Per P.K. Bansal, Accountant Member: This appeal by assessee is directed against Order passed by Commissioner of Income-tax (Appeals)-I, Baroda ['CIT(A)' for short] dated 5-8- 2003 for assessment year 1996-97. 2. only ground taken by assessee relates to disallowance of short-term loss of Rs. 4,32,000 claimed by assessee on account of extinguishment of warrants. 3. brief facts of case are that assessee has applied for 2,00,000 warrants and paid Rs. 2.70 per share (i.e., 5 per cent of Rs. 54) as upfront payment. assessee however exercised said right with respect to 40,000 warrants only and right with respect to balance 1,60,000 warrants was extinguished, which assessee claimed as short-term loss. Assessing Officer disallowed loss holding that sale of warrants cannot be treated as Capital Asset as per definition of Capital Asset given under section 2(14) of Act. 4. assessee went in appeal before CIT(A). Before CIT(A), assessee stated that in accordance with guidelines for preferential allotment of shares to promoters of company M/s. Deepak Nitrite Ltd. had issued warrants with right attached to holders of warrants, to subscribe against payment in cash for one equity share of company of Rs. 10 each for every warrant held, at such price and time as may be determined by Board in accordance with prevailing guidelines. guidelines are related to average of market price of company's share as quoted on Bombay Stock Exchange for preceding 6 months period from date of Board meeting, i.e., 28-6-1994, plus margin of 10 per cent over such average price. holder of warrants had to exercise their option within 18 months. assessee could exercise right only in respect of 40,000 warrants and on balance rights were extinguished. balance 1,60,000 warrants was extinguished. It was contended that warrant is also capital asset as per definition of capital asset given under section 2(14) of Act. Reliance was placed on decision of Hon'ble Supreme Court in case of Ahmed G.H. Ariff v. CWT [1970] 76 ITR 471 and also decision of Hon'ble Karnataka High Court in case of Syndicate Bank Ltd. v. Addl. CIT [1985] 155 ITR 68. It was also contended that on extinguishment of right in 1,60,000 warrants transfer has taken place and for this reliance was placed on definition of 'transfer' given in section 2(47). CIT(A) after discussing submissions of assessee, took view that warrants fall under category of capital assets as they are valuable right and in present instance had clearly demarcated market value/price. It was also held that assessee had spent Rs. 2.70 per warrant but in respect of other plea of assessee that extinguishment of warrant will tantamount to be transfer, CIT(A) did not agree with assessee. CIT(A) held that no capital loss is allowable to assessee by observing as under: ' 3.6 Accordingly if asset is irretrievably lost it cannot be said that assessee suffered long-term or short-term loss. Calcutta High Court in case of CIT v. East India Charitable Trust 206 ITR 152 held that where assessee's asset of debenture in company were rendered valueless by reason o f insolvency of company, no capital gains/loss arose as it was case of disappearance of assets themselves, further Supreme Court in case of Kartikeya V. Sarabhai v. CIT 228 ITR 163 has held that if there is reduction in face value of shares there is extinguishment of right of share holder to extent of reduction. Hence gains arising from such reduction were liable to capital gains tax. This clearly shows that element of transfer between two parties has to be involved before there can be any liability to capital gains/loss. 7. In present instance I find that appellant continued to have right to apply for shares of M/s. Deepak Nitrite Ltd., and that right continued to be on paper in form of dividend warrants available with him. It was his matter of choice, that he did not opt to convert 1,60,000 warrants. However such non-action did not transfer right to anyone and warrants remained his possession/property. After lapse of 18 months they became valueless in normal way without any transfer occurring. This is merely case of lapsing but can in no way be treated as transfer of asset, which can be considered as capital loss. There is absence of transferee in such situation and hence as per Supreme Court's decisions mentioned above (Vania Silk Mills), I as per Supreme Court's decisions mentioned above (Vania Silk Mills), I would hold that no capital loss is allowable to assessee.' 5. Before us, Shri S.N. Soparkar, ld. AR drawn our attention towards provisions of sections 45, 2(14) and 2(47) of Act. It was contended that there is no dispute that warrant is capital asset, as revenue has not come in appeal in respect of finding given by CIT(A) on this account. only dispute before us relates to whether there is transfer of capital asset or not. Our attention was drawn towards provisions of section 2(47) and it was contended that definition given in this section is inclusive definition and relates to capital asset. Clause (ii) of section 2(47) is applicable in case of assessee. This clause states extinguishment of any rights in capital asset to be transferred. assessee since did not exercise option of subscription of equity shares against warrants there was extinguishment of rights in asset, viz., warrants. Our attention was invited towards decision of Hon'ble Supreme Court in case of CIT v. Mrs. Grace Collies [2001] 248 ITR 323 and on basis of this decision it was pointed out that Hon'ble Supreme Court in this decision at page 330 did not approve decision in case of Vania Silk Mills (P.) Ltd. v. CIT [1991] 191 ITR 647 (SC) that extinguishment of any right therein should be on account of transfer. Hon'ble Supreme Court held 'extinguishment of any rights therein' cannot be extended to mean extinguishment of rights independent of or otherwise than on account of transfer. Since rights of assessee in capital assets got extinguished when assessee did not exercise option to subscription for equity shares, there is transfer within meaning of section 2(47). Reliance was also placed on decision of Hon'ble Supreme Court in case of Kartikeya V. Sarabhai v. CIT [1997] 228 ITR 163 for proposition of law that section 2(47) provides that relinquishment of asset or extinguishment of any right therein amounts to transfer of capital asset. It is not necessary for capital gain to arise, that there must be sale of capital asset. Sale is only one of modes of transfer envisaged by section 2(47) of Act. On query from Bench, if it is accepted that there is transfer in case of assessee, how capital loss will be computed in absence of sale consideration, Shri Soparkar pointed out that sale consideration will be taken to be NIL. 6. learned DR, on other hand, relied on order of CIT(A) and by referring to section 2(47), contended that there cannot be any transfer in case of assessee because assets no more remain in existence. Referring to section 45, it was contended that for arising capital gain or loss, there must be transfer of capital asset. In absence of transfer of capital asset, there cannot be any capital loss. 7. We have carefully considered rival submissions, and perused material on record and have also gone through orders of authorities below as well as case law relied upon before us. There is no dispute on proposition of law that warrants applied for by assessee are capital assets within meaning of section 2(14) of Act and this proposition seems to be accepted by revenue as revenue has not come in appeal against order of CIT(A), when in para-7 he held that warrants are capital assets. For computing capital gain, section 45 lays down as under: ' 45(1) Any profits or gains arising from transfer of capital asset effected in previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E [54EA, 54EB,] 54F [, 54G and 54H], be chargeable to income-tax under head 'Capital gains', and shall be deemed to be income of previous year in which transfer took place.' From reading of this section it is apparently clear that provisions of section 45(1) are charging provisions and for charging profits or gains under this head there must be capital asset. capital asset must be transferred. method of computation of capital gain has been laid down under section 48. This is settled law that computation provisions cannot supersede charging provision. word 'transfer' has been defined under section 2(47) which lays down as under: ' (47) 'transfer', in relation to capital asset, includes, - (i) sale, exchange or relinquishment of asset; or (ii) extinguishment of any rights therein; or (iii) compulsory acquisition thereof under any law; or (iii) compulsory acquisition thereof under any law; or (iv) in case where asset is converted by owner thereof into, or is treated by him as, stock-in-trade of business carried on by him, such conversion or treatment; or (v) any transaction involving allowing of possession of any immovable property to be taken or retained in part of performance of contract of nature referred to in section 53A of Transfer of Property Act, 1882 (4 of 1882); or (vi) any transaction (whether by way of becoming member of, or acquiring shares in, co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has effect of transferring, or enabling enjoyment of, any immovable property.' From this definition it is apparently clear that definition of 'transfer' is inclusive definition which inter alia provides six situations under which there can be transfer in relation to capital assets. Extinguishment of any rights in capital assets is one of situations enumerated in section 2(47). words 'extinguishment of any rights therein' denotes that extinguishment of rights should be only capital assets with reference to which word 'transfer' has been defined. warrant is capital asset. moment assessee loses rights attached to warrant for exercising option of subscription to equity shares, in our opinion, there is extinguishment of right in warrant. It is not case of extinguishment of assets itself. warrant is capital asset. It may not have any value subsequent to extinguishment of rights available to assessee for subscription to equity shares. Hon'ble Supreme Court at page 330 in case of Mrs. Grace Collies (supra) has held that expression 'transfer' included extinguishment of rights in assets independent. We have also gone through decision of Hon'ble Supreme Court in case of Kartikeya V. Sarabhai (supra). In this decision, Hon'ble Supreme Court has held that this is only one of modes of transfer envisaged by section 2(47). relinquishment of assets or extinguishment of any rights in it which may not amount to sale can also be considered as transfer. Therefore, on this issue, we do not agree with finding of CIT(A) that there is no transfer in case of assessee and accordingly we reverse finding of CIT(A) on this issue and hold that in case of assessee there is transfer when rights of assessee to subscribe for shares got extinguished. 8. question before us is whether there is loss incurred by assessee on transfer of capital asset. Section 45 is charging provision so far as imposition of tax on capital gain is concerned. computation of capital gain has to be made in accordance with provisions of section 48, which stipulates as under: 48. Mode of computation. - income chargeable under head 'Capital gains' shall be computed, by deducting from full value of consideration received or accruing as result of transfer of capital asset following amounts, namely: (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) cost of acquisition of asset and cost of any improvement thereto:' From reading of aforesaid section, it is apparent that for computation of capital gains, full value of consideration received or accrued on transfer of capital asset is to be ascertained and from this value of consideration, amounts as enumerated under section 48(i) and (ii) which consists of expenditure incurred in connection with such transfer and cost of acquisition and cost of improvement of capital asset has to be deducted. charging section and computation provision together constitutes integral code as has been held by Hon'ble Supreme Court in case of CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294. If computation provision cannot apply at all case will not fall within charging provision. 'cost of acquisition' and 'cost of improvement' are defined under section 55(1) for purposes of section 48 but no such definition has been given in respect of full value of consideration. We do not agree with plea of learned Senior Advocate that full value of consideration shall be deemed to be NIL. If full value of consideration in absence of any definition given under Chapter IV-E is to be taken NIL, cost of assets could also be taken to be NIL for computing capital gains for purpose of section 48 and there was no need of inserting clauses (a) and (aa) in section 55(2) defining cost of acquisition in respect of certain assets to be NIL. definition relating to cost of acquisition to be taken as NIL in respect of certain assets were brought into statute under section 55(2) after decision of Hon'ble Supreme Court in case of B.C. Srinivasa Setty (supra), in which Hon'ble Supreme Court has held as under: ' charging section and computation provisions together constitute n integrated code. When there is case to which computation provisions cannot apply at all, it is evident that such case was not intended to fall within charging section. All transactions encompassed by section 45 must fail under governance of its computation provisions. transaction to which those provisions cannot be applied must be regarded as never intended by section 45 to be subject of charge. What is contemplated by section 48(ii) is asset in acquisition of it is possible to envisage cost: it must be asset which possesses inherent quality of being available on expenditure of money to person seeking to acquire it. None of provisions pertaining to head 'Capital gains' suggests that they include asset in acquisition of which no cost at all can be conceived. When goodwill generated in new business is sold and consideration brought to tax, what is charged is capital value of asset is not any profit or gain. Further, date of acquisition of asset is material factor in applying computation provisions pertaining to capital gain; but in case of goodwill generated in new business it is not possible determine date when it comes into existence.' Therefore, in view of provisions of section 48 there must be full value of consideration out of which expenditure and cost of acquisition has to be deducted for computing capital gains. In absence of any value being assigned to consideration received on transfer of warrants, in our opinion, capital loss cannot be computed in case of assessee. We are therefore of view that in case of assessee capital loss cannot be computed under section 45 read with section 48 and therefore assessee will not be entitled for claiming deduction under head 'Short-term capital loss' as computation provisions relating to short capital gain fail. 9. In result, appeal of assessee is dismissed. *** AJAY C. MEHTA v. DEPUTY COMMISSIONER OF INCOME TAX