TaxTMI 
TaxTMI 
2001 (6) TMI 170
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....165) per debenture. On allotment, however, the assessee was required to pay Rs. 50 against Part A and Rs. 185 against Part B, the aggregate amount thus payable on allotment being Rs. 235. The letter of offer of the above-mentioned PCDs itself provided for arrangement of sale of the non-convertible portion (Part B) of the debenture. BILT had already made arrangement with Citi Bank in accordance with which Citi Bank purchased the Part B portion of the face value of Rs. 300 @ Rs. 235 per debenture resulting thereby no payment being required by the applicants for the PCDs on allotment and surrender of the Part B portion in favour of the Citi Bank. The assessee-company accepted the above offer, paid @ Rs. 165 per debenture on application and surrendered the Part B portion to the Citi Bank thereby securing the payment on allotment in respect of Part A portion. The assessee thus claimed the loss in respect of the transactions in the non-convertible portion of the aforesaid debentures (Part B) as follows: ------------------------------------------------------------------------------------- No. of  ....
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....sp; (6) ------------------------------------------------------------------------------------- Rs. 1,23,38,205 Rs. 34,12,695 (3 - 5) ------------------------------------------------------------------------------------- The Assessing Officer did not accept the aforesaid claim of loss. He was firstly of the opinion that the assessee had intended to retain the convertible portion (Part A) of the PCDs for the purpose of acquiring shares in BILT, the ultimate motive of the assessee being to have controlling interest of the said company. The Assessing Officer also mentions in this connection that the assessee-company was showing its holding of shares as 'investment' and not as 'stock-in-trade'. The....
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....(A) has further been of the opinion that even under the arrangement with Citi Bank, the purchase of PCDs was not complete by signing of the agreement or delivery of documents but only after the payment was made by the Citi Bank under the Scheme entered into by that Bank with BILT. In this connection, the CIT(A) argues that unless the payment was made by the assessee-company on allotment, the earlier payment on application would have got completely lost and the assessee would not have been entitled to any debenture at all. 4. However, the CIT(A) did not approve of the finding of the Assessing Officer that the entire amount of Rs. 165 (Rs. 100 in respect of Part A and Rs. 65 in respect of Part B claimed by the assessee as loss) should be treated as cost price of the convertible portion (Part A). The CIT(A) noted that under the Scheme of issuance of PCDs, only Rs. 100 had been shown as the cost price of Part A which again consisted of Rs. 10 at face value and Rs. 90 towards premium. The CIT(A) thus disapproved of the action of the Assessing Officer in considering Rs. 65 to be added to the cost of Part A potion of the PCDs. According to the CIT(A) the aforesaid amount of difference of....
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....nce the shares of BILT should be considered to be lying in the investment portfolio of the assessee-company under capital head and not as stock-in-trade. It has also been pointed out in this connection that in its accounts the assessee was all along showing the shares not as 'trade investment' but as 'other investment'. It is thus contended that the original holding of the shares should be considered to be on capital account. It is furthermore argued in this connection that the results of subsequent transactions in respect of one type of shares or debentures would merely go to increase or decrease the cost of the original shares without any gain or loss having accrued to the assessee. The following judgments have been relied upon in this connection: (1) Miss. Dhun Dadabhoy Kapadia v. CIT [1967] 63 ITR 651 (SC) (2) CIT v. Oberoi Building & Investment (P.) Ltd. [1993] 203 ITR 403 (Cal.) (3) CIT v. Tushar Commercial Co. Ltd. [1998] 230 ITR 918 (Cal.). 7. On the other hand, the learned counsel for the assessee argued that if the original asset was not on the capital account, the right to receive or renounce further right shares thereon cannot also be considered to be on capital....
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.... should be taken together and the loss incurred by the assessee in the transactions in respect of Part B should be aggregated with the transactions in Part A. On many occasions, a businessman may be required to incur a pre-determined as well as deliberate loss for the sake of bigger business interests. Hence, in our view not only the results of transactions in Part B are required to be considered separately from those with regard to Part A, but the said results in respect of Part B portions of the PCDs are to be treated as transactions on revenue account. In other words, the loss incurred by the assessee in such transactions is required to be allowed as revenue loss. 9. Even if it be argued that so far as the acquisition of Part A portion of the PCDs, is concerned, the objective of the assessee being acquiring the controlling interest in the company (BILT) by the Thapar Group, the Part A portion of the PCDs should be treated on capital account by way of considering them to be of the nature of 'investment' yet, there is no authority anywhere that the concomitant expenses, if any, incurred by the assessee on revenue account for the purpose of acquiring Part A portions on capital ac....