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TMI Blog2022 (5) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... g concern as cost of shares while determining capital Gain on sale of said shares received in exchange of membership of the said broking concern. 2. The learned Commissioner of Income-tax (Appeals) erred in law and in facts in not adopting fair market value as on 01-04-1981 of Membership and not allowing an Indexation thereof, 3. Each of the above grounds of appeal are independent and without prejudice to each other, 4. The appellant craves liberty to add, to alter and /or amend any of the grounds of appeal at or before the time of hearing. 3. The assessee in this case received a sum of Rs. 1,42,32,400/- on sale of 2737 shares of Bombay Stock Exchange. However, capital gain was not offered. On Assessing Officer's query it was inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt proceedings." 5. However, AO had rejected it by holding as under:- "a) The creditors paid off cannot be treated as cost of sale of the shares, because the value of the creditors is not connected to the value of the shares. The attachment of the membership card would be in force irrespective of the quantum of creditors, 'because the attachment is in terms of rules and regulations of the Exchange, Even if 99% of the creditors are paid off, the attachment is not liable to be lifted solely because of the outstanding 1% of the creditors. Thus the claim made by the assessee fails on account of absence of proximate nexus and is accordingly rejected. b) The next issue is the claim of cost, of the shares on the basis of letter issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld is also not allowable for the reason that when the shares were allotted, the capital gain arising from the transfer of membership right was entitled for not being regarded as a transfer by virtue of section 47(xiii)(a). Accordingly, the cost of- the shares was also specifically provided by section 55(ab), by which it is apparent that the, legislative intent was to deny adoption of fair market value. Since the assessee has not beer, able to furnish the cost paid by him for acquiring the membership of the stock exchange. Therefore, the same is estimated at Rs. 20,000." 6. Upon assessee's appeal, the details noted by ld.CIT(A) are as under:- "i) Consequent upon corporatization and demutualization of Bombay Stock Exchange, each trading m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever (other than transfer restriction imposed on the equity shares pursuing to SEBI letter dtd. Feb. 23, 2006), at the time of tendering the letter of transmittal would be eligible to be offered for sale in the offer process." 7. The ld.CIT(A) rejected the assesses submission as under:- "It is the argument of the appellant that he paid Rs.1.58 cr. to the creditors in order to be active member of the BSE. On said payment, membership of the Stock Exchange became active and share could be received in favour of the appellant. On these facts, it is contended that payment of Rs.1.58 cr. would be eligible to be considered as cost of shares and would be eligible indexation too. On the specific query, regarding date of payment to the creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties my HL Fund 3,000,000.00 1982 To 1983 15,866,461.10 The purpose of payment to the creditors was to become operative member on BSE. At that time, ' no one even thought of corporatization and demutualization of BSE and allotment of any share. Therefore, payment to creditors has nothing to do with cost of shares and allotment of shares. For allotment of shares, the appellant filed application dated 05.08,2005 and it was allotted 10000 shares which are shown as on 30.03.2006. From the above facts, it is seen that payment to the creditors admittedly made in the year 1982 to 1994 except the payment of Rs.2 lacs which is claimed to be paid to Bank of Baroda in the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of capital gains arising from the sale of shares of the BSE Ltd. sold by the Appellant in the relevant previous year to AY 2008-09. The shares of the BSE were allotted to the Appellant when the BSE corporatized on 30th March 2006. Prior to that the Appellant held a membership of the BSE. The flow depicting the acquisition of the BSE Ltd. shares is as under: 1. This membership of the BSE was initially acquired by the Appellant's father Shri Harkisondas Dalai in 1933 and was used for the running of a proprietary share trading business. 2. The appellant's brother Shri Manharkant Dalai joined the concern as a partner of the stock broking concern in 1939. 3. Shri Shri Harkisondas Dalai passed away in 1957 and the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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