2015 (5) TMI 551

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.... the amount of Rs. 15 Lakhs paid by the assessee to subscribe for Preferential Equity Warrants was investment and not stock-in-trade and was not for business purpose was perverse and contrary to the materials on record ? ii) Whether on the facts and in the circumstances of the case the Appellate Tribunal was justified in law in holding that the loss of Rs. 15 lakhs on the forfeiture of application money for Preferential Equity Warrants was a capital loss and not a revenue loss ? The facts, briefly stated, are as follows. The assessee is an investor. He does not deal in shares; he is a mere investor. The assessee, pursuant to a rights issue floated by KND Engineering Technologies Ltd applied for 1,50,000 Preferential Equity Warrants....

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.... CIT v. Madan Gopal Radhey Lal reported in (1969) 73 ITR 652 wherein the following opinion was expressed : "Held, (i) that, at the relevant time, under the Income-tax Act, 1922, issue of bonus shares by capitalisation of the accumulated profits was not treated as distribution of dividend; and it was well settled that bonus shares given by a company in proportion to the holding of equity capital by a shareholder were, in the absence of any express provision to the contrary, liable to be treated as capital and not income. The bonus shares, by the mere fact that they were received by the assessees in respect of their stock-in-trade, and as accretion thereto, did not become part of their stock-in-trade; the bonus shares were received as capi....

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.... view expressed by the Apex Court but we have not been impressed by the submission. The question which Their Lordships were considering in the case of Associated Industrial Development Co.(P)Ltd. is the nature of holding : whether it is investment or stock-in-trade. But the question before us is not a case of holding because the shares were never fully subscribed by the assessee. He merely deposited the application money. Thereafter he did not deposit the balance. Therefore, the shares were never received by the assessee. Therefore, the question involved in the case of Associated Industrial Development Co.(P)Ltd does not at all have any application to the facts and circumstances of the case. The question in this case is whether the loss ....