TaxTMI 
TaxTMI 
2020 (10) TMI 521
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....oneous and further holding that period of holding shares should be from the date of conversion into shares to the date of sale of shares and it is short term capital gain as it is less than 12 months only. 2. Facts leading to filing of the appeal briefly stated are that assessee is a non-resident company. The company filed its return of income for Assessment Year 2008-09 by declaring a total income of Rs. 49,95,03,232/-. In the assessment proceedings under Section 143(3) read with Section 144C of the Act, the Assessing Authority, vide order dated 18.02.2011 inter alia held that assessee had acquired foreign currency convertible bonds and after conversion of the same into shares, sold the same during the relevant previous year and disclosed short term capital gains from the transaction and paid tax thereon at the prescribed rate. It was further held that the cost of acquisition of equity shares on conversion of foreign currency convertible bonds was shown to be at Rs. 873.83 and Rs. 858.08 per share whereas in fact the assessee converted the bonds into shares at Rs. 200/- per share. The Assessing Authority therefore concluded that cost of acquisition of share has to be assessed a....
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....ed counsel for the assessee has invited the attention of this court to the scheme for facilitating issue of foreign currency, convertible bonds and ordinary shares through global depository mechanism by Indian companies and has invited our attention to Clause 2(f) of the Scheme and has pointed out that the words and expressions not defined in the scheme but defined in the Act, the Companies Act, 1956 or the Securities and Exchange Board of India Act, 1992 or the Rules and Regulations framed under these acts shall have the same meaning respectively assigned to them as the case may be in Income Tax Act, or the Companies Act or the Securities and Exchange Board of India Act. It is also pointed out that Clause 7 of the scheme deals with transfer and detention and sub-Clause (4) of Clause 7 cannot be read in isolation and has to be read along with sub-Clause (3). It is also argued that clause 4 of the scheme deals with cost of acquisition of shares in respect of conversion of foreign currency convertible bonds. It is also pointed out that 2008 scheme deals with foreign currency exchangeable bond and therefore, does not apply to the fact situation of the case. It is also urged that the i....
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....nce: 15. Section 115AC deals with taxability of only certain types of income that could arise in respect FCCBs and GDRs. a) Interest payments made to nonresident holders of FCCBs would be liable to tax in India at 10 percent. b) Long-term capital gain realized from the transfer of FCBBs or shares to a resident would be liable to tax in India at 10 percent. 16. In light of the amendment to section 115AC of the Act, clause (x) of Section 47 was amended simultaneously to include "bonds" to address the taxability arising from the conversion into equity shares of the issuing company. Section 47 of the Act, specifies the cases in which transfer of a capital asset is not assessable to tax under the head "Capital Gains". Clause (x) of section 47 reads as under: "(x) any transfer by way of conversion or debentures, debenture-stock or deposit certificates in any form, of a company into shares or debentures of that company." 17. Section 49 of the Act specifies the cost with reference to certain modes of acquisition. Section 49(2A) of the Act was not amended to include "bonds". Section 49(2A) of the Act at the time of introduction to sectio....
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....sset is acquired by the assessee" 21. The notes to clauses dealing with Section 47(xa) and 49(2A) at the time of introduction read as under: "47 (xa) It is proposed to insert a new clause (xa) to provide that any transfer by way of conversion of bonds referred to in clause (a) of sub-section (1) of section 115AC into shares or debentures of any company shall not be considered as transfer. 49(2A) Sub-section (2A) of the said section provides that where the 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. It is proposed to substitute the said sub-section to provide that where the capital asset, being a share or debenture of a company, became the property of the assessee in consideration of a transfer referred to in clause(x) or clause (xa) of section 47, the cost of acquisition of the asset to the assessee shall be deemed to be that par....