Capital Gain Tax

This query is : Resolved

CA Shailesh +91 9393926464 (Querist)
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29 April 2008 My Client got share warrants on 01.01.2007

He converted the warrants into equity shares on 01.07.2007

He later sold the converted shares on 31.03.2008

Query:

1) Whether conversion of share warrants into equity shares is a transfer and attract capital gain tax on the date of conversion?

2) If not, what is the period of holding for equity shares sold on 31.03.2008?

CA UMESHKUMAR R. ACHARYA

CA UMESHKUMAR R. ACHARYA (Expert)
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29 April 2008 Share warrants are option given by company to purchase share of company at specific rate before specfic period or before specific date for a valuable cosideration so it is not transfer. as holder of share warrants and holder of shares are same person. In other words there is no different identity of transferee & Transferor and this is the exact reason where it is called "convesion" rather than transfer &
it will not attract any capital Gain.
As conversion place on 01-07-2007 & from that specific date only thewarrant holder becomes equity holder with other rights when he sales the shares on 31-03-2008, the holding period is less than year it will attract short Term Capital Gain.

CA Shailesh +91 9393926464

CA Shailesh +91 9393926464 (Querist)
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30 April 2008 Sir,

At the time of allotment of warrants, the company collected ,say, Rs 20/- per warrant and at the date of conversion, the co. issued shares for Rs 200/- thereby collected the balance of Rs 180/-

What is the cost of aquisition of warrants/shares?

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