TMI Blog1991 (6) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... as adopted as the cost of acquisition of the shares sold by the assessee and computed the long-term capital gain at Rs. 57,820 and subjected it to tax. In so doing, the Income-tax Officer purported to follow the decision in CIT v. Dalmia Investment Co. Ltd. [1964] 52 ITR 567 (SC), as, in his view, the decision in Shekhawati General Traders Ltd. v. ITO [1971] 82 ITR 788 (SC), was inapplicable in that, on the issue of bonus shares, the original shares were split up, totally losing their identity. On appeal by the assessee before the Appellate Assistant Commissioner, she, after adverting to the history of the shareholding of the assessee and referring to the decisions of CIT v. Dalmia Investment Co. Ltd. [1964] 52 ITR 567 (SC) and Shekhawati G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quent issue of bonus shares, to arrive at the cost of acquisition of 300 bonus shares sold by the assessee. So computing the cost of acquisition of shares sold by the assessee, the Tribunal affirmed the order of the Appellate Assistant Commissioner and dismissed the appeal. That has given rise to this reference under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), at the instance of the Revenue, on the following question of law : "Whether, on the facts and in the circumstances of the case, the method adopted by the Tribunal for valuing the cost of shares for purposes of arriving at the taxable capital gains is correct in law ? " A brief reference may now be made to the mode of acquisition of shares by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Income-tax Officer was plainly erroneous. In respect of the 375 shares out of 675 shares sold, which formed part of the original shareholding of the assessee, under section 55(2)(ii) of the Act, at the option of the assessee, the fair market value of the asset on January 1, 1954, had been determined at Rs. 184 per share. Thus, with reference to the ascertainment of the cost of acquisition of 375 shares out of 675 shares sold by the assessee, the cost of acquisition has to be worked out on the basis of the unalterable fair market value fixed at the option of the assessee as on January 1, 1954, and that has to be adopted. This is clearly established by the decision of the Supreme Court in Shekhawati General Traders Ltd. v. ITO [1971] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s On March 31, 1967, March 31, 1968, and March 31, 1970. However, the Tribunal has found as a fact that out of 5,750 bonus shares issued on July 4, 1966 (for the year ending March 31, 1967), the assessee had sold 300 bonus shares bearing distinctive numbers 80,706 to 81,005. To ascertain the cost of acquisition of 300 bonus shares sold by the assessee, the cost of 2,875 shares at the rate of Rs. 184 per share as opted by the assessee has to be taken into account and that cost spread over the original shareholding of the assessee, viz., 2,875 shares, as well as the bonus shares issued during the year ended March 31, 1967, viz., 5,750 shares, in order to ascertain the cost of acquisition of the bonus shares issued during the year ended March ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it would suffice to ascertain the cost of acquisition of the bonus shares so sold and, for that purpose, the subsequent issue of bonus shares on March 31, 1968, and March 31, 1970, would not be relevant. Under section 48 (ii) of the Act, the income chargeable under the head "Capital gains" shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, the cost of acquisition of the capital asset and the cost of any improvement thereto. In this case, there is no question of cost of any improvement and necessarily, the cost of acquisition of 675 shares sold alone has to be deducted from the full value of the consideration of Rs. 89,661 and, in respect of ascertai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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