1989 (3) TMI 3

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....,307. Later, this share was split into 10 shares of Rs. 100 each, and from time to time a total of 80 shares of the face value of Rs. 100 each was issued to the assessee by way of bonus shares. In consequence, on December 31, 1959, the assessee owned 90 shares in the Shorrock Co. of the face value of Rs. 100 each. There is another company called the New Shorrock Spinning and Manufacturing Co. Ltd. to which reference may be made as "the New Shorrock Co.". It was decided to amalgamate the Shorrock Co. with the New Shorrock Co., and upon petitions filed under section 391 and section 394 of the Companies Act, 1956, the Gujarat High Court made an order dated September 23, 1960, directing meetings of the shareholders of both the companies. The....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....panies were to be consolidated accordingly. During the assessment proceedings for the assessment year 1961-62, the previous year being the financial year ended March 31, 1961, the Income-tax Officer, although apprised of the fact of the scheme of amalgamation and of the acquisition by the assessee of 45 shares of the New Shorrock Co., omitted to consider the applicability or otherwise of section 12B of the Indian Income-tax Act, 1922. On January 21, 1964, the Commissioner of Income-tax issued a notice under section 33B of the Act to the assessee stating that the receipt of 45 shares of the New Shorrock Co. "in exchange" for his original holding of 90 shares in the Shorrock Co. in December, 1960, had resulted in an assessable profit, and ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....nt for the purposes of section 12B. The High Court took the view that no exchange can be said to have taken place on the allotment of the 45 shares of the New Shorrock Co. under the scheme of amalgamation. Nor, in the opinion of the High Court, did it constitute a relinquishment. In the result, the High Court answered both the questions in favour of the assessee and against the Revenue. The relevant portion of section 12B of the Act provides: "2B. Capital gains.-(1) The tax shall be payable by an assessee under the head 'Capital gains' in respect of any profits or gains arising from the sale, exchange, relinquishment or transfer of a capital asset effected after the 31st day of March, 1956, and such profits and Ions shall be deemed to....