TMI Blog1993 (8) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Assessing Officer and the capital gains returned by the assessee should have been accepted. 2. The assessee is a HUF and derives income from business and other sources. The assessment year involved is 1984-85 or which the accounting year ended on 31-12-1983. It held 7025 shares in M/s. Palaniandavar Mills which consists of 3513 shares originally acquired in the year 1961 at a cost of Rs. 37,252 and 3512 bonus shares allotted in the year 1969. During the accounting year, the assessee sold the entire lot of shares for Rs. 84,300 and declared the net long-term capital gains of Rs. 28,422. The stand taken by the assessee was the original shares should be valued at the cost of acquisition and the bonus shares should be valued on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares subsequent to that date was wholly extraneous and irrelevant and could not be taken into consideration. 5. The learned departmental representative, on the other hand, supported the decision of the CIT (A). 6. We have duly considered the rival submissions and the record. We have also set out the relevant facts which would show that in this case both the original shares and the bonus shares were acquired or obtained prior to 1-4-1974. Therefore, when the assessee sold the entire lot of shares including original and bonus shares the option of the assessee to substitute fair market value as on 1-4-1974 for the cost of acquisition arises which is a statutory privilege and this should not be ignored by relying on the principle of avera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seeks to invoke in its favour. On this basis, the assessee has exercised the option to substitute the cost of acquisition of original shares at Rs. 37,252 and accordingly worked out the capital gains arising out of the transfer of the original shares at Rs. 4,904. As regards the bonus shares which were also allotted prior to 1-4-1974 the principle of averaging as laid down by the Supreme Court in the case of Dalmia Investment Co. Ltd. was applied and the average cost of Rs. 18,626 was claimed to work out the capital gains arising on sale of bonus shares at Rs. 23,518. Although the privilege of the assessee to substitute the fair market value as on 1-4-1974 is statutorily available, we find that there is a dichotomy in the method of computat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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