1984 (7) TMI 115

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....f allotment. However, cl. 4 of the conditions for the issue of bonds given the bond-holder an alternative of converting the bonds into equity shares of the company. This option could be exercised only after 1st July, 1976 and before 31st Dec. 1976. According to this clause, the bond-holder exercising the option will be given I equity share of face value of Rs. 100 and cash. The payment of cash depended upon whether the company had declared bonus shares earlier. If they had, then on surrender of one bond the bond-holder would be paid a sum of Rs. 200 in cash and I equity share of face value of Rs. 100. 2. The assessee before us exercised the option and received during the accounting year Rs. 7,000 in cash and 35 equity shares. The equity ....

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....ital assets. The question is whether there is nay transfer within the meaning of s. 2(47) when the bond-holder exercises option given in converting the bonds into equity shares. it will be noticed that the bond-holder has only an option. It was open to the bond-holder to keep the goods with him till the maturity date. But, if he chooses to exercise the option, he does something voluntarily. No. doubt, cl. 4 of the scheme gives the option but that does not mean that the right exists in the scheme itself. The right becomes exercisable only when the option is exercised. The right is not conferred by mere efflux of time. It is available only when the bond-holder voluntarily exercise the right and requires the company to allocate equity shares. ....

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....e to agree. The Gujarat High Court had pointed out in their decision in he case of CIT vs. R. M. Amin (1971) 82 ITR 194 (Guj) that it was not necessary that after extinguishment of any of the right of the assessee therein, the asset should also continue to exist. We may, however, mention that in respect of the expression "relinquishment" there is a decision of the Bombay High Court according to which the asset should continue to exist after the relinquishment of the assessee's rights therein. But, in respect of the expression 'extinguishment', there is not decision other than the decision of the Gujarat High Court which is against the assessee. 7. In this connection, we will refer to the decision of the Gujarat High Court in the case of ....