Tribunal allows assessee's appeal, deems reinvested dividend as acquisition cost.

The Tribunal ruled in favor of the assessee, determining that the cost of acquisition for the debentures should be the dividend amount reinvested, contrary to the Assessing Officer's decision to treat it as 'Nil.' The Tribunal emphasized the legitimacy of the transaction under a court-approved scheme and the payment of taxes on the deemed dividend, leading to the allowance of the appeal and relief for the assessee.

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Issues:
Challenge to order dated 11th January 2019 under section 143(3) of the Income Tax Act, 1961 for the assessment year 2015-16 regarding the treatment of cost of acquisition of bonus debentures received from Blue Dart Express Limited as 'Nil' for computing capital gains.

Analysis:
The assessee, a non-resident company, contested the order of the Assessing Officer and the learned CIT(A) regarding the cost of acquisition of debentures received from Blue Dart Express Ltd. The Assessing Officer treated the cost of acquisition as 'Nil' while computing capital gains, despite the amount being dividend reinvested in the form of bonus debentures. The learned CIT(A) upheld this decision without addressing the assessee's contentions adequately. The assessee argued that the dividend amount should be considered as the cost of acquisition to avoid double taxation. The debentures were issued following a court-approved scheme where the dividend amount was reinvested by a merchant banker on behalf of the shareholders. The Tribunal found the Assessing Officer's decision erroneous and ruled in favor of the assessee, acknowledging the dividend amount as the cost of acquisition for the debentures.

The Tribunal noted that the authorities failed to address the assessee's submissions properly and upheld the claim that the cost of acquisition should be the dividend amount reinvested in the debentures. The transaction involving the reinvestment of dividend in debentures was part of a court-approved scheme, making the Assessing Officer's treatment of the debentures as 'bonus' incorrect. The Tribunal recognized the legitimacy of the transaction and the taxes paid on the deemed dividend, concluding that the assessee was entitled to consider the dividend amount as the cost of acquisition for the debentures. Therefore, the Tribunal allowed the appeal, granting relief to the assessee and overturning the previous decisions.

In conclusion, the Tribunal found in favor of the assessee, ruling that the cost of acquisition for the debentures should be the dividend amount reinvested, contrary to the Assessing Officer's decision to treat it as 'Nil.' The Tribunal emphasized the legitimacy of the transaction under a court-approved scheme and the payment of taxes on the deemed dividend, leading to the allowance of the appeal and relief for the assessee.

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