COMMISSIONER OF INCOME TAX Vs. ABHINANDAN INVESTMENT LIMITED

JUDGEMENT

(1.) All these five appeals under Section 260A of the Income-tax Act, 1961 (in short the Act) are inter-linked and in fact arise out of a common judgment of the Income-tax Appellate Tribunal, Delhi Bench-D (in short, the Tribunal). The assessment year involved is 1995-96. The following questions have been posed for adjudication :-

(2.) . Factual background common to all five appeals are essentially as follows. During the assessment year in question, each of the assessee- respondents came up with a private placement of its preferential shares and also subscribed to the right issue of non-convertible debentures (in short NCD) of Jindal Iron and Steel Co (in short, JISCO). The assessee also subscribed to the equity issue of Jindal Vijay Nagar Steel Ltd (in short, JDSL), a new company of the Jjndal group floated during February, 1995. During the relevant period, JISCO came up with a right issue of 10.5% redeemable NCD with a detachable warrant for cash at par. The face value of NCD was Rs 500.00 and it carried a detachable warrant ( in short DW) which entitled the holder to apply for one equity share of JISCO with a face value ofRs 10.00 at a premium of Rs 190.00per share The DW which was post-dated gave right, whereby the holder could buy one JISCO share @ Rs.200.00 at a time to be determined by JISCO but not later than sixty months. The DWs were to be listed and traded separately.

(3.) The application money for this right issue was Rs. 11.00 per'NCD and the allotment money was Rs. 389.00 per NCD. The rights NCD issued opened on 11-11.00 1994. JISCO made certain arrangements with Units Trust of India (in short, UTI) in July, 1994 which were accepted by the latter in September, 1994. As per the arrangement, the allottee of the NCD could surrender the NCD to UTI who would pay the allotment money ofRs. 389.00, and secure the NCD while the DWs would remain with the applicant. It was noticed by the Assessing Officer that this arrangement with UTI was made only for the promoters. All the assessee companies availed of this arrangement. In return the assessee companies claimed Rs. 111.00 as cost of the debenture. On 25/03/1995, they sold two-thirds of their DWs at the rate of Rs.20.00 per DW and the difference of Rs. 91.00 per DW was booked as a short term capital loss. The losses claimed by the assessee companies were as follows: <FRM>JUDGEMENT_392_ILRDLH7_2001Html1.htm</FRM>