TMI Blog2021 (9) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... quisition of equity shares on conversion from FCCBs/GDRs has to be determined as per clause 7(3) and 7(4) of the 1993 scheme. Same view has been expressed by the Hon ble Karnataka High Court in case of DIT vs. Intel Capital Corporation [ 2020 (10) TMI 521 - KARNATAKA HIGH COURT] . Assessee has adopted the cost of acquisition in terms of clause 7(3) and 7(4) of 1993 scheme, based on the data available in public domain. Thus, respectfully following the decision of the Hon ble jurisdictional High Court noted above, we direct the AO to compute capital gain by following the method prescribed under clause 7(3) and 7(4) of the 1993 scheme (supra). - ITA No. 7322/MUM/2019 - - - Dated:- 16-8-2021 - Shri Pramod Kumar, Hon ble Vice President And Shri Saktijit Dey, Hon ble Judicial Member For the Assessee : S/Shri Nishant Thakkar/Hiten Chande (ARs) For the Revenue : Shri S.S. Iyengar (Sr.DR) ORDER PER SAKTIJIT DEY, JM Captioned appeal of the assessee arises out of assessment order dated 27.09.2019 passed under section 147 r.w.s. 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 for the assessment year 2011-12, in pursuance to the directions of le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d (4) of 1993 scheme and FCCB scheme notified by the Government of India. Learned DRP, however, was not impressed with the contention of the assessee. Learned DRP observed, the cost of acquisition of equity shares acquired by the assessee on conversion of FCCBs/GDRs would be governed by the provisions of section 49(2A) as well as section 47(x) or 47(xa), read with section 115AC of the Act. Accordingly, learned DRP upheld AO s computation of short term capital gain. However, learned DRP disapproved the adoption of cost of acquisition of ₹ 1/- per share by the Assessing Officer. Learned DRP directed the assessee to provide necessary details for enabling the AO to determine the cost of acquisition shares on redemption of FCCBs/GDRs. 5. Learned counsel for the assessee submitted, the departmental authorities have not disputed the fact that the FCCBs/GDRs which were ultimately converted to equity shares relate to the 1993 scheme. Drawing our attention to the Issue of Foreign Currency Convertible Bonds and ordinary shares (through depositary receipt mechanism) scheme 1993, learned counsel submitted, as per clause 7(3) of the scheme, on redemption, the cost of acquisition of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cost on the date on which the Overseas Depositary Bank advises the Domestic Custodian Bank for redemption. The price of the ordinary shares of the issuing company prevailing in the Bombay Stock Exchange or the National Stock Exchange on the date of the advice of redemption shall be taken as the cost of acquisition of the underlying ordinary shares. (4) For the purposes of conversions 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. 9. On a careful reading of these clauses, it becomes clear that the cost of acquisition of underlying shares of GDRs shall be the price of the ordinary shares of the issuing company prevailing in the BSE or the NSE on the date of the advice of redemption by the Overseas Depository Bank to the Domestic Custodian Bank. Similarly, the cost of acquisition of underlying shares of FCCBs would be the conversion price determined on the basis of the price of shares at the B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer by way of conversion of bonds referred to in clause (a) of subsection (1) of section 115AC into shares or debentures of that company. This is, therefore, not a transfer as is evident from the reading of section 47. However, the cost with reference to certain modes of acquisition is a matter dealt with by section 49 and where the capital asset becomes the property of the assessee on any distribution of assets on the total or partial partition of a Hindu undivided family or under a gift or will, by succession, inheritance or devolution, then, that is an aspect dealt with by sub-section (1). Where the capital asset being a share or shares in an amalgamated company which is an Indian company and that becomes property of the assessee in consideration of a transfer referred to in clause (vii) of section 47, the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the share or shares in the amalgamating company and by (2A) where the 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 (xa) of section 47, then the cost of acquisition of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in clause (a) of sub-section (1) of section 115AC of the Income Tax Act, 1961 the legislature had in mind the scheme. In these circumstances, it is evident that any scheme prior thereto and particularly the one involved before us, namely, the FCCB Scheme notified by Central Government in 1993 and applicable with effect from 1st April, 1992 and enabling the computation of cost of acquisition, in terms thereof, was held to be unaffected. It was, therefore, possible to compute the cost in terms of the clauses of that scheme and which was admittedly an earlier scheme. 82 To our mind, therefore, Mr. Kaka 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, Mr. Kaka 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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