DCIT, CIRCLE-13(1), NEW DELHI vs. JARUL INFRASTRUCTURE PVT. LTD, NEW DELHI

per share. That itself shows that the decision to invest in 10.50 crores

convertible warrants of Indiabulls Power Ltd. was never guided as a

prudent investment and there was something else for which, the

investment has been made. This also the highest price per share of M/s

Indibulls Power Ltd. on 19.11.2010 was Rs.28 while the assessee

company made the investment @ 29/-. This shows that the assessee

company has actually been a conduit for passing this sum ultimately to

Indibulls Power Ltd. through this sham transaction. The Assessing

Officer referre to assessee’s response in this regard, which reads as

under:-

“It is humbly submitted that Jarul Infrastructure Pvt. Ltd. took Inter Corporate Deposit from M/s Heliotrope Real Estate Private Limited, which in turn took funds from Chloris Properties Limited. Confirmation from M/s Heliotrope Real Estate Private Limited and bank statement has already been submitted and bank statement and confirmation from chloris has been attached in this submission. All companies are duly filing their income tax return and all such outstanding are appearing in the audited accounts of all the companies. Merely because the company has suffered long term capital loss it cannot be presumed to be a sham transaction.” 10. However, the Assessing Officer was not satisfied. He referred

to the decision of the Hon’ble Supreme Court in the case of Sumati Dayal

vs CIT (214 ITR 801)(SC) and CIT vs Durga Prasad More and held that

apparent is not true actually, a colourable device and the entire amount

is transferred to Indiabulls Power Ltd. as capital receipt. Thereafter, the

11 ITA NO.3514/DEL/2019 M/s Jarul Infrastructure Pvt. Ltd.

AO referred to bond results of Rattan India Power Ltd. and observed as

under:-

“It is interesting to note that the entire investment of Rs.304.50 crores has been forfeited by Rattan India Power Ltd. on a single day i.e. 30.11.2010 thereby forfeiting the entire amount invested by all the four companies. As if all the four companies have simultaneously decided to not to exercise the option of conversion before 30.11.2010 even though they were entitled to exercise its option till 29.05.2012. M/s Indiabulls Power Ltd. (Now Rattan India Power Ltd.) has also by a single resolution dated 19.11.2011 forfeited the entire amount of Rs.305.50 crores and has shown as a capital receipt.” 11. Hence, the Assessing Officer held that the entire transaction

is actually a conduit for transfer of the amount to credit the amount as a

capital receipt in the books of Indiabulls Power Ltd. (Now RattanIndia

Power Ltd.) The Assessing Officer referred to the decision of the Hon’ble

Supreme Court in the case of McDowell and Co. Limited vs CIT 154 ITR

148 (SC) and other decision in this regard and concluded as under:-

“It has also been observed that; ‘‘Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges”. 8.1 In the instant case also, a colourable device has been created to camouflage the credit of the amount to Indiabulls Power Ltd. (now RattanIndia Power Ltd.) as a capital receipt to avoid the test of section 68 of the Income tax Act, 1961. The assessee company alorg with its holding company acted as an operator & conduit to the transaction to provide ultimate benefit to Indiabulls Power Ltd. (now RattanIndia Power Ltd.) who has shown this amount of Rs. 304.50 crores as a capital receipt and thus avoid taxation on this sum.

12 ITA NO.3514/DEL/2019 M/s Jarul Infrastructure Pvt. Ltd.

Thus, considering all facts of the case as analyzed in foregoing paras, the transaction is treated as a sham transaction and the short term capital loss of Rs. 76,12,50,0001- claimed by assessee is rejected. Penalty proceedings U/s 271(1)(c) of the Income Tax Act, 1961 for concealment of income as aforesaid and furnishing inaccurate particulars within ther meaning of explanation 1 to the sub-section (1) of the section 271(1)(c) of the Income Tax Act, 1961 are initiated. In view of the above discussion, the total income of the assessee is computed as under: Loss as declared by the assessee 76,12,79,690 Add: (as discussed above)

the Ld. CIT(A). The Ld. CIT(A) elaborately noted all the submission of the

assessee. He summarized the facts of the case are as under:-

4.2.3.1. The appellant had filed its return of income for AY 2012- 13, declaring a total loss of Rs. 76,12,79,690/-. The appellant is engaged in the business of purchasing, selling, developing, constructing, hiring or otherwise acquire and deal in all real or personal estate/ properties either directly or through group companies, and construct, acquire hold/ sell properties, buildings and acts as real estate agent and all other related and ancillary objects. The AR has submitted that during FY 2010-11, Indiabulls Power Limited ("IPL") proposed to allot 42,00,00,000 convertible (non- transferrabie) warrants representing equal number of equity shares of IPL having face value of Rs, 10 per share at a conversion price of Rs. 29 per share. As per the terms of allotment, an upfront payment of 25% of conversion price i.e. Rs. 7.25 per share was required to be made by allottees and the balance was payable at the time of exercise of option i.e. within eighteen months from the date of allotment. The above mentioned convertible warrants were issued by IPL tothe following 4 allottees:

13 ITA NO.3514/DEL/2019 M/s Jarul Infrastructure Pvt. Ltd.

Name of the allottee Number of Total amount paid warrants upfront @ Rs.7.25 per warrant (Amount in Rs.) Azalea Infrastructure 15,00,00,000 Rs.108,75,00,000 Pvt. Ltd. Gloxinia Infrastructure 6,00,00,000 Rs.43,50,00,000 Pvt. Ltd. Jarul Infrastructure 10,50,00,000 Rs.76,12,50,000 Pvt. Ltd. Alona Infrastructure 10,50,00,000 Rs.76,12,50,000 Pvt. Ltd.

The appellant company along with 3 other companies invested in the share warrants at a lock in price of Rs.29 per share on 29.11.2010. The facts of the case as submitted by the AR of the appellant is that in F.Y.2010-11 Indiabulls Power Limited (“IPL”) proposed to allot 105,000,000 share warrants to the appellant which upon conversion would have entitled the appellant to acquire an equal number of equity shares of IPL of face value of Rs.10/- each at a- conversion price of Rs. 29/- per share. According to the terms of the offer, the appellant was required to pay Rs. 7.25/- per warrant (25% of conversion price of Rs. 29/-) amounting to Rs. 76,12,50,000/- as upfront at the time of allotment of share warrant and the balance was payable at the time of exercise of option i.e. within eighteen months from the date of allotment.” 13. Thereafter, he noted the submissions of the assessee’s

counsel and held as under:-

“4.2.3.5. From a perusal of aforesaid judicial pronouncements and facts of the Appellant's case, it is evident that the appellant submitted entire evidence and explanations for the investment in IPL and subsequent forfeiture by IPL. Hence, the appellant had discharged its initial onus and burden to prove the transaction. Thereafter, it was the duty of the AO to verify the same or else bring on record any evidence to contradict the same. Based on a perusal of the assessment order, it is evident that the AO has not brought on record any evidence to contradict the explanations offered by the appellant. In fact the findings of the AO are in line with the explanations offered by the appellant. Moreover, at every stage, the appellant has also submitted rationale along with information available on the public domain to prove the reasons for investment in

14 ITA NO.3514/DEL/2019 M/s Jarul Infrastructure Pvt. Ltd.

convertible share warrants, the trading history of the shares of IPL, the subsequent events of merger and demerger of group companies, and trading pattern of IPL's shares pursuant to investment to substantiate its decision to not proceed with any further investment in the share warrants thereby resulting in forfeiture of the warrants. The appellant has also explained in earlier parts of this submission that as per provisions of section 2(47) of the Act, the forfeiture of share warrants representing a right in IPL’s ownership represents extinguishment of asset (being the right), such forfeiture results in transfer u/s 2(47) of the Act, thereby resulting in short term capital loss in the hands of the appellant. AO In the assessment order, the AO disallowed the short term capital loss of Rs. 76,12,50,000/- claimed by the appellant by treating the transaction as a sham transaction. In the assessment order, the AO has observed that the investment by appellant into I'PL and consequent forfeiture was a colourable device used by the appellant to camouflage the credit of amount to IPL as a capital receipt to avoid the test of section 68 of the Act; the appellant company acted as a conduit to the transaction to provide ultimate benefit to IPL; since the appellant company did not wait till end of conversion period to convey unwillingness, the said forfeiture was pre-decided; even if the appellant company did not want to invest further in the shares of IPL, then the unwillingness should have been expressed in May 2812 instead of November 2011; the forfeiture of warrants by IPL does not amount to transfer as per provisions of section 2(47) of the Act. The AO disallowed the short term capital loss of Rs. 76,12,50,000 claimed by the appellant. In addition to the appellant's submissions, the AR has also submitted the order of Ld. CIT(A)-1, who has allowed the short term capital loss claimed by Alona Azalea Infrastructure Pvt. Ltd, (AIPL), as AIPL was one of the allottees of the convertible warrants, and similar to the case of the appellant, AIPL's warrants were also forfeited resulting in capital loss. The shares of IPL having face value of Rs. 10 each were traded at prices ranging from Rs. 29.60 to Rs. 45.50 and were expected to increase in the near future, Thus, at such point in time, the appellant along with 3 other companies had invested in the convertible share warrants of IPL by way of making 25% part payment, wherein the balance payment was due upon conversion at any time in the next 18 months. The facts of the case have been considered and the submissions filed by the AR of the appellant have been perused. The Assessment order has

15 ITA NO.3514/DEL/2019 M/s Jarul Infrastructure Pvt. Ltd.

been considered. All case laws cited by the AO and tine Appellant have been considered. The order of Ld. CIT(A) 1, on similar facts has been perused. The relevant para of the order is reproduced below: Considering the facts of the case, it cannot be said that the appellant has used any colourable device to get the share warrants forfeited. The decision was taken by the appellant with the intention to earn money but such ad decision has gone wrong and to cut the further losses the appellant decided not to pay the further amount. Therefore, the disallowance of short term loss of the appellant as alleged by the Assessing Officer in para 4.6 and 5.1 of the assessment order is untenable and same is deleted. As the facts are identical, maintaining judicial discipline and respectfully following the decisions of Ld. CIT(A)-01 the appeal is allowed. The appeal on ground no.1 is allowed.” 14. Against this order revenue has filed appeal before us. learned

departmental representative relied upon the orders of the assessing

officer. He submitted that assessing officer has given the finding that

assessee has adopted a colourable device and hence the claim of loss has

been rightly disallowed.

assessing officer has tried to sit into the shoes of a businessman and

decide what is prudent. He submitted that this is not at all legally

sustainable. He submitted that all the necessary details were available

before the assessing officer. He did not find any fault therein. On the

basis of conjectures and surmises he had made the disallowance. He

submitted that on identical facts in case of another company M/s Azalea

Infrastructure Pvt. Ltd. which has also similarly contributed to Indiabulls

Power Ltd. and has suffered similar loss the claim was duly allowed by

16 ITA NO.3514/DEL/2019 M/s Jarul Infrastructure Pvt. Ltd.

the ITAT. Hence, he submitted that the issue is in fact covered by the

ITAT decision on similar facts. Furthermore learned counsel of the

assessee summarised in submission as under:-

17 ITA NO.3514/DEL/2019 M/s Jarul Infrastructure Pvt. Ltd.

share price was Rs. 12.10/ share - refer page 24,25 of Annexure 1 showing data downloaded from website of NSE and pg 17 of assessment order vi. Even today i.e. on 3 June 2022 the share price is Rs. 4.2/- per share- refer page 26 of Annexure 1 showing data downloaded from website of NSE vii. Additional immediate outflow and additional outflow after 6 months: The Assessee would have had to pay Rs. 2.28 crores immediately i.e. on 27th November 2011 -refer High Court Order dated 17 October 2011 at page 237,266,270 of PBK and would have had to pay balance Rs. 226 crores in May 2012 that too when the price of one share was Rs. 10. viii. The falling share prices with no expectation of price to rise, immediate financial outflow of Rs. 2.28 crores due to the directions of the Hon’ble High Court in November 2011 and balance amount of Rs. 225 crores to be paid in next 6 months i.e. in May 2012 was the reason the Assessee decided to not exercise the option and conveyed its decision on 18.11.11 to IPL. Hence, decision was only prudent and rational and in accordance with economic indicators and market trends. 2. Prices are not controlled or manipulated by Assessee: IPL is a listed and publicly traded company on NSE and BSE and its prices are available on public domain. The Assessee has no control over its price of shares .-refer page 114,214,225,237 of PBK and page 15 of assessment order 3. Shares were non transferrable and could not have been sold in open market to recover its money-refer para 6.2 at page 12 of assessment order 4. Exercising the option would have resulted in greater loss and no rational person would have exercised the option: Shares in open market were available for Rs. 10 per share then why would the Assessee pay balance amount of Rs. 21.75 per share. Assessee also submitted before the Ld. AO the computation of loss if option would have been exercised-refer page 43 ofPBK 5. STCL not set off - No benefit obtained: Such STCL not set off against any CG and remains outstanding. Hence, no benefit is derived-refer return of Income of Assessee for AY 2020-21at Annexure 2. 6. No restriction on obtaining loam from Holding Company: .There is no legal restriction on obtaining a loan

18 ITA NO.3514/DEL/2019 M/s Jarul Infrastructure Pvt. Ltd.

from Holding Company to make investment in promoter companies. 7. No restriction on timing of investment; There is no restriction on timing of investment. It is for parent company to decide whether they would like to keep substantial idle funds in the account of its subsidiary or to infuse funds only when the same are required to be invested in IPL. Assessee has no control over their fund management. Given the analogy suggested by the Ld. AO, it appears that Ld. AO is trying to suggest that in case the funds had stayed for a longer period in the bank Account of Assessee then this investment would have been genuine otherwise this investment would be termed as bogus. 8. AO cannot step into the arm chair of a business man: The investment was the decision of the Assessee and its promoters. Such management decisions are the essence of commercial expediency of business undertakings and cannot be questioned. It is not the domain of the AO to allege whether any decision was right or wrong, as the same is undertaken after due consideration by a business undertaking for the overall benefit of the business. Thus, commercial expediency should be judged from the point of view of businessman and not the taxing Department. The Hon'ble Apex Court has held that the income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman. Even the Hon'ble jurisdictional High Court has held that revenue cannot justifiably claim to put itself in the armchair of a businessman or in the position of the board of directors and assume the said role to decide how much is a reasonable expenditure having regard to the circumstances of the case-refer case law summary 9. Full disclosure- all transaction were through bank; source of investment and source of source was also established i. Bank statements of Assessee showing receipt and transfer of funds on 29.11.2010 at page 45 of PBK ii. Bank statements of Heliotrope Real Estate Pvt. Ltd showing receipt and transfer of funds on 29.11.2010 at page 68A of PBK

19 ITA NO.3514/DEL/2019 M/s Jarul Infrastructure Pvt. Ltd.

iii. Bank statements of Chloris Properties Ltd showing receipt and transfer of funds on 29.11.2010 at page 86 of PBK iv. Confirmation dated 1st January 2014 by Chloris Properties Ltd in respect of amount lent to Heliotrope Real Estate Pvt. Ltd -Pg 84 of PBK; v. Confirmation dated 20th March 2014 by Heliotrope Real Estate Pvt. Ltd in respect of amount lent to Assessee -Pg 36 of PBK, vi. Audited Financials of Assessee - Refer note 5,9,10,20,21 at pages 5,9,10,11,12,13 of PBK vii. Audited financials of IPL for AY 2012-13-refer page 92,94,95,99,100,101,108,113,114,121,123,126,132,133,135 viii. Audited Financials of IPL for AY 2011-12 - refer page 142,144,156,167,168,179 of PBK ix. Audited Financials of Heliotrope Real Estate Pvt. Ltd - refer note 6,8,10,22 at page 58,63,64,67 of PBK x. Audited Financials of Chloris Properties Limited -refer note 3and 23 at page 74,78,81,82 of PBK xi. Board Resolutions dated 7th October 2010 of Assessee regarding the investment -refer page 54 of PBK xii. Board Resolution dated 17th November 2011 of Assessee regarding decision to not exercise the option of conversion and regarding forfeiting the upfront money -refer page 55 of PBK xiii. Board Resolutions of IPL dated 19th November 10 regarding issue of share warrants and their terms and conditions. Provisions of Income tax Act, Companies Act, article of association, memorandum of association, listing agreement, SEBI and approvals, sanctions, permissions, consent of BOD and other authorities were complied with- refer page 189-191 of PBK xiv. Board Resolutions of IPL dated 30th November 2010 regarding allotment of 42 crores share warrants which shall upon conversion be locked in for a period as stipulated under SEBI; xv. Share Warrant certificate dated 30th November 2010 - refer pg 47 of PBK

20 ITA NO.3514/DEL/2019 M/s Jarul Infrastructure Pvt. Ltd.

xvi. Communication to IPL vide letter dated 18th November 2011 regarding decision to not exercise the conversion at page 48 of PBK xvii. These companies are filing returns, have made due disclosure in their books. 10. Disallowance on Conjectures and surmises: There was no independent inquiry by the Ld. AO to verify the reasons and justification given by Assessee, he has placed no objection to the evidence given by the Assessee. He has disallowed the claim on the ground that the transaction was sham as it was structured only to evade tax. There is no whisper or any allegation that the amount invested in the forfeited shares has come back to the Assessee in any form. The forfeiture is not claimed to be bogus nor has if been shown to be a fraud or colourable devise. The observation that such transactions are to be treated as sham transaction are mere allegations and bereft of any merits and no cogent material to substantiate this allegation is on record. 11. Forfeiture of call monies/ share warrants/ loss on sale of shares bv group company The following propositions have been held by the Hon'ble Apex Court and the Jurisdictional High Court in various decisions wherein there is forfeiture of share warrants/ call money by a group company-re/er case law summary • No prudent businessmen would permit loss of capital under normal circumstances and it is only under unavoidable circumstances that a person lets go or permits forfeiture of his capital; • If forfeiture is not claimed to be bogus nor it has been shown to be a fraud or colourable devise then the disallowance cannot be made; • That there has to be a positive finding as to how the transaction is to be termed as a colourable device or a fraudulent transaction. No disallowance can be made on surmises and conjunctures, there has to be a finding to the effect that a colourable device was conceived by the assessee to defraud the revenue; the observation that such transactions are to be treated as sham transaction are mere allegations and bereft of any merits: and no cogent material to substantiate this allegation is on record. • It is for the holder of the shares and not for the revenue to decide when to sell the shares held by it;

21 ITA NO.3514/DEL/2019 M/s Jarul Infrastructure Pvt. Ltd.

• There is no provision in the Act which would prevent the assessee from selling loss-making shares; • If the sale of shares was not illegal, it could have been made to any one, including a group company and it was immaterial that the purpose of sale of shares was to reduce the outstanding liabilities of the assessee. It was also absolutely immaterial that the liabilities of the assessee were towards group companies. Similarly, it was also immaterial that the shares sold by the assessee were of another group company. It was also immaterial as to who was the purchaser of the shares, so long as the shares were not sold at a price..wh.ich_w.as higher or lower than their fair price and there was no restriction on sale of such sha res to a group company. • Neither the assessee nor the amalgamated company adjusted the capital loss on account of sale of those shares against any long-term capital gain. No tax benefit was, therefore, obtained by the assesse. Hence, it could not be said that the transactions in question were a colourable device, meant to gain some unfair tax advantage. 12. Decision in case of other promoter companies vyho invested in share warrants of IPL. Infact, the warrants were issued by IPL to 4 promoter companies including Azalea Infrastructure Pvt. Ltd. and Alona Infrastructure Pvt. Ltd. In all the 4 cases, the upfront money was forfeited. The Hon’ble Delhi Tribunal has deleted the addition in case of DCIT v. Azalea Infrastructure Pvt. Ltd ITA No. 3667/Del/2017 ITAT DELHI and the Ld. CIT(A) has deleted the addition in case of Alona Infrastructure Pvt. Ltd. vide order dated 22.12.15 AppeaL No. 465/14- 15 -refer case law paperbook 13. Forfeiture pf convertible warrant amounts tp 3 transfer within meaning of section 2f47) of the act as there is extinguishment of a right and loss on their forfeiture is allowable as capital loss A per section clause 47 of section 2 of the Act, transfer includes the extinguishment of any right. The section is reproduced below: “2. (47) transfer, in relation to a capital asset, includes,— …………….. (ii) the extinguishment of any rights therein; or

22 ITA NO.3514/DEL/2019 M/s Jarul Infrastructure Pvt. Ltd.

…………….” The following propositions have been held by the Hon'ble Apex Court and the Hon’ble Jurisdictional High Court-refer case law summary • It is not necessary that for a capital gain to arise there must be sale of a capital asset. Sale is only one of the modes of transfer envisaged by section 2(47). Relinquishment of the asset or the extinguishment of any right in it, which may not amount to sale, can also be considered as a transfer and any profit or gain which arises from the transfer of a capital asset is liable to be taxed under section 45; • Forfeiture of convertible warrant had resulted in extinguishment of the right of the assessee to obtain a share. It was not a case where the asset itself had been extinguished or destroyed. The assessee entitled to claim capital loss; • loss suffered by the assessee, i.e., non-recovery of share application money was consequent to the forfeiture of its right in the shares and the same was to be understood to be within the scope and ambit of transfer. Loss would amount to short- term capital loss to the assessee; • The definition of 'transfer' in section 2(47) clearly contemplates the extinguishment of rights in a capital asset distinct and independent of such extinguishment consequent upon the transfer thereof Conclusion: It is therefore prayed that the disallowance be deleted.” 16. We have carefully considered the submissions and perused

the records. We find that in this case assessee company has suffered

short-term capital loss which arose out of forfeiture of share warrant

money. It is not the case of the assessing officer that the legal claim of

short-term capital loss arising out of forfeiture of share warrant money is

not legally sustainable. Rather assessing officer in the beginning has

questioned the wisdom of assessee is investing. For this he has referred

to the share price movement of the investing company. Despite noting

that prices were touching Rs.28, he found Rs.29 investment a wrong

23 ITA NO.3514/DEL/2019 M/s Jarul Infrastructure Pvt. Ltd.

decision. His inference in this regard is not correct as the price

movement by no stretch of imagination point out that investment was in

a bogus or penny stock company. Further, it is settled law that

Assessing Officer cannot sit in the shoes of businessman and decides the

prudence of business decision. Thereafter Assessing Officer has

wondered why instead of getting the share warrants forfeited assessee

did not sell these shares. It was informed that as per the agreement there

was no clause of selling the shares. As subsequent movement in prices

have duly corroborated that the share prices fell and the assessee’s

decision not to pay the balance amount was not at all unjustified. The

prime emphasis of the assessing officer at the end is that the exercise

was meant to bring capital receipt in the hands of Indiabulls Power Pvt.

Ltd. and thwart examination from the perspective of section 68. This line

of reasoning is wholly unsustainable. Firstly assessing officer is not at all

seized with the assessment of Indiabulls Power Pvt. Ltd. as to how the

capital receipt in his hand is to be examined from the perspective of

section 68. Morevoer, even if assessee had contributed the balance

amount that would still be a capital contribution. Moreover, even for

exempt capital receipt, there is no law that such credits are outside

purview of section 68. Hence, Assessing Officer’s surmise also is without

any basis whatsoever. Moreover, the amendment in section 68 providing

for examination of source of source for share application money, share

capital, and share premium, or any such amount was brought in by

Finance Act, 2012 w.e.f. 01.04.2013 is not applicable in this case.

24 ITA NO.3514/DEL/2019 M/s Jarul Infrastructure Pvt. Ltd.

was meant to provide capital receipt in the hands of the said company

cannot at all be sustained. Even otherwise, since all the details of the

flow of funds was before the assessing officer he has not been able to

point out as to which stage and in what respect ingredients of section 68

are not cogently satisfied. There is no mention as to whether the identity

is not available, or that the source of funds is not given, or that

Assessing Officer has unearthed some other transactions. Hence the

assessing officer’s order is only based upon surmises and conjecture and

hence it is not sustainable in law. Moreover, we note that in identical

circumstances, this ITAT in the case of DCIT vs Azalea Infrastructure Pvt.

Ltd. vide order dated 28/01/2021 had allowed the claim of short term

capital loss.

assessee in this case is whether the forfeiture of the convertible warrant

amount to a transfer within the meaning of section 2(47). The ITAT in

the case of M/s Azalea Infrastructure Pvt. Ltd. (supra) has answered this

by concluding as under:-

“9. So far as the issue for taxation in the hands of the assessee is squarely covered in favour of the assessee by the decision of honourable Delhi High Court in 329 ITR 356 in case of CIT versus Chand Ratan Bagri, wherein the addition was made in the hands of the assessee on protective basis and the addition was made on substantive basis in the hands of the company who forfeited the shares. In paragraph number 2 there was also an allegation of tax evasion tactic prohibited by law employed by the assessee. It is also the allegation in the impugned case. In paragraph number 12 - 14 clearly clinches the issue in favour of the

25 ITA NO.3514/DEL/2019 M/s Jarul Infrastructure Pvt. Ltd.

assessee. The honourable High Court held that the issue as to whether the forfeiture of the convertible warrant amount to a transfer within the meaning of Section 2 (47) of the said act has now been made clear by the Supreme Court in the case of Grace Collis (supra) as also by the Karnataka High Court in BPLSanyo finance Ltd (supra) and the honourable High Court also followed the same. In paragraph number 14 the honourable High Court held that forfeiture of the convertible warrant has resulted in extinguishment of the right of the assessee to obtain a share in the issuer company. 10. In view of this, the ground number 1 of the appeal raised by the learned assessing officer, and so appeal, is dismissed.” 19. Accordingly, in the background of aforesaid discussion and

following the Co-ordinate Bench decision in identical case, we uphold the

order of Ld. CIT(A).

Order pronounced in the open court on 23.06.2022.

Sd/- Sd/- [ANUBHAV SHARMA] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER

Delhi; Dated: 23.06.2022.

f{x~{tÜ? f{x~{tÜ? f{x~{tÜ? f{x~{tÜ? Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi