COMMISSIONER OF INCOME TAX Vs. CHAND RATAN BAGRI

JUDGEMENT

(1.) THE Revenue is aggrieved by the order dt. 23rd Feb., 2009 in ITA No. 2347/Del/2007 relating to the asst. yr. 2002 -03. The only issue sought to be raised for consideration of this Court is with regard to the forfeiture of an amount of Rs. 59,50,000 towards 10 lakh preferential convertible warrants @ Rs. 5.95 per warrant. The said warrants were subsequently split up into convertible warrants of Rs. 1 each with Rs. 0.595 as paid up amount in respect of each warrant. The balance amount was to be paid by 8th Oct., 2001. The assessee had subscribed to these warrants issued by M/s BLB Ltd. The assessee after making the initial payment could not make the balance payment and, therefore, M/s BLB Ltd. forfeited the amount of Rs. 59,50,000 earlier paid by the assessee. The assessee claimed this loss as short -term capital loss under the head "Capital gain". It was submitted on behalf of the assessee that the company had debited the loss to its capital account and not to the P&L a/c and consequently, there was no effect on the P&L a/c of the assessee company. The AO, however, observed that the same had cast an effect on the short -term capital gains of the assessee and the forfeiture of this amount in the manner indicated by the assessee was a tax evasion tactic, prohibited by law.

(2.) SINCE the assessee was the promoter director in M/s BLB Ltd., the AO taxed the same in the hands of the assessee on protective basis and observed that the said amount could be taxed in the case of M/s BLB Ltd.

(3.) THE main issue sought to be raised by the learned counsel for the Revenue is that the forfeiture of the convertible warrants did not amount to transfer of assets. The learned counsel referred to s. 45 of the IT Act, 1961 (hereinafter referred to as "the said Act"). The beginning words of which are as follows: