INCOME TAX ACT, 1961

Section 55(2)(ab)

Capital gains - Cost of acquisition - Cost of shares of BSE Ltd. received in lien of membership card - Assessee already claimed depreciation on membership card

Assessee share broker showed long-term capital gain of Rs. 1,79,77,183 on sale of shares of BSE Ltd. The assessee sold 6386 of shares of BSE Ltd. for a consideration of Rs. 3,32,07,200 and after claiming index cost of acquisition of Rs. 1,52,30,017 from sales consideration, long-term capital gain was computed at Rs. 1,79,77,183. Assessee was a holder of BSE membership card which was purchased in May 2000 for a value of Rs. 2,50,90,000 and thereafter assessee claimed depreciation on said card from assessment year 2001-02 to assessment year 2005-06. In August 2005 BSE underwent demonization and corporatization. Under said scheme, BSE card holders were allotted equity shares of Rs. 1 each. Assessee opted for the scheme and was accordingly allotted 10,000 shares of Rs. 10,000. Out of said shares assessee sold 6,386 shares back to BSE on 17-5-2007 and on the sale of these shares , assessee computed long-term capital gain of Rs. 1,79,77,183. While computing the long-term capital gain assessee took cost of acquisition of shares at Rs. 2,60,90,000 which was calculated by adding together original cost of acquisition of BSE membership card, i.e., Rs. 2,50,90,000 + price paid for cost of acquisition of 10,000 shares Rs. 10,000 with indexation from 2000-01. AO took cost of acquisition of 10,000 shares as on 31-3-2005 at WDV cost as on that date and accordingly, calculated WDV of 6386 shares at Rs. 38,08,594. After indexing same to inflation index of financial year 2017-18, indexed cost of acquisition was calculated at Rs. 42,22,405 and the long-term capital gain was computed at Rs. 2,89,84,795 as against Rs. 1,79,77,183 computed by assessee.Held: Section 55(2)(ab) does not prescribe any reservation or exception for cases wherein assessee has already claimed depreciation on cost of membership card. This implies that legislature in its wisdom has considered the scenario of double deduction while bringing in such amendment. In such cases, it cannot be inferred that benefit granted to assessee was unintentional and would not be allowed to the assessee. Accordingly, cost of acquisition of shares of BSE Ltd. should be original cost of acquisition of membership card in terms of section 55(2)(ab) even though assessee had claimed depreciation on cost of membership card in the earlier years.

Followed:Techno Shares & Stocks Ltd. [ITA No. 5938/M/2012, A.Y. 2008-09] : 2019 TaxPub(DT) 7512 (Mum-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

INCOME TAX ACT, 1961

Section 28

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