The Supreme Court of India has dismissed the Special Leave Petition (SLP) challenging the Bombay High Court’s judgment in favor of Kingfisher Capital regarding the cost of FCCB (Foreign Currency Convertible Bonds) shares. The decision of the Supreme Court upholds the earlier ruling of the Bombay High Court, bringing the legal proceedings to a conclusion.
In its ruling, the Bombay High Court held that the cost of acquisition for the computation of capital gains should be determined from the date of conversion of FCCBs into shares, rather than the date of acquisition of the FCCBs themselves. This decision upheld the earlier ruling of the High Court.
The Supreme Court highlighted the distinction between the 1993 Scheme, which governs the issuance of FCCBs, and the 2008 Scheme, which pertains to Foreign Currency Exchangeable Bonds (FCEBs). The Court noted that the FCCBs in question were issued under the 1993 Scheme and not the 2008 Scheme. As a result, the arguments put forth by the Revenue, which relied on Section 47(xa) and Section 115AC of the Finance Act, 2008, were rejected by the Supreme Court.
The case revolved around Kingfisher Capital’s subscription to Zero Coupon FCCBs in the Indian company NBVL in 2006, and the subsequent sale of shares received from the conversion of these FCCBs. Kingfisher Capital reported short-term capital gains based on the 1993 Scheme, considering the cost of acquisition to be the closing price of NBVL shares on the NSE on the date of conversion. The Revenue disputed this approach, citing the provisions introduced by the Finance Act, 2008.
The Bombay High Court ruled in favor of Kingfisher Capital, emphasizing that the provisions introduced in 2008 only apply to FCEBs, not FCCBs. The High Court concluded that the 1993 Scheme prevails and governs the computation of cost of acquisition for FCCB-related transactions, as long as there are no corresponding provisions in the Act.
The Supreme Court, in agreement with the Bombay High Court’s reasoning, has dismissed the Revenue’s Special Leave Petition. This brings the legal proceedings to a conclusion and affirms the earlier ruling in favor of Kingfisher Capital regarding the computation of capital gains.
Case Title: CIT v/s Kingfisher Capital CLO Ltd
Citation: Petition(s) for Special Leave to Appeal (C) No(s). 919/2020