that if the cost of acquisition is considered in accordance with this amended Section 49(2A) of the Income-tax Act, it creates discrimination amongst assessees. The assessees who have sold their shares prior to the amendment cannot be put on par with those who have undertaken a similar transaction post the amendment. 36. Mr. Kaka also submitted that there are decisions in the field which would buttress the arguments of the petitioner that amendment to section 49(2A) to include bonds cannot and was not meant to retrospectively cover bonds issued prior to the date under the FCCB Scheme. Thereby, the cost of acquisition of equity shares upon conversion of FCCBs was not governed by the provisions of section 49(2A) of the Income-tax Act. Instead, the cost was to be determined in accordance with the specific provisions of clause 7(4) read with clause 8(3) of the FCCB Scheme read with section 115AC of the Income-tax Act. 37. Mr. Kaka argued that the provisions of section 115AC read with the FCCB Scheme should govern the FCCB related transactions to the extent that corresponding provisions are not repealed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition and the table below it would demonstrate as to how the factual and legal position has not been appreciated at all or has not been appreciated in its proper perspective. The correct factual and legal position should have been noticed and that having not been done, the impugned order is vitiated by an error of law apparent on the face of the record. 40. On the other hand, Mr. Ahuja appearing on behalf of the Revenue would support the impugned order. It is submitted by him that the petitioners are not disclosing or rather have not disclosed the true and correct facts. They have been succinctly set out both in the impugned order and in the affidavit-in-reply filed to this petition. Mr. Ahuja submits that it is correct that the FCCB Scheme notified by the Central Government in 1993 is applicable with effect from 1st April, 1992 and the same governed the issue of FCCBs and GDRs with equity shares of the Indian companies as underlying securities. Mr. Ahuja submits that a copy of the same has been enclosed as Exhibit-B to the writ petition, but the print-out of the FCCB Scheme 2003 has been taken from the official website of the Income Tax Department. It is a matter of record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to buttress and support his argument that their combined reading would enable the Revenue to urge that in cases of conversion of bonds into shares and for subsequent sale by the tax payer, the cost of acquisition of such shares shall be deemed to be that part of the cost of bond / FCCB in relation to which such assets / shares were acquired by the assessee. It is in these circumstances and the Act containing clear provisions, no amount of reliance on the clauses of the Scheme will assist the petitioner-assessee. 41. Mr. Ahuja would submit that the petitioner had submitted before the Revisional Authority that given the lack of clarity in the Act, provisions of the FCCB Scheme should govern FCCB related transactions to the extent that corresponding provisions are not explicitly included in the Act. However, these contentions were not found acceptable in the light of section 49(2A). The assessee has taken the closing price of the shares of NBVL as prevailing on the date of conversion from FCCBs to shares, namely, 18th August, 2011. Therefore, as per its version the appreciation while the security was FCCB has to be ignored. That means the appreciation from 24th June, 2008 to 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed. 44. In support of his arguments, Mr. Ahuja relied upon a compilation which contains the chronology of events and particularly the omitted events according to him. Then, he relies upon several judgments compiled in the compilation filed on behalf of the Revenue. 45. For properly appreciating the rival contentions, a reference will have to be made to the power conferred in the Revisional Authority by the law. 46. Pertinently, the Revisional Authority was approached by the petitioner. The copy of the Revision Application annexed to the writ petition denotes that the Assessing Officer had issued an order dated 13th May, 2015, under section 143(3) read with section 144C(3) of the Income-tax Act. This order of assessment was passed for the Assessment Year 2012-13. The argument was that this order is prejudicial to the interest of the assessee and, therefore, Revision is sought of the same by invoking section 264 of the Income-tax Act. 47. Section 264 of the Act confers upon the Principal Commissioner or Commissioner a power to call for either of his own motion or an application by the assessee for reviewing the record of any proceedings in the case of any order ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, 1998, an order shall be passed within one year from the end of the financial year in which such application is made by the assessee for revision. Explanation .- In computing the period of limitation for the purposes of this sub-section, the time taken in giving an opportunity to the assessee to be re-heard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. (7) Notwithstanding anything contained in sub-section (6), an order in revision under sub-clause (6) may be passed at any time in consequence of or to give effect to any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation 1-. An order by the Principal Commissioner or Commissioner declining to interfere shall, for the purposes of this section, be deemed not to be an order pre-judical to the assessee. Explanation 2.- For the purposes of this section, the Deputy Commissioner (Appeals) shall be deemed to be an authority subordinate to the Principal Commissioner or, Commissioner. 48. A bare perusal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Scheme. 52. As we have noted in the foregoing paragraphs, the FCCB is a Scheme notified by the Central Government. It shall be deemed to have come into effect from the 1st day of April, 1992. The definitions in the Scheme open with the words Unless the context otherwise requires the foreign currency convertible bonds means bonds issued in accordance with the FCCB Scheme and subscribed by a non-resident in a foreign currency and convertible into ordinary shares of the issuing company in any manner, either in whole or in part, on the basis of any equity related warrants attached to that instrument . The word issuing company is defined to mean a company permitted to issue FCCBs or ordinary shares of that company against global depository receipts. Now, clause (2) sub-clause (f) of the Scheme very clearly says that the words and expressions not defined in the Scheme, but defined in the Income-tax Act 1961 or the Companies Act 1956 or the Securities Exchange Board of India Act, 1992, or the Rules and Regulations framed under these Acts shall have the meaning respectively assigned to them, as the case may be, in the Income-tax Act, or the Companies Act or the SEBI Act. 53. Once ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortion of the bond shall be subject to deduction of tax at source at the rate of ten per cent. (3) Conversion of Foreign Currency Convertible Bonds into shares shall not give rise to any capital gains liable to income-tax in India. (4) Transfers of Foreign Currency Convertible Bonds made outside India by a non-resident investor to another non-resident investor shall not give rise to any capital gains liable to tax in India. 56. By sub-clause (1) interest payments on the bonds until the conversion option is exercised shall be subject to deduction of tax at source at the rate of ten per cent. Conversion of Foreign Currency Convertible Bonds into shares shall not give rise to any capital gains liable to income-tax in India and transfers of FCCBs made outside India by a non-resident investor to another non-resident investor shall not give rise to any capital gains liable to tax in India. Now, heavy reliance is placed on this clause and the clause pertaining to taxation on shares issued under Global Depository Receipt Mechanism in clause 9 to urge that whenever there is a liability to tax and in terms of the Indian Law (Income-tax Act) the FCCB Scheme has clearly spelt it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring apparel. Explanation 2.- For the purposes of this clause- (a) the expression Foreign Institutional Investor shall have the meaning assigned to it in clause (a) of the Explanation to section 115AD; (b) the expression securities shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); (iii) agricultural land in India, not being land situate- (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand; or (b) in any area within the distance, measured aerially,- (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defined in section 2(24) includes any capital gains chargeable under section 45 of the Income-tax Act. 60. The definition of the term Indian company is equally important and that is to be found in section 2, clause 26. That definition reads as under : 2. Definitions.- In this Act, unless the context otherwise requires,- (1) (26) Indian company means a company formed and registered under the Companies Act, 1956 (1 of 1956), and includes - (i) a company formed and registered under any law relating to companies formerly in force in any part of India [other than the State of Jammu and Kashmir and the Union territories specified in sub-clause (iii) of this clause; (ia) a corporation established by or under a Central, State or Provincial Act; (ib) any institution, association or body which is declared by the Board to be a company under clause (17); (ii) in the case of the State of Jammu and Kashmir, a company-formed and registered under any law for the time being in force in that State; (iii) in the case of any of the Union territories of Dadra and Nagar-Haveli, Goa, Daman and Diu, and Pondicherry, a company formed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade of a business carried on by him, such conversion or treatment;] [or] (iva) the maturity or redemption of a zero coupon bond; or (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882); or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. Explanation 1.- For the purposes of sub-clauses (v) and (vi), immovable property shall have the same meaning as in clause (d) of section 269UA. Explanation 2.- For the removal of doubts, it is hereby clarified that transfer includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply to a transaction undertaken on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in foreign currency: Provided also that nothing contained in this clause shall apply to any income arising from the transfer of a long-term capital asset, being an equity share in a company, if the transaction of acquisition, other than the acquisition notified by the Central Government in this behalf, of such equity share is entered into on or after the 1st day of October, 2004 and such transaction is not chargeable to securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004 (23 of 2004). Explanation .-For the purposes of this clause,- (a) equity oriented fund means a fund- (i) where the investible funds are invested by way of equity-shares in domestic companies to the extent of more than sixty-five per cent. of the total proceeds of such fund; and (ii) which has been set up under a scheme of a Mutual Fund specified under clause (23D): Provided that the percentage of equity share holding of the fund shall be computed with reference to the an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration of a transfer referred to in clause (x) or clause (xa) of section 47, the cost of acquisition of the asset to the assessee shall be deemed to be that part of the cost of debenture, debenture-stock, bond or deposit certificate in relation to which such asset is acquired by the assessee. ... 68. Therefore, if such a capital asset being a share or debenture of a company, became the property of the assessee in consideration of a transfer referred to in clause (x) or clause (xa) of section 47, the cost of acquisition of the asset to the assessee shall be deemed to be that part of the cost of debenture, debenture-stock, bond or deposit certificate in relation to which such asset is acquired by the assessee. 69. Ordinarily, in section 47 the clauses set out therein deal with transactions not regarded as transfers. That, inter-alia, includes transfer by way of conversion of bonds of a company into shares or debentures of that company and transfer by way of conversion of bonds referred to in clause (a) of sub-section (1) of section 115AC into shares or debentures of any company, but if it becomes the property of the assessee in consideration of a transfer set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (a) or, as the case may be, Global Depository Receipts referred to in clause (b), the income-tax payable shall be the aggregate of- (i) the amount of income-tax calculated on the income by way of interest or dividends, other than dividends referred to in section 115-O, as the case may be, in respect of bonds referred to in clause (a) or Global Depository Receipts referred to in clause (b), if any, included in the total income, at the rate of ten per cent; (ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (c), if any, at the rate of ten per cent; and (iii) the amount of income-tax with which the non-resident would have been chargeable had his total income been reduced by the amount of income referred to in clauses (a), (b) and (c). (2) Where the gross total income of the non-resident - (a) consists only of income by way of interest or dividends, other than dividends referred to in section 115-O in respect of bonds referred to in clause (a) of sub-section (1) or, as the case may be, Global Depository Receipts referred to in clause (b) of that subsection, no deduction shall be allowed to him under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lobal depository receipts referred to in clause (c) of sub-section (1). Thus, section 115AC(1)(c) deals with such income which is earned from the transfer of bonds referred to in clause (a) or, as the case may be, the GDRs referred to in clause (b) and by sub-section (3) what is clarified is that provisos 1 and 2 to section 48 shall not apply for the computation of long-term capital gains arising out of the long-term assets being bonds or GDRs referred to in sub-section (1). 72. Pertinently, section 48 is a provision which sets out the mode of computation. The income chargeable under the head capital gains shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, the amounts mentioned in clauses (i), (ii) and thereafter the two provisos. 73. We reproduce this part of section 48 only to note that where the assessee is a non-resident, capital gains arising from the transfer of a capital asset being shares in, or debentures of, an Indian company shall be computed by converting the cost of acquisition, expenditure incurred wholly and exclusively in connection with such transfer and the full value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tures of, an Indian company referred to in the first proviso, the provisions of clause (ii) shall have effect as if for the words cost of acquisition and cost of any improvement , the words indexed cost of acquisition and indexed cost of any improvement had respectively been substituted: 74. Now we find that in the impugned order, the Commissioner had before him the petition of the assessee and which sets out the afore referred facts. The Commissioner then refers to the relevant materials including the Revenue Circulars and findings of the Assessing Officer and he comes to the conclusion that the AO proceeded on completely baseless presumptions that FCCBS were allocated to the assessee even before its date of incorporation. In paragraph 7 of the impugned order, he grants a relief to the assessee-petitioner before us on the following factual findings. From the facts narrated above and from the chronology of events and from the documents furnished during the Section 264 proceedings, it is clear that the A.O. proceeded on completely baseless presumption that the FCCBs were allocated to the assessee even before its date of incorporation. As already been poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have already made detailed reference above, deals with a capital asset being a share or debenture of a company becoming the property of the assessee in consideration of a transfer referred to in clause (x) or (xa) of section 47 and section 47(x) under a transfer by way of conversion of bonds or debentures and (xa) by way of conversion of bonds referred to in clause (a) of subsection (1) of section 115AC into shares or debentures of any company. The assessee may maintain that there is nothing in the Act which enables the authorities to deal with a situation and it is only clause 7 dealing with transfer and redemption and particularly sub-clause (4) thereof, as spelt out in the Scheme, which will apply. We are of the clear opinion that it is the conversion of foreign currency convertible bonds that the cost of acquisition in the hands of non-resident Indian investors would be the conversion price determined on the basis of the price of the shares as in this case, the National Stock Exchange, on the date of conversion of foreign currency convertible bonds into shares. This is the cost of acquisition in the hands of a non-resident investor. That would be the conversion price determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A bare perusal of the unamended provision denotes that insofar as on introduction of clause (xa) of section 47 effective from 1st April, 2008 by the 2008 Finance Act, this subsection (2A) of section 49 was also amended. Simultaneously, with the introduction of clause (xa) in section 47, this amendment has been effected. Therefore, though section 47 opens with the words nothing contained in section 45 shall apply to the following provisions , section 49 provides for determination of cost with reference to certain modes of acquisition. Earlier, where the capital asset being a share or debenture in a company, became a property of an assessee in consideration of a transfer referred to in section 47, the determination of the cost of that acquisition was provided for. By the substituted sub-section (2A) of section 49, the cost of acquisition of the asset of the assesee shall be deemed to be that part of the cost of debenture, debenture-stock bond or deposit certificate in relation to which such asset is acquired by the assessee. The introduction of the word bond and the word or before the words deposit certificate with effect from 1st April, 2008 is thus crucial. 81. All thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hatia) decided on 19th August, 2015 . There, the substantial question as raised was as under:- Whether on the facts and in law, the Hon ble Income Tax Appellate Tribunal was justified in reckoning the period for long term capital gains from the date of purchase of convertible debentures instead of actual date of allotment of shares on conversion from debentures? 84 In para 2 of the judgment, the facts have been noted as also the submissions and thereafter, the discussion has been made in paras 7 and 8, which read as under:- 7. Section 2(42A) of the Act defines a short term capital asset and in case of shares where the assessee holds the said shares for 12 months or less than 12 months, it shall be short term capital asset. Clause (f) of Explanation I(i) to Section 2(42A) of the Act states that in case of capital asset being a financial asset, allotted without any payment and on the basis of holding of any other financial asset, the period shall be reckoned from the date of the allotment of such financial asset. Section 47(x) and 49(2A) were inserted by the Finance (No.2) Act, 1961 with retrospective effect from 1.4.1962. Section 47(x) provides that any transfer by w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not lost. More so, when it is dealing with an identical issue. 86. We are aware of the fact that Mr.Ahuja has also tendered a compilation and he has given certain list of dates, but, once we find that the reliance on these dates and events and particularly the date of conversion would not in any manner dilute the clauses of the FCCB Scheme of 1993, then, these dates and events as compiled by the Revenue are of no assistance. 87. In the compilation tendered on behalf of the Revenue, several other materials are also introduced, including the Budget Speech of the Finance Minister. It also contains the new Industrial Policy, 1991 and relevant part of Taxmann s Foreign Exchange Management Manual. These may also make reference to the FCCB, but what we find is that an attempt is made to read the provisions of the Income Tax Act and introduced with effect from 1st April, 2008 in relation to Foreign Currency Exchangeable Bond Scheme, 2008 and apply it to the FCCB Scheme of 1993. That is not correct. 88. Then, Mr. Ahuja invited our attention to the judgments of the Hon ble Supreme Court in Gainda Ram and Ors. vs. Municipal Corporation of Delhi and Ors, reported in (2010) 10 SCC 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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