TMI Blog2009 (2) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... e, with Mrs. Mauna M. Bhatt for the Appellant. Mr. J.P. Shah with Mr. Manish J. Shah for the Respondent. JUDGMENT JUSTICE D.A.MEHTA - All these tax appeals are taken together as in each of the tax appeals following three identically worded questions have been formulated at the time of admission on 20.09.2000: Whether the Appellate Tribunal is right in law and on facts in holding that the assessee was entitled to short term capital loss? Whether the Appellate Tribunal is right in law and on facts in holding that the Assessing Officer was not justified in determining the short term capital gain relating to the transaction of sale of right of fully convertible debentures in relation to which the assessee claimed loss? W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame entitled to one convertible debenture for every 10 shares held as on 18.10.1992. The assessee was thus entitled to 153036 rights in the ratio of 1:10. The assessee renounced the rights in favour of two group companies for consideration of Rs.3,06,07,200/- which was credited to the Profit Loss A/c. The Assessing Officer worked out the taxable short term capital gains at a sum of Rs.3,06,07,200/- holding that in absence of any cost of acquisition the entire consideration received was taxable. Accordingly, the loss claimed by the assessee to the tune of Rs.7,03,96,560/-, on the transaction relating to renunciation of rights to receive debentures, was disallowed. 5. The assessee carried the matter in appeal before Commissioner (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the rights entitlement, but was also due to various other market factors. It was further contended that the transaction in question was in violation of Section 13 of the Securities Contract Act. Lastly, it was submitted that the right was already embedied in original shares and thus the loss, if any, was in relation to a long term asset and was liable to be treated as long term capital loss. 7. Mr. Bhatt elaborately read provisions of Section 12B of 1992 Act as well as provisions of Sections 2(47), 45, 48(i) and 48(ii) of the Act to emphasise the difference in language of the provisions and contended that the 1992 Act permitted working out capital gain or loss on the basis of actual cost, whereas in the provisions under the present Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt by the Bombay and Calcutta High Courts in the cases of : Commissioner of Income-Tax, Bombay City I Vs. K.A. Patch, [1971] 81 ITR 413 (Bom.); AND Commissioner of Income Tax Vs. Oberoi Building and Investment Pvt. Ltd., [1993] 203 ITR 403 (Cal.). 9. It is an accepted position between the parties that Section 55 of the Act has been amended w.e.f. 01.04.1995 by the Finance Act, 1994 by insertion of Clause (aa) in sub-section (2) of Section 55 whereby the cost of acquisition in relation to a capital asset, where by virtue of holding capital asset being a share or any other security, the assessee became entitled to subscribe to any additional financial asset, then in relation to any right to renounce the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The principles of accounting indicated by us above are clearly the principle that must be applied in order to find out the net capital gain or loss arising out of a transaction of the nature with which we are concerned. .." 12. Thus, applying the principles laid down by the Apex Court in the case of Miss Dhun Dadabhoy Kapadia Vs. CIT, Bombay (supra) the Court does not find any case made out to interfere with the decision of the Tribunal holding that the assessee was entitled to the short term capital loss claimed by the assessee. Therefore, in the facts and circumstances of the case the contention regarding the Apex Court decision not being applicable due to change in the Scheme of the Act does not merit acceptance. Similarly, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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