Itxa/5613/2010 Of The Commissioner Of Income Tax -5, Mumbai v. M/S Crown Estates Pvt. Ltd

sas IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.5613 OF 2010 The Commissioner of Income Tax-5, Mumbai ..Appellant. V/s. M/s. Crown Estates Pvt. Ltd. ..Respondent. Ms. Suchitra Kamble for the appellant. Mr. P.J. Pardiwala, senior Advocate with A.K. Jasdani for the respondent. CORAM : J.P. DEVADHAR AND A.R. JOSHI, JJ. DATED : 11TH JANUARY, 2012 P.C. :- 1. Whether the ITAT was justified in holding that the income earned from sale of tradeable warrants amounting to Rs.37,46,400/- was not taxable on the ground that the asset transferred had no cost of acquisition, is the question raised in this appeal. 2.The assessment year involved herein is AY 1994-95. 3.Admittedly, the assessee had stopped its trading activity since the assessment year 1993-94 and whatever stocks of shares that remained with the assessee have been converted into investment. On sale of the tradeable warrants held as investment in the assessment year in question, the assessee claimed that the profits arising therefrom are not taxable as the tradeable warrants do not have any cost of acquisition. The assessing officer, however, held that the income earned on sale of tradeable warrant were liable to capital gains tax. The appeal filed by the assessee against the said order was dismissed by CIT(A). On further appeal, the ITAT has allowed the claim of the assessee. 4.The question to be considered is, whether the tradeable warrants which do not have any cost can be assumed to have 'Nil' cost of acquisition, even in the absence of any statutory provision to that effect ? Admittedly, clause (aa) to Section 55(2) of the Income Tax Act, 1961 has been brought on the statute book by the Finance Act 1995 with effect from 1/4/1996 to the effect that the cost of acquisition attributable to the trading warrants shall be statutorily deemed to be Nil with effect from 1/4/1996. Since the assessment year involved herein is AY 1994-95, that is, prior to the insertion of clause (aa) to Section 55(2) of the Act, in our opinion, no fault can be found with the decision of the ITAT in holding that in the assessment year in question, the income earned on the sale of tradeable warrants were liable to capital gains tax as the said tradeable warrants did not have any cost of acquisition. 5.In the result, we see no merit in the appeal and the same is dismissed with no order as to costs. (J.P. DEVADHAR, J.)