Date of Acquisition of Capital Assets

Dear manish,

AO can take 16.09.2006 as date of acquisition only if he believes that on account of dematerialization TRANSFER took place otherwise he has to take 17.05.2000 as date of acquisition.

for transfer definition under 2(47) is given and your case can either fall in clause (i) or (ii). You can explain to AO that as per section 2(47) (i) & (ii) no transfer has taken place with the help of these decided cases:

Section 2(47)(i)

An exchange involves the transfer of property by one person to another and reciprocally the transfer of property by that other to the first person. There must be a mutual transfer of ownership of one thing for the ownership of another - CIT v. Rasiklal Maneklal (HUF) [1989] 177 ITR 198/43 Taxman 259 (SC).

The ordinary meaning of the word ‘sale’ is a transaction entered into voluntarily between two persons known as the buyer and the seller by which the buyer acquires property of the seller for an agreed consideration known as a price - Calcutta Electric Supply Corpn. Ltd. v. CIT [1951] 19 ITR 406 (Cal.).

A relinquishment takes place when the owner withdraws himself from the property and abandons his rights thereto. It presumes that the property continues to exist after the relinquishment. - CIT v. Rasiklal Maneklal (HUF) [1989] 177 ITR 198/43 Taxman 259 (SC).

Section 2(47)(ii)

The expression ‘extinguishment of any rights therein’ will have to be confined to the extinguishment of rights on account of transfer and cannot be extended to mean any extinguishment of right independent of or otherwise than on account of transfer. - Vania Silk Mills (P.) Ltd. v. CIT [1991] 59 Taxman 3/191 ITR 647 (SC).

Try to explain the AO that no element of transfer in involved in the dematerialization of shares.