Supreme Court of India
NAVIN JINDALversusASSTT. COMMISSIONER OF INCOME TAX
- Citation
- 2010 INSC 26
- Decided
- 11 January 2010
- Disposal
- Appeal(s) allowed
- Bench
- S H KAPADIA
Holding
The loss of Rs 2,43,750 is a short‑term capital loss.
Summary
Navin Jindal, a shareholder of Jindal Iron and Steel Co., was entitled to subscribe to partly convertible debentures (PCDs) issued on a rights basis. He renounced this right for Rs 56,250, which caused a fall in the value of his original 1,500 equity shares by Rs 200 per share, resulting in a net loss of Rs 2,43,750. Jindal claimed the loss as a short‑term capital loss under Section 48 of the Income Tax Act, 1961, while the Revenue treated it as a long‑term loss and applied the Section 48(2) standard deduction accordingly. The Supreme Court held that the right to subscribe arises only when the rights issue is announced, making it a distinct capital asset that existed for only a few days, and therefore the loss is short‑term. Consequently, the Court affirmed Jindal’s computation and allowed the appeals.
Issues considered
- Whether the loss incurred on renunciation of the right to subscribe to partly convertible debentures is a short‑term capital loss or a long‑term capital loss under Section 48 of the Income Tax Act, 1961.
- Whether Section 48(2) deduction can be applied to the loss in question.
Legislation cited
- Income Tax Act, 1961s. 2(29A), s. 2(42A), s. 45(1), s. 48(1), s. 48(2)
Subjects
capital gainsshort‑term losslong‑term lossrights issuepartly convertible debenturesSection 48Income Tax Act
Judgment
[2010] 1 S.C.R. 255
NAVIN JINDAL A
v.
ASSTT. COMMISSIONER OF INCOME TAX
(Civil Appeal No.634 of 2006)
JANUARY 11, 2010
B
[S.H. KAPADIA, H.L. DATIU AND DEEPAK
VERMA, JJ.]
Income Tax Act, 1961:
c
s. 48 - 'Capital gains' - Offer made to assessee-
shareholder to subscribe to Partly Convertible Debentures
(PCDs) at par on Rights Basis - Assessee renouncing the
right - Loss due to diminution in value of original equity
shares on renunciation of right to subscribe to additional 0
shares/debentures - HELD: Rightly shown by assessee as
'short-term loss' - Revenue erred in treating the same as
'long-term loss'.
The assessee in Civil Appeal No.634 of 2006 held
1500 equity shares of a Company. The Company, in E
January 1992 announced issue of 12.5% equity share
secured PC Os (Partly Convertible Debentures) of Rs.110/
- for cash at par to shareholders on Rights Basis. The
assessee received an offer to subscribe to 1875 PCDs on
Rights Basis. He renounced his right to subscribe to F
PCDs in favour of another Company on 15th February,
1992 at the rate of Rs.30/- per Right. Accordingly,
assessee received Rs.56,250/- for renunciation of right to
subscribe to PCDs. Against this s~!e consideration,
assessee suffered diminution in the value of the original G
1500 equity shares at the rate of Rs.200/- per share,
totalling to Rs.3,00,000/-. Consequently, the capital loss
suffered by the assessee was Rs.2,43, 750/-. The assessee
showed the loss of Rs. 2,43,750/- as short term capital
255 H
256 SUPREME COURT REPORTS [2010] 1 S.C.R.
A loss whereas the Revenue treated it as long term capital
loss and computed assessee's income accordingly. The
other appeals were filed in similar circumstances.
The question for consideration before the Court
was: whether the amount of Rs.2,43,750/- was a 'short
8
term capital loss' as claimed by the· assessee, or a 'long-
term loss' as assessed by the Revenue?
Allowing the appeals, the Court
c HELD: 1.1. The loss suffered by the assessee
amounting to Rs.2,43,750/- was a short-term loss. The
computation of income under the head 'capital gains' as
submitted by the assesee is correct and the computation
of income made by the Department is erroneous. [Para
D 14) [270-C-D)
1.2. The right to subscribe for additional offer of
shares/debentures on Rights basis, on the strength of
existing shareholding in the Company, comes into
existence when the Company decides to come out with
E the Rights Offer. Prior to that, such right, though
embedded in the original shareholding, remains inchoate.
The same crystallizes only when the Rights Offer is
announced by the Company. Therefore, in order to
determine the nature of the gains/loss on renunciation of
F right to subscribe for additional shares/debentures, the
crucial date is the date on which such right to subscribe
for additional shares/debentures comes into existence
and the date of transfer (renunciation) of such right. The
said right to subscribe for additional shares/debentures
G is a distinct, independent and separate right, capable of
being transferred independently of the existing
shareholding, on the strength of which such Rights are
offered. [Para 8) [264-A-D]
1.3. For the purposes of s.48 of the Act, one must
I~
NAVIN JINDAL v. ASSTI. COMMISSIONER OF 257
INCOME TAX
keep in mind the important principle that chargeability A
and computation has to go hand in hand. Computation
is an integral part of chargeability under the Act. It is for
this reason that the right to subscribe for additional offer
of shares/debentures comes into existence only when
the Company decides to come out with the Rights Offer. B
It is only when that event takes place, that diminution in
the value of th~ original shares held by the assessee
takes place. One has to give weightage to the diminution
in the value of the original shares which takes place when
the Company decides to come out with the Rights Offer. c
[Para 9) [264-E•G]. . ·
Miss Dhun Dadabhoy Kapadia vs. Commissioner of
Income-Tax, Bombay (1967) 63 ITR 651, relied on.
·Case Law Reference: D
(1967) 63 iTR 651 relied' on Para 10
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 634
of 2006.
E
From the Judgment & Order dated 11.8.2005 of the High
Court of Punjab & Haryana at Chandigarh in Income Tax Appeal
No. 55 of 2002.
WITH
F
C.A. Nos. 635; 636, 637 and 639 of 2006.
Ajay Vohra, Kavita Jha, Sandeep S. Karhail, Manoj Swarup
for the Appellant.
B.V. Bhattacharya, ASG, Arijit Prasad, Rahul Kaushik, G
Naresh Kaushik, B.V. Balaram Das for the Respondent.
The Judgment of the Court was delivered by
S.H. KAPADIA, J. 1. Heard learned counsel on both '
sides. H
258 SUPREME COURT REPORTS [2010] 1 S.C.R.
A 2. In this batch of civil appeals, the narrow issue which
arises for determination is the nature of the loss suffered by the
appellant(s) [assessee(s)] - whether Rs.2,43,750/-was a short-
term capital loss, as contended on behalf of the assessee(s),
or whether the said loss was a long-term loss, as contended
B on behalf of the Revenue?
3. In the lead matter, being Civil Appeal No.634 of 2006,
we are concerned with Assessment Year 1992-1993
corresponding to the Financial Year ending 31st March, 1992.
C 4. The assessee was a shareholder in Jindal Iron and Steel
Company Limited [' J ISCO', for short]. The said Company
announced in January, 1992, issue of 12.5% equity secured
PCDs [Partly Convertible Debentures] of Rs.110/- for cash at
par to shareholders on Rights Basis and employees on
0 Equitable Basis. The Issue opened for subscription on 14th
February, 1992, and closed on 12th March, 1992. As the
assessee held 1500 equity shares of JISCO, assessee
received an offer to subscribe to 1875 PCDs of JISCO on
Rights Basis. Assessee renounced his right to subscribe to
E PCOs in favour of Colorado Trading Company on 15th
February, 1992, at the rate of Rs.30/- per Right. Assessee
received, accordingly, Rs.56,250/- for renunciation of right to
subscribe to PCDs. Against the afore-stated sale consideration,
assessee suffered diminution in the value of the original 1500
F equity shares in the following manner: the cum-right price per
share on 3rd January, 1992, was Rs.625/-, whereas ex-Rights
price per share on 6th January, 1992, was Rs.425/-, resulting
in a loss of Rs.200/- per share. Consequently, the capital loss
suffered by the assessee was Rs.3,00,000/- [1500 x 200] as
G against the receipt of Rs.56,250/- on renunciation of 1875
PC Os.
5. To complete the chronology of events, on 7th August,
1991, assessee sold 8460 equity shares of JSL at Rs.240/-
for the total consideration of Rs.20,30,400/-, whose cost of
H
NAVIN JINDAL v. ASSTT. COMMISSIONER OF 259
INCOME TAX [S.H. KAPADIA, J.]
acquisition was Rs.3,63,200/- and, consequently, the A
transaction resulted in a long-term gain for the assessee in the
sum of Rs.16,67,200/-. Similarly, on 20th June, 1991, assessee
sold 7000 equity shares of Saw Pipes Limited ("SPL", for short)
at the rate of Rs.103/- each, for total consideration of
Rs.7,21,000/- from which the assessee deducted Rs.70,000/- B
towards cost of acquisition, resulting in a long-term gain of
Rs.6,51,000/-. In all, under the caption, "long-term gain"
assessee earned Rs.23, 18,200/- [Rs.16,67,200 +
Rs.6,51,000]. These figures are not in dispute, though there is
a small variation in arithmetical calculations made by the two c
sides, which is insignificant.
6. The quantum of loss is not in issue in these civil
appeals. The only question which this Court has to decide is
the nature of the loss. The Assessing Officer accepted the
computation of loss on renunciation of right to subscribe to D
PCDs at Rs.2,43,750/- but treated the same as long-term
capital loss. As a consequence, the Assessing Officer reduced
the amount of long-term capital loss by t~e amount of statutory
deduction under Section 48(2) of the Income Tax Act, 1961. It
is this calculation which is the subject-matter of challenge by E
the assessee(s) in this batch of civil appeals.
7. To answer the above question, we need to quote
hereinbelow the relevant provisions of the Income Tax Act, 1961,
['Act', for short] having a bearing on the issue in dispute: F
"2(29A). ·Long-term capital asset' means a capital asset
which is not a short-term capital asset.
2(42A). 'Short-term capital asset' means a capital asset
held by an assessee for not more than thirty-six months G
immediately preceding the date of its transfer.
45(1). Any profits or gains arising from the transfer of a
capital asset effected in the previous year shall, save as
otherwise provided in sections 53, 54, 548, 54D, 54E, 54F,
H
260 SUPREME COURT REPORTS [2010) 1 S.C.R.
·A 54G and 54H, be chargeable to income-tax under the
head 'Capital gains', and shall be deemed to be the
·income of the previous year in which the transfer took
place.
48(1). The income chargeable under the head 'Capital
B
gains' shall be computed,--
[a] by deducting from the full value of the consideration
received or accruing as a result of the transfer of the capital
asset the following amounts, namely:--
c
[i] expenditure incurred wholly and exclusively in
connection with such transfer;
[ii] the cost of acquisition of the asset and the cost
of any improvement thereto;
D
Provided that in the case of an assessee, who is a
non-resident Indian, capital gains arising from the transfer
of a capital asset being shares in, or debentures of, an.
Indian company shall be computed by converting the cost
E of acquisition, expenditure incurred wholly and exclusively
in connection with such transfer and the full value of the
consideration received or accruing as a result of the
transfer of the capital asset into the same foreign currency
as was initially utilised in the purchase of the shares or
F debentures, and the capital gains so computed in such
foreign currency shall be reconverted into Indian currency,
so however, that the aforesaid manner of computation of
capital gains shall be applicable in respect of capital gains
accruing or arising from every re-investment thereafter in,
and sale of, shares in, or debentures of, an Indian
G
company.
Explanation: For the purposes of this clause,-
(i) 'non-resident Indian' shall have the same meaning as
H in clause (e) of section 11 SC;
NAVIN JINDAL v. ASSTI. COMMISSIONER OF 261
INCOME TAX [S.H. KAPADIA,· J.]
(ii) 'foreign currency' and ·Indian currency' shall have the A
meanings respectively assigned to them in section 2 of the
Foreign Exchange Regulation Act, 1973 (46 of 1973);
..
,
. (iii) the conversion of Indian currency into foreign currency
and the reconversion of foreign currency into Indian
B
currency shall be at the rate of exchange prescribed in this
n:J,behalf' -'"'1 '· , '
'
[b] where the capital gain arises from the transfer of a long-
. term capital asset (hereafter in this section referred to,
respectively, as tong-term capital gain and long-term capital C
asset) by making the further deductions specified in sub-
section (2).
· (2) The deductions referred to in clause (b) of sub-section
;f1l'(1) are the following; namely:-~1 • · ' ·, .' •
[a) where the amount of long-term capital gain arrived at
after making the deductions under clause (a) of sub-
section (1) does not exceed fifteen thousand rupees, the
whole of such amount;
E
[b] in any other case, fifteen thousand rupees as increased
lib b"y a 'su'm equal to, -- · , · ·•
' ' ' .
(i) in respect of long-term capital gain so arrived at relating
to capital assets, being buildings or lands or any rights in
F
buildings or lands or gold, bullion or jewellery,--
(A) in the case of a company, ten per cent of the amount
"·. of su'ch'ga_fr;· in e~cess o{fifteen thousand rupees; .
i J. 1 ,_ c j
'(B) in the case of any other assessee, fifty per cent of the G-
amount of such gain in excess of fifteen thousand rupees;
(ia) in respect of long-term capital gain so arrived at
relating to equity,shares of venture capital undertakings,-
, (A).in the case of a company, other than venture capital HH
262 SUPREME COURT REPORTS [2010] 1 S.C.R.
A company, thirty per cent of the amount of such gain in
excess of fifteen thousand rupees;
(B) in the case of venture capital company, sixty per cent
of the amount of such gain in excess of fifteen thousand
rupees;
B
(C) in any other case, sixty per cent of the amount of such
gain in excess of fifteen thousand rupees;
[ii] in respect of long-term capital gain so arrived at relating
c to capital assets other than capital assets referred to in
sub-clauses (i) and
(ia),--
(A) in the case of a company, thirty per cent of the amount
D of such gain in excess of fifteen thousand rupees;
(B) in any other case, sixty per cent of the amount of such
gain in excess of fifteen thousand rupees:
Provided that where the long-term capital gain relates to
E both categories of capital assets referred to in sub-clauses
(i) and (ii), the deduction of fifteen thousand rupees shall
be allowed in the following order, namely:--
[1] the deduction shall first be allowed against long-term
F capital gain relating to the assets mentioned in sub-clause
(i);
[2] thereafter, the balance, if any, of the said fifteen thousand
rupees shall be allowed as deduction against long-term
capital gain relating to the assets mentioned in sub-clause
(ii), and the provisions of sub-clause (ii) shall apply as if
references to fifteen thousand rupees therein were
references to the amount of deduction allowed in
accordance with clauses (1) and (2) of this proviso:
H Provided further that, in relation to the amount referred to
NAVIN JINDAL v. ASSTI. COMMISSIONER OF 263
INCOME TAX [S.H. KAPADIA, J.]
in clause (b) of sub-section (5) of section 45, the initial A
deduction of fifteen thousand rupees under clause (a) of
this sub-section shall be reduced by the deduction already
allowed under clause (a) of section BOT in the assessment
for the assessment year commencing on the 1st day of
April, 1987, or any earlier assessment year or, as the case s1
may be, by the deduction allowed under clause (a} of this 1
sub-section in relation to the amount of compensation or
consideration referred to in clause (a) of sub-section (5)
of section 45 and references to fifteen thousand rupees
in clauses (a) and (b) of this sub-section shall be construed C
as references to such reduced amount, if any.
Explanation: For the purposes of this section,--
[a] 'venture capital company' means such company as is
engaged in providing finance to venture capital o
undertakings mainly by way of acquiring equity shares of
such undertakings or, if the circumstances so require, by
way of advancing loans to such undertakings, and is
approved by the Central Government in this behalf;
[b] 'venture capital undertaking' means such company as E
the prescribed authority may, having regard to the following
factors, approve for the purposes of sub-clause (ia) of
clause (b) of sub-section (2), namely;--
[1] the total investment in the company does not exceed F
ten crore rupees or such other higher amount as may be
prescribed; ·
[2] the company does not have adequate financial
resources to undertake projects for which it is otherwise G
professionally or technically equipped; and
[3] the company seeks to employ any technology which will
result in significant improvement over the existing
technology in India in any field and the investment in such
technology involves high risk." H
264. SUPREME COURT REPORTS [2010] 1 S.C.R.
A' 8. We find merit in this batch of civil appeals filed by the
assessee(s). The right to subscribe for additional offer of
shares/debentures on Rights basis, on the strength of existing
shareholding in the Company, comes into existence when the
Company decides to come out with the Rights Offer. Prior to
B- that, such right, though embedded in the original shareholding,
remains inchoate. The same crystallizes only when the Rights
Offer is announced by the Company. Therefore, in order to
<;letermine the nature of the gains/loss on renunciation of right
to subscribe for additional shares/debentures, the crucial date
G is the date on which such right to subscribe for additional
shares/debentures comes into existence and the date of
transfer [renunciation] of such right. The said right to subscribe
for additional shares/debentures is a distinct, independent and
separate right, capable of being transferred independently of
the existing shareholding, on the strength of which such Rights
D are offered.
9. For the purposes of Section 48 of the Act, one must
keep in mind an important principle, namely, that chargeability
and computation has to go hand in hand. In other words,
E computation is an integral part of chargeability under the Act.
It is for this reason that we have opined that the right to
subscribe for additional offer of shares/debentures comes into
existence only when the Company decides to come out with
the Rights Offer. It is only when that event takes place, that
F diminution in the value of the original shares held by the
assessee takes place. One has to give weightage to the
diminution in the value of the original shares which takes place
when the Company decides to come out with the Rights Offer.
For determining whether the gains/loss of renunciation of right
G to subscribe is a short-term or long-term gains/loss, the crucial
date is the date on which such right to subscribe for additional
shares/debentures comes into existence and the date of
renunciation [transfer] of such right.
10. Our view is based on the judgement of this Court in
H
NAVI~ JINPAL v. AS~!if· _COMM'l~,~!O.~J~~;Of;;?, 2~!),•.
\,
INCOME TAX'[$.H. KAPADIA, J]
the case of Miss Dhun Dadabhor. KapadJa vs .. Commissioner A\
of !nqonie-iax, ~9m~ay'.: r~~-0~~~" i:~ t1~~7l~~3~~~r:,~:..~~1],
which h.as taken the v,1ew .tn~t. f'?[, ~o~~u\1ng c:~p.1b~1 1 ~~1q~i on
renunciation of right to subscribe· for )Gitib'-''..:
, • • . = 1
additional.
·-
shares,
-~L l1 .<r1"
.-,.,_']• t-•1" 1
diminution in the value' of· original'
,-1 , ..
·
shares would.-·,t.)11("
I ~.
be, regarded
i·'\i. i(>~'Jj
·.<"1i' -~·r1 1 ;..
as. the co.st ?f ac.qu~~itio~ -f~r~~NC::h rigP!)~G~ R~9~.;t·~i15§55 B8
of t~~ .1sa1d iudg~m,e~~r .'{'Je_ q~o,~e ~-~~~.1~0~~0".Y;.,W~ 1 [~/eX.~nt
portion
,
of the said Judgement
'"ir~·; -~ 1'• , · .
Which further
'· ,;[~:!L
indicates .lhat the
,.· l'd.'IL.-i.i (y;_.jG:::1V1'.i
ng~~ ,to, sub~cribe -~~r ilew, s1~~-~e~l9iE:l~~qtur,~s, 1~..,,~r?~p~r~te
capital' asset' which comes
i.'! ~ . U•
. •,
into· existence
",1qf-i.'" '
j
only when lhe
1t· fr 1'1 ~;I •1ll)~IJ
C6mpariy
(~'·
passes Resolution
-i "",
for-the issue o.f new
.·"ii ··:b.~l'('-·'·
,sJi'ares: .
!JVUbt.Jt11q!:"~ 0
1
C,..,_ 1
\
."The capital asset which the"-appellafit' 6rtgifi~lly
possessed consisted of 710 brdinafy''slfare~:BFihe
'<company:· There was''already \~ rHovislcfn"l<tl1at?_'.ifl\the
3
JI COIYlpany' iSSUed any 'hewnohares,"e\Jery' flolde(!OJ 0ld
shares would be entitled'to such ~numbe(='of ordinary DCl
. shares as the board may, by re'solution."decide.:.tfiitnght
was possessed by the appellant because of herowrier8hip
of the old 710 ordinary shares?'and'when tfie!boara of
directors of the company passed a"-resolUtionr for issue
of. new shares, this right of the 'appellant rriatured ti:tihe E ,
extent that she became entitled'to'receive ·71<5"new
shares, i This right could be exeroisei:Fby h'df1/fy aaiually
. purchasing those shares af the~prescribeifii-at&; f>or·by
renouncing those shares in favour of afiother1Jersolra'nd
obtaining monetary·gain in that-trahsa'ction: ii.fthe\fime, F :i
therefore, when the appellant renounced her right to take
' th~se new'shares, the capital asset which she actually
P9,~~es~eq,coqsjst~cj <.?! !J!Jt91c;l ·7.1 Q:$IJ,a_~sp/!J.s:.fhis right
t,o .ta~e 7.1.0 n~\"( sf?_ar~~ 1.J1a,,/ r.s~.. 1 '>ril r·;nu JiJi;;.ii;rsn;;
1·· " .; ,, ' ,,!uor '):J !Jd c,J i·. '· , .'<.:' ai 3rno:..1i ii:n,cG C)
1::·:·: ::·.:· '";· :··· · ~. :.i Ei i k~''· ..., ... 11 noiJr_.-, ~·h ..;:;t,,.JJ ~rn l() 9iJ~Bv 1iu;
cl n the alternative.' the. case :canJ be'exarriined ,iri' ·another ' 0
aspect. At the time 'ofi:the 1ssue·•ofJ'ffe\N stiares\'·th~xe
appellant possessed 710 old shares ~arid 'shealso"gofllie1 :->~
right to obtain 710 new shares: Wherl'stie 1so1d:tfos<iight' e:H H
266 SUPREME COURT REPORTS (2010] 1 S.C.R.
A to obtain 710 new shares and realised the sum of
Rs.45,262.50P., she capitalised that right and converted
it into money. The value of the right may be measured by
setting off against the appreciation in the face value of the
new shares the depreciation of the old shares and,
B consequently, to the extent of the depreciation in the value
of her original shares, she must be deemed to have
invested money in acquisition of this new right. A
concomitant of the acquisition of the new right was the
depreciation in the value of the old shares, and the
c depreciation may, in a commercial sense, be deemed to
be the value of the riJht which she subsequently
transferred. The capital gain made by her would, therefore,
be represented only by the difference between the money
realised on transfer of the right, and the amount which she
lost in the form of depreciation of her original shares in
D
order to acquire that right. Looked at in this manner also,
it is clear that the net capital gain by her would be
represented by the amount realised by her on transferring
the right to receive new shares, after deducting therefrom
the amount of depreciation in the value of her original
E shares, being the loss incurred by her in her capital asset
in the transaction in which she acquired the right for which
she realised the cash. This method of looking at the
transaction also leads to the same conclusion which we
have indicated in the preceding paragraph."
F
[Emphasis supplied]
11. Section 48 deals with mode of computation of income
chargeable under the head "Capital gains". Under that section,
such income is required to be computed by deducting from the
G full value of the consideration received as a result of the transfer
of the capital asset, the expenditure incurred wholly and
exclusively in connection with such transfer anc;l the cost of
acquisition of the asset. Under Section 48(1 )(b) of the Act, it
is further stipulated that where the capital gain arises from the
H
NAVIN JINDAL v. Assn. COMMISSIONER OF 267
INCOME TAX [S.H. KAPADIA, J.]
transfer of a long-term capital asset, then, in addition to the A
expenditure incurred in connection with the transfer and the cost
of acquisition of the asset, a further deduction, as specified in
Section 48(2) of the Act, which is similar to standard deduction,
becomes necessary.
8
12. The basic controversv in this batch of civil appeals
concerns the stage at which Section 48(2) of the Act becomes
applicable. For that purpose, we annex hereinbelow a chart
indicating Computation of Income under the head "Capital
gains", as projected by the assessee on the one hand and as
projected by the Assessing Officer on the other hand. C
13. On analysis of the said chart, one finds that, according
to the assessee, the net income chargeable to tax under the
head "Capital gains" is Rs.6,77,530/-, whereas, according to
the Assessing Officer, the net Dincome is Rs.8,28,980/-. o
According to the assessee, the loss suffered by him, as
indicated in the chart, is a short-term capital loss of
Rs.2,43,750/-, which occurred to the assessee on sale of right
to subscribe to PCDs. The long-term gain, which accrued to
the assessee on sale of shares of JSL and SPL, came to E
Rs.23, 18,200/- to which Section 48(2) is applied by the
assessee. On application of Section 48(2), the standard
deduction comes to Rs.13,96,920/- Accordingly, the long-term
gain, as computed under Section 48, accruing to the assessee
on sale of shares of JSL and SPL came to Rs.9,21,280/- from
F
which the assessee deducts loss of Rs.2,43, 750/- resulting in
the net income of Rs.6,77,530/-. On the other hand, according
to the Assessing Officer, there is no dispute regarding the long-
term gains accruing to the assessee on sale of shares of JSL
and SPL amounting to Rs.23,31,200/- [difference in the figures
is insignificant]. from the said figure of Rs.23,31,200/-, the G
Assessing Officer deducts the loss of Rs.2,43,680/- as a long-
term loss and applies Section 48(2) deduction to the figure of
Rs.20,d7,450/-. Consequently, the Assessing Officer works out
H
' ' '
COMPUTATION OF INCOME UNDER THE HEAD "CAPiTAL GAINS
..
As per assessee As per assessing officer
ca121ta1 ga1nstLoss:
(/)
a] Short Term: c
Amount of sale proceeds 56,250 -0
;:o
(renouncement of 1875 Right m
PCDs offer of JISCO from :s:
Colorade Trading Co. Ltd. m
on 15.2.92@ 301-. ()
Less : being cost of
0
c
acquisition of 1875 right ;:o
PCD offer of JISCO being -I
;:o
depleted in the value of m
existing share holdings of -0
1500 Equity shares as 0
under:-
Cum-right price ~
per share on 3.1.92 625
Less : Ex-right price
per share on 6.1.92 425
Difference 200
1500 shares @ Rs.200/-
(/)
per share i.e.1500 x 200 (-) 3,00,000 (-} 2,43,750 NIL NIL
()
(A)
;:o
.,
b] Long Term: .!: z
I. On 8460 equity shares
of JSL:
) ~-
z
sold on 7.8.91
"
{"-j \;
•\ ~ r,, Z'-
@ Rs.240/- 20,30,400 ".' l oz
·~
- oo;
Less: Aggregate 16,67,200 IJ, s:: )>'
" ' . * (.'
cost oJ acquisition 3,63.200 mr
: ~' I) \
-I ::::
II. Oti 7000 Equity shares . • UJ c.
« )> )>
of SAW PIPES LTD. x CJ)
'
Sold on 20.6.91 @ -' ~CJ)
Rs.103/- each 7,21,000 ~ -I
., - ·- -] ..... :r:
•
-I·
• ~· ...J
Less : Cost during .;..~er,,
f Ci ..!"
86-87 @ Rs.10/- each 70.000 6,51,000 23,18.200, ii23,31;200 :
' ~ . :.
Less: Long term capital loss <-{ -·"
due depreciation in the value
of 1500 original share of ,.., "'y
JISCO as a result of right ti1 .. ~
!:t., {,)
issue of PCDs after adjusting
~ (fl
the profit realized on ale of 0 ·'
_,
_,
discussed above ::i {~ I f 0
~ ;., 6<
Less : Deduction u/s 48(2): <;, u.. 2
~· -
('I
On Rs.15000/- @ 100%
Cit
C..tJ ~
·,
On Rs.2303200/- @ 60% . ~ -
{B) -15,ooo: l ':
Net Income under the head 1,:381,920 -N
"capital gains" (A) + (B) O>
l: <O
270 SUPREME COURT REPORTS [2010] 1 S.C.R.
A the net income at Rs.8,28,980/- as against the figure of
Rs.6,77,530/-worked out by the assessee. The above analysis
shows the controversy between the parties. Assessee treats
Rs.2,43,750/- as a short-term loss, and, therefore, he applies
the standard deduction under Section 48(2) to the long-term
B gain of Rs.23, 18,200/- from sale of shares of JSL and SPL,
whereas the Assessing Officer applies Section 48(2) deduction
to the figure of Rs.20,87,450/- which is arrived at on the basis
that the loss suffered by the assessee of Rs.2,43,680/- was a
long- term loss.
c 14. As stated above, we have opined that the loss suffered
by the assessee amounting to Rs.2,43,750/- was a short-term
loss. Therefore, in our view, the computation of income under
the head "Capital gains", as projected in the chart submitted
by the assessee and as computed by the assessee is correct.
D In other words, the computation of income under the head
"Capital gains" submitted to this Court by the assessee is
correct and the computation of income made by the
Department is erroneous.
E Accordingly, civil appeals filed by the assessees stand
allowed with no order as to costs.
R.P. Appeals allowed.
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