The Tax Publishers2021 TaxPub(DT) 0673 (Del-Trib)


Section 45 Section 143(3)

Assessee company had claimed short-term capital loss originated from India Bulls Infrastructure Ltd. on forfeiture of share warrants which was disallowed by the AO but was allowed by the CIT(A) mainly relying on case-laws.

Capital gains - Short-term or long-term capital loss - Forfeiture of amount paid as share warrant, on assessee's inability to exercise the option -

During the year, the assessee company had no business activity in relevant year nor in the immediately preceding year, which was evident from the profit and loss account as noted by the AO. Assessee had filed return of income on 26-9-2012 declaring loss of Rs. 108 75 29 690. It was found by the AO that assessee company had shown business loss of Rs. 29,690 and short-term capital loss of Rs. 10,875,00,000. The above loss was claimed by assessee stating that assessee had paid Rs. 10,87,500,000 as upfront amount for part payment against the 15 crore share warrants of India Bulls Power Ltd. having equal number of equity shares of the face value of Rs. 2 each. In addition, during the year ended on 31-3-2012 the assessee-company had conveyed the unwillingness to the India Bulls Power Limited to exercise the warrants. Consequently the upfront amount of Rs. 1,087,500,000 paid by the assessee-company towards part payment against the said share warrants was forfeited and the same was charged to the statement of profit and loss account as loss on share warrants. AO disallowed the above sum as a short-term capital loss claimed by the assessee and assessed the total income of the assessee at a business loss earned by the assessee of Rs. 29,690 in the return of income.` The CIT(A), however, allowed assessee's short-term capital loss. Held: On looking at the strange set of facts, the information was called for from the assessee with respect to the corporate restructuring and business justification for layering of the funds. Assessee merely submitted that the issue was squarely covered in favour of the assessee by several decisions and once again relying on the decision of the CIT(A). As far as the scheme of things goes, it was evident for everybody. Nothing is further required to be mentioned that who was the beneficiary and who was the conduit. Further, it was not the assessee who was to be taxed in its hands, as the real beneficiary was India Bulls Power Ltd., which further went into restructuring and scheme of amalgamations.

Relied:CIT v. Ratan Chand Bagri (2010) 329 ITR 356 (Del-HC) : 2010 TaxPub(DT) 1355 (Del-HC), Grace Collis (2001) 248 ITR 323 (SC) : 2001 TaxPub(DT) 1188 (SC) and Dy. CIT v. BPL Sanyo Finance Ltd. (2009) 312 ITR 63 (Karn-HC) : 2009 TaxPub(DT) 312 (Karn-HC).


FAVOUR : In assessee's favour.

A.Y. : 2012-13


Section 45 Section 2(47)


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