|The Tax Publishers2020 TaxPub(DT) 5388 (Mum-Trib)
INCOME TAX ACT, 1961
The definition of the term 'Capital asset' under section 2(14) is too wide to encompass even monies paid for acquiring rights like share application money being paid to acquire shares.
Capital gains - Capital asset - Corporate restructuring exercise - Share application money
Assessee as part of a group corporate restructuring exercise had to transfer certain equity, preference shares and rights to apply for shares, i.e., share application money to other group entities. Capital losses, both long term and short-term, arose in this respect, the set-off of which was not allowed by the AO on share application money. Question was whether share application money as transferred by assessee would constitute 'capital asset' within the meaning of section 2(14) of the Act or not. Held: The share application money is nothing but mere advances till the time the shares are allotted and share application money is converted into share capital. This is further fortified by the fact that the provisions of the Companies Act provide for refund of share application money with interest under certain circumstances. Therefore, the share application money as transferred/assigned by the assessee would constitute a 'Capital asset' within the meaning of section 2(14) of the Act. It does not fall under any of the exclusions. Consequently, the resultant losses would be allowable to the assessee.
Applied:CIT v. Siemens Nixdorf Information Systems, Gmbh (ITA No. 1366 of 2017, dated 26-8-2019) : 2019 TaxPub(DT) 5881 (Bom-HC)
FAVOUR : Against the revenue.
A.Y. : 2004-05
IN THE ITAT, MUMBAI 'F' BENCH
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