Need Tally
for Clients?

Contact Us! Here

  Tally Auditor

License (Renewal)
  Tally Gold

License Renewal

  Tally Silver

License Renewal
  Tally Silver

New Licence
  Tally Gold

New Licence
 
Open DEMAT Account with in 24 Hrs and start investing now!
« From the Courts »
Open DEMAT Account in 24 hrs
 Inordinate delay in income tax appeal hearings
 Income Tax leviable on Tuition Fee in the Year of Rendering of Services: ITAT
 Supreme Court invoked its power under Article 142 of Constitution to validate notices issued under section 148 as notices issued under section 148A. However the same shall be subject to amended provisions of section 149.
 ITAT refuses to stay tax demand on former owner of Raw Pressery brand
 Bombay HC sets aside rejection of refund claims by GST authorities
 [Income Tax Act] Faceless Assessment Scheme does not take away right to personal hearing: Delhi High Court
 Rajasthan High Court directs GST Authority to Unblock Input Tax Credit availed in Electronic Credit Ledger
 Sebi-taxman fight over service tax dues reaches Supreme Court
 Delhi High Court Seeks Status Report from Centre for Appointments of Chairperson & Members in Adjudicating Authority Under PMLA
 Delhi High Court allows Income Tax Exemption to Charitable Society running Printing Press and uses Profit so generated for Charitable Purposes
 ITAT accepts Lease Income as Business Income as Business Investments were mostly in nature of Properties

Commissioner Of Income Tax Delhi-I Vs. M/s Stainless Investment Ltd.
December, 18th 2015
           THE HIGH COURT OF DELHI AT NEW DELHI
%                                     Judgment delivered on: 19.11.2015
+       ITA 305/2002
COMMISSIONER OF INCOME TAX DELHI-I                      ..... Appellant
                          versus
M/S STAINLESS INVESTMENT LTD.                           ..... Respondent
Advocates who appeared in this case:
For the Appellant    : Mr Kamal Sawhney, Senior Standing Counsel
                       with Mr Raghvendra Singh and Mr Shikhar
                       Garg.
For the Respondent   : Mr. Ajay Vohra, Senior Advocate with Ms.
                       Kavita Jha.
CORAM:
DR. JUSTICE S. MURALIDHAR
MR. JUSTICE VIBHU BAKHRU
                               JUDGMENT
VIBHU BAKHRU, J

1.      The Revenue has filed this appeal under Section 260A of the Income

Tax Act, 1961 (hereafter the `Act') impugning an order dated 14th March,

2002 passed by the Income Tax Appellate Tribunal (hereafter `ITAT') in

ITA No. 5306/Del/95. The said appeal (being ITA No. 5306/Del/95) was

filed by the Revenue against an order dated 15th March, 1995 passed by the

Commissioner of Income Tax (Appeals) [hereafter 'CIT(A)'] in Appeal

No.284/93-94 whereby the CIT(A) allowed the Assessee's appeal directed

against the assessment order dated 28th July, 1993 passed by the Assessing




ITA 305/2002                                                   Page 1 of 5
Officer in respect of Assessment Year (AY) 1990-91.

2.       The Appeal was admitted on 12th October, 2004 and the following

questions of law were framed:-

           "1. Whether the Income Tax Appellate Tribunal was right in
           holding that the sale consideration received by the assessee
           by transfer of shares and sale of rights entitlement of Partly
           Convertible Debentures (PCDs) is income from capital gains
           and not income from business?
           2. Whether the Income Tax Appellate Tribunal was right in
           holding that the assessee had incurred loss on sale of its
           entitlement to acquire partly convertible debentures and the
           assessee is entitled to set off the alleged loss from the capital
           gains/income earned by the assessee?"






3.       However in the facts of the present case, the first question does not

arise. Further the reference to partly convertible debentures in the second

question may be read as fully convertible debentures.

4.      Briefly stated the relevant facts necessary to address the aforesaid

question are as under:-

4.1     The Assessee company is an investment company belonging to the

Jindal Group of companies. Jindal Group is mainly engaged in the

manufacturing and production of ferrous metals and alloys. Jindal Group

includes investment companies ­ such as the Assessee ­ which, inter alia,

hold and transact in shares of the operational companies of the Group.



ITA 305/2002                                                         Page 2 of 5
4.2     The Assessee filed its return of income on 28 th December, 1990

declaring an income of Rs.75,510/-. In the computation of income, the

Assessee had claimed a loss of Rs.40,22,350/-. The return was picked up

for scrutiny and the AO passed an assessment order under Section 143(3) of

the Act on 10th June, 1992. The said assessment was set aside by CIT(A) by

an order dated 2nd February, 1993. Thereafter, a notice under Section

143(2) of the Act was issued to the Assessee and a fresh assessment order

dated 28th July, 1993 was passed by the AO.

4.3     As on 1st April, 1989, the Assessee held 1,94,000 equity shares of

Jindal Strips Limited (hereafter `JSL'). JSL floated rights issue of fully

convertible debentures (FCDs) of Rs.140/- each. In terms of the said issue,

every shareholder would be entitled to subscribe to FCDs in the ratio of 2:1,

that is, 1 FCD for every 2 equity shares held by the shareholders.

Accordingly, the Assessee was offered 97,000 FCDs. Out of the aforesaid

entitlement, the Assessee renounced rights to subscribe to 35,000 FCDs in

favour of M/s Saw Pipes Ltd. (another company of the Jindal Group) at

Rs.12/- per FCD, that is, at an aggregate consideration of Rs.4,20,000/-.

4.4     The Assessee claimed that the cum-right price of an equity share of

JSL was Rs.270/- as on 27th October, 1989 and the said share was quoted



ITA 305/2002                                                     Page 3 of 5
ex-rights at Rs.208/-. The Assessee claimed that the cost of rights to

subscribe to 35,000 FCDs was Rs.43,40,000/- (i.e. Rs.62 per share x 70,000

shares). Accordingly, the Assessee claimed that it had incurred a loss of

Rs.39,20,000/- (Rs.43,40,000/- ­ Rs.4,20,000/-).

4.5     The AO noticed that the shares of JSL were held as closing stock

and, accordingly, disallowed the notional cost of acquisition claimed by the

Assessee. The Assessee held that any diminution in the value of stock of

JSL ­ the basis on which the cost of acquisition of rights was claimed ­

would be reflected in the valuation of the closing stock of JSL. He also

observed that the closing stock was valued at price of Rs.10.38/- per share

against the market value of Rs.118/- per share and, thus, any loss claimed

by the Assessee was only notional.

4.6     The Assessee appealed to the CIT(A) against the said assessment

order (being Appeal No. 294/93-94). The CIT(A) allowed the aforesaid

appeal and held that the loss claimed by the Assessee was allowable in

terms of the decision of the Bombay High Court in CIT v. K.A. Patch:

(1971) 81 ITR 413 (Bom).

5.      The Revenue preferred an appeal before the ITAT, which was

rejected. Aggrieved by the same, the Revenue has filed the present appeal.








ITA 305/2002                                                    Page 4 of 5
6.      The present appeal was heard alongwith Commissioner of Income

Tax Delhi-I v. M/s Abhinandan Investment Ltd.: ITA No.130/2001 and

the questions of law framed in present appeal and in ITA 130/2001 are also

common. Further, the learned counsel for the parties contended that the

material facts and issues in the present appeal were similar to the issues

involved in ITA 130/2001 and a decision in ITA 130/2001 would also be

determinative of the question in the present appeal.

7.       Thus, in view of our decision in Commissioner of Income Tax

Delhi-I v. M/s Abhinandan Investment Ltd.: ITA 130/2001 delivered

today, the question of law is answered in favour of the Revenue and against

the Assessee.

8.      The appeal is allowed. The parties are left to bear their own costs.




                                                       VIBHU BAKHRU, J




                                                       S. MURALIDHAR, J
NOVEMBER 19, 2015
RK




ITA 305/2002                                                       Page 5 of 5

Home | About Us | Terms and Conditions | Contact Us
Copyright 2024 CAinINDIA All Right Reserved.
Designed and Developed by Ritz Consulting