TaxTMI 
TaxTMI 
2001 (12) TMI 203
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....% and in lieu thereof each shareholder was allotted shares in HCL-HP Ltd. (new company) to the extent of 32%, It was explained that instead of one old share, each shareholder of HCL Ltd. (existing company) became entitled to two shares, one of HCL and one of HCL-HP Ltd. It was explained that simultaneous to the split of the company there was an interchange in the names of the company i.e., HCL Ltd. (existing company) was renamed as HCL-Hewlett Packard Ltd. and HCL-HP Ltd. was renamed as HCL Ltd. it was further explained that after the split, the share capital of HCL Ltd. was divided into shares of two companies, which after interchange in the names stood as under:-- 68% Rs.10,08,94,640 HCL-Hewlett Packard Ltd. (existing company) 32% Rs.4,74,79,700 HCL Ltd. (new company). Consequent of splitting into two companies it was explained that the assessee's shareholding got split up as follows:-- HCL-Hewlett Packard Ltd. 41,444 shares HCL Ltd. &nbs....
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.... in the case of CITv. Vania Silk Mills (P.) Ltd. [1977] 107 ITR 300 held that the case of assessee was covered under section 2(47)(ii) being "extinguishment of any rights therein" and hence had amounted to transfer within the pale of the definition of the term "transfer". Ergo the action of the Assessing Officer was echoed by CIT(A). 4. Before us the learned counsel for the assessee contended that the CIT(A) had miserably failed to appreciate the contentions raised before him and had relied upon the decision of Hon'ble Gujarat High Court in the case of Vania Silk Mills (P.) Ltd. which was no more a good law because theHon'ble Apex Courthas reversed the said order in Vania Silk Mills (P.) Ltd. v. CIT [1991] 191 ITR 647. It was further submitted that though the CIT(A) passed order in 1994 but he failed to take into consideration the decision of theApex Courtwhich was rendered much earlier in 1991. The learned counsel reiterated the stand taken before the lower authorities to the effect that for any transfer there must be two separate persons and the value of the assets for transfer/exchange must also be different. The learned counsel also placed reliance on the decision of the Sup....
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....head Capital Gains. There is no dispute about the fact that the learned CIT(A) while disposing of the appeal decided the matter in revenue's favour by relying upon the judgment of the Hon'ble Gujarat High Court in the case of Vania Silk Mills (P.) Ltd. which was subsequently reversed by theApex Court. It is imperative to note that the interpretation of the expression .extinguishment of any rights therein" did not come to an end with the decision of the Supreme Court in Vania Silk Mills (P.) Ltd.'s case. In a recent decision the Hon'ble Supreme Court in the case of CITv. Mrs. Grace Collis [2001] 248 ITR 323 again considered the expression "extinguishment of any rights" and specifically disapproved the observations earlier made in the Supreme Court in Vania Silk Mills (P.) Ltd.'s case by holding that the extinguishment of any rights in capital assets was not confined to the extinguishment by transfer or exchange and had included extinguishment of any capital assets independent of and otherwise than on account of transfer. The relevant observations of theApex Courtin this decision, rendered by three judges, are as under:-- "We have given careful thought to the definition of "transf....
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.... 371 the Supreme Court was concerned with a case where a company dealing in shares was holding 14,500 shares of A Ltd. of the face value of Rs. 10 each as its stock-in-trade. The said shares were valued by the company at Rs.1,45,000 and included in the closing stock. Subsequently a new company AC Ltd. made an offer to obtain shares of A Ltd. In exchange for the allotment of its own shares @ 38 equity shares in AC Ltd. for 10 equity shares in A Ltd. The company accepted the said offer and received 55,100 shares of AC Ltd. in exchange of its holding of 14,500 shares in A Ltd. The face value of the shares of the second company was Rs. 10 per share. The Assessing Officer held that the assessee had earned a profit of Rs.4,06,000 in the said transactions and brought the same amount to tax. The plea of the company was that it was the case of mere exchange of shares of one company for another company and the difference between the price of the shares of the first company and the second company on the date of exchange was not income chargeable to tax. The Hon'ble Supreme Court held that the exchange of shares of one company for shares of another company was realisation of shares of first co....