:1: IN IN IN THE THE THE HIGH COURT OF JUDICATURE AT BOMBAY HIGH COURT OF JUDICATURE AT BOMBAY HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.282 OF 2001 The Commissioner of Income Tax-I, Pune. ...Appellant. Vs. M/s. Jannhavi Investments Pvt. Ltd. ....Respondent. Mr. Vinod Gupta, Advocate for the Appellant. Mr.S.N.Inamdar with Mr.A.K.Jasani for the Respondent. CORAM : F.I. REBELLO & R.S. MOHITE, JJ. DATED : 8TH JANUARY,2008. PC : (Per R.S. Mohite, J.) 1. Heard both sides. 2. According to the revenue the Questions of Law at Sr. Nos. 1,2,3 and 4 arise from the basic question as to whether the assessee was entitled to opt for the fair market value of certain shares as on the statutory date i.e. 1.4.1981, even though the said shares were held as stock-in-trade as on that date. 3. The brief facts relevant for the decision of this question are that the respondents acquired certain shares of M/s. Bharat Forge Limited in the year 1977. On the original holding they received bonus shares in the financial year 1981-82 and additional bonus shares in the financial year 1989-90. All the shares were held as stock-in-trade till 6.11.1987. On the sale of the shares while working out capital gain assessee computed :2: fair market price as on 1.4.1981. The Assessing Officer held that since the assessee was holding the shares as stock-in-trade upto 2.11.1987 and as the said shares were not capital assets as on 1.4.1981, the option adopted as fair market price as on 1.4.1981 was not available to the assessee. 4. The revenue had carried this matter to the Commissioner of Income Tax and the appeal was partly allowed. In an appeal by the petitioner to the Appellate Tribunal, on the aforesaid issue, the Tribunal held in favour of the assessee and while doing so, reliance was placed upon the Division Bench Judgment of this court in the case of Keshavji Karsondas Vs. Commissioner of Income Tax reported in 207 ITR Page 737. 5. In the aforesaid case the subject matter of assessment were certain agricultural lands which were first acquired in the year 1941. When the said lands were acquired they were not capital assets. Later on, due to effect of Finance Act 1970, with effect from 1.4.1970, the concerned agricultural lands fell within the amended definition of the term "Capital Asset". The question before the Division Bench was as to what could said to be the "Cost of Acquisition" of the said agricultural lands. It was held by this court that what was relevant for computing the capital gains tax was the "Cost of Acquisition" and not the cost on date on which :3: the asset was treated as capital asset. That cost of acquisition was the cost of the asset on the date when the asset was actually acquired. 6. On behalf of the revenue, it was sought to be contended by counsel for revenue that the decision in the case of Keshavji Karsondas (cited supra) was distinguishable in the facts of the present case. He pointed out that by Finance Act 1992, with effect from 1993, the mode of computation of income chargeable under head "Capital Gain" had changed and the concept of "Index Cost of Acquisition" had been introduced and defined under Explanation III to the 5th proviso of Section 48. According to him the concept "Index Cost of Acquisition" was calculable on the basis of the cost of acquisition for the first year in which the asset was held or on the first day of April,1981 whichever was later. He drew our further attention to Section 55(2)(b) which related to calculation of the cost of "any other capital asset". 7. In our view, there is no substance in the contention of the revenue. The Amendment of 1993 referred to herein above does not in any way nullify or dilute the ratio as laid down in the case of Keshavji Karsondas. The cost of acquisition can only be the cost on the date of the actual acquisition. In the present case there was no acquisition of the shares on 6.11.1987 when the :4: same were converted from stock-in-trade to a capital asset. 8. The substantial question of law at Sr. Nos. 5 and 6 arise from the question as to Whether the coupons received alongwith non convertible debentures issued by Bharat Forge Limited were liable for capital gains. The question has been answered in the negative by the ITAT after giving detailed reasons. On perusal of the reasoning, we find no reason to disagree. The Tribunal held that in the case of such coupons there was no cost of acquisition. According to the learned counsel appearing for the revenue cost of acquisition would be as provided under Section-55(2)(aa)(ii). Nothing has been shown to us to convince us that the said coupons are a security within the meaning of Clause (h) of Section-2 of the Securities Contracts Regulation Act, 1956 which is an essential ingredient for the applicability of Section-55(2) (aa-ii). No doubt, it may be a financial asset within the meaning of Section 55(2) (aa)(iiia). That provision however was brought into force subsequently and would not be applicable to the facts of the present case. 9. In the net result, the substantial questions of law as framed would not arise and the appeal stands dismissed. (R.S. MOHITE, J.) (F.I. REBELLO, J.)