TaxTMI 
TaxTMI 
2016 (10) TMI 87
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....is the acceptance by the Assessing Officer (A.O.) of the assessee's claim for short term capital gain (STCG) on the nonexercise of the option to subscribe to the (equity) share capital in Sintex Industries Ltd. (SIL) at the offered price of Rs. 454.74 per share, including share premium of Rs. 452.74 per share. Share warrants, 66 lacs in number, were subscribed to by the assessee-company in SIL on 18.1.2008 by making a payment of Rs. 3001.284 lacs, being 10% of the value of same number of shares at the subscription price of Rs. 454.74 per share. The assessee, however, subscribed to only 13.44 lac shares, paying the balance 90% share price. The amount of Rs. 23,89,90,320/-, i.e., corresponding to the balance 52.56 (i.e., 66 - 13.44) lac share....
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....act being settled otherwise than by delivery of the underlying asset, i.e., the shares in SIL, the transaction is a speculative transaction and the option premium paid and lost, a speculative loss, which could be set off against speculative income, directing the AO accordingly. Aggrieved, the assessee is in appeal, raising both jurisdictional as well as legal issues. 3. We have heard the parties, and perused the material on record. 3.1 The assessee's case has two limbs to it. Firstly, that the impugned claim was accepted by the AO in the assessment proceedings after due verification, and that therefore his order cannot be regarded as erroneous and prejudicial to the interest of the Revenue, so as to warrant a revision u/s. 263. On mer....
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....r option) as on 31.3.2009. The right to acquire the shares (capital asset), a capital asset itself, would lapse by time or expire only on 17.7.2009 (day-end), and not earlier. The loss booked by the assessee, stated to be in view of the loss in the value of the SIL shares - the capital asset to be acquired, and the consequent loss of value of the corresponding share warrants (the right or the option attached therewith) is thus only on account of a fall in its value. That is, from whatever value that may have been perceived by the assessee initially when the value of the SIL shares was higher. There is no expiry or extinguishment of the right and, therefore, no transfer, by 31.3.2009. There is, we may emphasize no forfeiture of the amount pa....
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....er se. The extinguishment of a right in a capital asset, on the other hand, would be where the right gets destroyed or annihilated, as by the act of God or law or by the action of third party. Reference in this context may be made to the definition of the word 'extinguishment' in P. Ramanatha Aiyar's - The Law Lexicon - 3rd Edition 2012, reads as under: 'Extinguishment: The extinction or annihilation, of a right, estate, etc., by means of its being merged in, or consolidated with another, generally a greater or more extensive, right or estate. Wherever a right, title or interest is destroyed, or taken away the act of God, operation of law, or act of the party this in many books is called an extinguishment. (Co. Lit. 147 b. Ro. Abr.....
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.... loss arising while Reason 1 is with regard to as to why the same cannot be considered as having been incurred and, thus, not arising during the current year. Needless to add, the loss in any case, would arise only in the immediately succeeding year. Further, Reasons 2 & 3, which emphasize the absence of the element of 'transfer' in the instant case - the right being conceived for a defined period of time only, so that it is a sunk cost thereafter, are without prejudice to Reason 1, which disqualifies the assessee's claim on the ground of the impugned loss being not incurred or sustained during the current year, ousting the same at the threshold. 4. We having travelled directly to the merits of the case, are conscious of the assessee's G....
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....and with which we are therefore concerned with. The law in the matter is well-settled and the case law, legion, and toward which the ld. CIT has himself referred to some decisions, viz. CIT vs. Bhagwan Das [2005] 272 ITR 367 (All) and P. T. Lashkari Ram vs. CIT [2005] 272 ITR 309 (All); and Ashok Leyland Ltd. vs. CIT [2003] 260 ITR 599 (Mad). No wonder, the thrust of the assessee's arguments before us, as afore-stated, was on the merits of the case. We are also conscious that while we have held the impugned loss to be a capital loss, the ld. CIT has regarded it as a speculative loss. We disapprove of the same in-as-much as there is no settlement of the contract, much less during the current year, and despite the assessee's unilateral act....