TaxTMI 
TaxTMI 
2012 (4) TMI 461
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....ir return on 29.8.2008 declaring an income of Rs. 2,05,93,100/- and Rs. 1,05,00,000/- respectively. The source of income declared by the assessees were capital gains on sale of shares of a company called M/s Breeze Hotels Ltd. Assessees had computed tax on such capital gains based on the concessional rate given in Section 115E of Income-tax Act, 1962 (in short 'the Act'). During the course of assessment proceedings, A.O. noted that capital gains arose out of sale of 14,06,090 shares in the case of assessee Smt. Deivanayagam Maruthini and 7,00,000 shares in the case of the assessee Shri Eassuwaran Deivanayagam of M/s Breeze Hotel Ltd. and the investments originally made by the assessees in the said company were as per the OCB Scheme of Gover....
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.... the Act. As per ld. CIT(Appeals), even though for working out the cost of bonus shares, cost of acquisition had to be spread over the original shares, here, the assessees had sold only bonus shares. Ld. CIT(Appeals) also noted that intention of the Legislature for giving a concessional rate of tax was only to encourage investments in convertible foreign exchange and this purpose would not be satisfied if the shares sold were bonus shares. 4. Now before us, strongly assailing the orders of lower authorities, learned A.R. submitted that Chapter XII-A of the Act contained special provisions relating to certain incomes of non-residents. According to him, sub-section (b) of Section 115C defined "foreign exchange asset" to be any specified as....
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....essee, being a non-resident Indian, includes - (a) any income from investment or income from long-term capital gains of an asset other than a specified asset; (b) income by way of long-term capital gains, the tax payable by him shall be the aggregate of - (i) the amount of income-tax calculated on the income in respect of investment income referred to in clause (a), if any, included in the total income, at the rate of twenty per cent; (ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, included in the total income, at the rate of ten per cent; and (iii) the amount of income-tax with which he would have been chargeable had his....
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.... dealt with in accordance with the following provisions of this section, that is to say,- (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the new asset bears to the net consideration shall not be charged under section 45. Explanation.- For the purposes of this sub-section, - (i) "cost", in relation to any new asset, being a deposit ^7[***] referred to in sub-clause (i....
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...., in relation to a claim of an assessee for exemption under Section 115F, had come up before Mumbai Bench of this Tribunal in the case of Sanjay Gala (supra), wherein it was held at paras 9 and 10 as under:- "9. We have considered the rival submissions, perused the relevant material on record, and gone through the orders of the authorities below as well as decisions cited. The issue involved in this appeal for our consideration is whether the assessee is eligible for benefit u/s 115F of the Act, on the bonus shares received by him. The assessee is NRI acquired shares with convertible foreign exchange. Subsequently, bonus shares were allotted to him. According to the A.O. and CIT(A), the assessee is only eligible for benefit u/s 115F of t....
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....ethod of spreading over on both the bonus and the original shares the cost of acquisition of the original shares would appear to be the proper method of determining the value of the asset. For, there is no doubt that on the issuance of the bonus shares, the value of the original shares is proportionately diminished. In simple language it is 'split up'. As such, the cost of acquisition of the original shares and their value is closely interlinked and interdependent on the issue of bonus shares. Therefore, once the bonus shares are issued, the averaging out formula has to be followed with regard to all the shares". In view of the above proposition, the bonus shares acquired by the assessee are covered by section 115C(b) of the Act, and the sa....