S.H.KAPADIA, J. - (1.) HEARD learned counsel on both sides.
(2.) IN this batch of civil appeals, the narrow issue which arises for determination is the nature of the loss suffered by the appellant(s) [assessee(s)] - whether Rs.2,43,750/- was a short-term capital loss, as contended on behalf of the assessee(s), or whether the said loss was a long-term loss, as contended on behalf of the Revenue? In the lead matter, being Civil Appeal No.634 of 2006, we are concerned with Assessment Year 1992-1993 corresponding to the Financial Year ending 31st March, 1992. The assessee was a shareholder in Jindal Iron and Steel Company Limited ['JISCO', for short]. The said Company announced in January, 1992, issue of 12.5% equity secured PCDs [Partly Convertible Debentures] of Rs.110/- for cash at par to shareholders on Rights Basis and employees on Equitable Basis. The Issue opened for subscription on 14th February, 1992, and closed on 12th March, 1992. As the assessee held 1500 equity shares of JISCO, assessee received an offer to subscribe to 1875 PCDs of JISCO on Rights Basis. Assessee renounced his right to subscribe to PCDs in favour of Colorado Trading Company on 15th February, 1992, at the rate of Rs.30/- per Right. Assessee received, accordingly, Rs.56,250/- for renunciation of right to subscribe to PCDs. Against the afore-stated sale consideration, assessee suffered diminution in the value of the original 1500 equity shares in the following manner: the cum-right price per share on 3rd January, 1992, was Rs.625/-, whereas ex-Rights price per share on 6th January, 1992, was Rs.425/-, resulting in a loss of Rs.200/- per share. Consequently, the capital loss suffered by the assessee was Rs.3,00,000/- [1500 x 200] as against the receipt of Rs.56,250/- on renunciation of 1875 PCDs.
(3.) TO complete the chronology of events, on 7th August, 1991, assessee sold 8460 equity shares of JSL at Rs.240/- for the total consideration of Rs.20,30,400/-, whose cost of acquisition was Rs.3,63,200/- and, consequently, the transaction resulted in a long-term gain for the assessee in the sum of Rs.16,67,200/-. Similarly, on 20th June, 1991, assessee sold 7000 equity shares of Saw Pipes Limited ("SPL", for short) at the rate of Rs.103/- each, for total consideration of Rs.7,21,000/- from which the assessee deducted Rs.70,000/- towards cost of acquisition, resulting in a long-term gain of Rs.6,51,000/-. In all, under the caption, "long-term gain" assessee earned Rs.23,18,200/- [Rs.16,67,200 + Rs.6,51,000]. These figures are not in dispute, though there is a small variation in arithmetical calculations made by the two sides, which is insignificant. The quantum of loss is not in issue in these civil appeals. The only question which this Court has to decide is the nature of the loss. The Assessing Officer accepted the computation of loss on renunciation of right to subscribe to PCDs at Rs.2,43,750/- but treated the same as long-term capital loss. As a consequence, the Assessing Officer reduced the amount of long-term capital loss by the amount of statutory deduction under Section 48(2) of the Income Tax Act, 1961. It is this calculation which is the subject-matter of challenge by the assessee(s) in this batch of civil appeals.;