TaxTMI 
TaxTMI 
1999 (10) TMI 732
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....of Maheshwari Mills Ltd. on 26-4-1983 at the aggregate cost (inclusive of cost of Right purchased of Rs. 5,17,575 of Rs. 18,05,075. Pursuant to the terms of the issue of the said debentures, the assessee was allotted 10,300 fully paid-up equity shares of the face value of Rs. 12.50 each. The assessee has sold on different dates during the year of account relevant for the assessment year 1984-85 the said debentures with residual rights, i.e., rights after the allotment of the shares on 30-6-1983, for Rs. 9,25,309 in the aggregate. The assessee has sold the equity shares received against the convertible debentures for Rs. 10,17,125. 4. In the return of income, the result of the sale of the debentures was disclosed as a loss of Rs. 6,99,258....
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....hares not the cost of the debentures allocable to the convertible portion, which is Rs. 1,80,508 but the depreciation in the value of the debentures consequent to their conversion into equity shares. For adopting the depreciation in the value of the debentures as the cost of acquisition of the shares, acquired on conversion, the assessee relied upon the ratio of the decision of the Apex Court in the case of Miss Dhun Dadabhoy Kapadia v. CIT [1967] 63 ITR 651 and the decision of the Hon'ble Bombay High Court in the case of CIT v. K.A. Patch [1971] 81 ITR 413 . The Assessing Officer rejected the claims of the assessee but did not give any particular reason for the rejection of the claims. On the other hand, he determined the loss at Rs. 342 o....
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.....50 per equity share (i.e. 10%) which is as per Controller of Capital Issue at issue of convertible debentures, or Rs. 86 which was equity price a little later in Oct./Nov. 1983. There is no justification for claiming Rs. 99 and claiming for debentures original full cost, thus claiming a total loss of Rs. 7 lakhs against actual profit of Rs. 1,37,000 on the same composite transaction through debentures after conversion, sold in different lots through Oct./Nov. 1983 but during same Assessment Year 1984-85. Applying principles of averaging or pro rata (i.e. equity @ 10% and debentures @ 90%) as held by a number of cases - Dalmia Cement 52 ITR 567 and others and distinguishing Dhun Kapadia decision from appellant's case (total sale in one a....
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....e capital asset, being a share or debenture in a company, became the property of the assessee in consideration of a transfer referred to in clause (x) of section 47, the cost of acquisition of the asset to the assessee shall be deemed to be that part of the cost of debenture, debenture stock or deposit certificates in relation to which such asset is acquired by the assessee." Clause (x) of section 47 refers to "any transfer by way of conversion of bonds or debentures, debenture-stock or deposit certificates in any form, of a company into shares or debentures of that company". In terms of the above statutory amendment, it is claimed that the cost of the equity shares has to be taken only at Rs. 1,80,508 which is the convertible portion of....
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....the Company, the terms of this Letter of offer and the Application Form : (i) Value: The Debentures have a face value of Rs. 125 each comprising a convertible part of Rs. 12.50 and non-convertible part of Rs. 112.50 issued in two parts, Part 'A' of Rs. 12.50 and Part 'B' of Rs. 112.50. (ii) Conversion terms : (a) The convertible part of each Debenture of Rs. 12.50 i.e. Part 'A' will be converted into One Equity Share of the nominal value of Rs. 12.50 at par. (b) The conversion will be effected on 30th June, 1983. (c) On conversion, the amount of Rs. 12.50 due to the Debenture holder will be applied towards the price of one fully paid Equity Share of the Company of the face value for Rs. 12.50 each at par. Thus, there will be ....