TaxTMI 
TaxTMI 
TaxTMI 
2007 (4) TMI 148
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....a period of time, acquired 3,88,44,324 shares of an Indian company by name Indian Aluminium Co. Ltd. (Indal). The shares acquired by the assessee-company are of the following categories (i) Shares acquired between 1938 and 1968 in Canadian dollars (CAD); (ii) Shares acquired in August, 1998, in American dollars (USD) ; and (iii) Bonus shares allowed between 1944 and 1996. 3 During the previous year relevant to the assessment year under appeal, the assessee-company sold the entire Indal shares to another company Hindalco Industries Ltd. The shares were sold on at an agreed price of Rs. 190 per share. The long-term capital gains arising out of the above transaction was reported by the assessee-company at Rs. 3,17,71,30,910 in its return o....
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....1981, the assessee could not take the benefit of FMV provided in section 55(2)(b)(i), thereby, meaning that the assessee cannot substitute its cost with FMV as on April 1, 1981. This is because, according to the assessing authority, the assessee is a non-resident and the non-residents are required to compute the capital gains in terms of the foreign currency conversion in terms of the first proviso to section 48. In other words, the Assessing Officer held that the capital gains in the case of. assessee being a non-resident, has to be computed on conversion of the foreign currency and simultaneously the assessee could not avail of the benefit of FMV as on April 1, 1981. The Commissioner of Income-tax (Appeals) concurred with the view of the ....
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.... of the Revenue that a non-resident was not entitled to indexation under section 48 of the Act and, therefore, was not eligible to rely on section 55(2)(b)(i). In this respect, the hon'ble Bombay High Court considered the following two questions (page 410) "(i) Whether, on the facts and ,in the circumstances of the case, the Tribunal erred in holding that the assessee was not entitled to exercise the option under section 55(2)(b)(i) of the Act to adopt the fair market value of shares as on April 1, 1981, as the cost of acquisition of such shares when computing the capital gain/loss arising on the transfer of the said shares ? (ii) Whether the Tribunal erred in holding that the first proviso to 15 a section 48 of the Act was charging sect....
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....ith reference to certain modes of acquisition. Therefore, it is to be seen that these provisions are machinery provisions embedded in the provisions of statute relating to the assessment of capital gains meant for computing the capital gains under different circumstances. Therefore, at the first instance itself, we have to state that sections 48, 49 and 55 are not charging sections, as tried to explain by the lower authorities. 14 Section 55(2) deals with the cost of acquisition for the purpose of sections 48 and 49. Clause (b) and sub-clause (i) thereof deals with the capital asset which became the property of the assessee before April 1, 1981. In such cases, the law provides that the cost of acquisition of the asset can be taken as the F....
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....e foreign currency in which the shares were first acquired. This facility of conversion .is provided for the reason that the conversion rate difference between the Indian currency and the foreign currency is different from currency to currency and fluctuate from time to time and not stable and also not comparable. Therefore, if no conversion is made and the capital gains is computed in the Indian currency, the computation will not reflect the "real capital gains". If the facility of currency conversion is not available and if the capital gains are computed throughout in the Indian currency, the computation would be distorted and unrealistic. It is a rule of income taxation that what is to be taxed is the real income. For that matter, capita....
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....td., In re [2005] 275 ITR 434 has considered and held in favour of the assessee in stating that the assessee is entitled to concessional rate of tax at 10 per cent. Therefore, this issue is also decided in favour of the assessee and direct the assessing authority to levy tax at 10 per cent. 20 The next issue to be considered in this appeal is regarding the cost of acquisition of bonus shares allotted to the assessee prior to April 1, 1981. This issue was considered by the Income Appellate Tribunal, Mumbai, in the case of Heinrich De Fries GmbH v. Joint CIT [2006] 281 ITR (AT) 18. The Tribunal has held that in the case of bonus shares issued prior to April 1, 1981, the assessee has the option to take the cost of acquisition at the FMV as on....