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2022 (5) TMI 194 - AT - Income TaxAddition u/s 56(2)(vii)(c) read with section 2(24)(xv) - Applicability of provisions of section 56(2)(vii)(c) applicable to the bonus shares - Whether allotment of bonus shares cannot be considered as received for an inadequate consideration and therefore, it is not taxable as income from other sources u/s 56(2)(vii)(c)? - HELD THAT:- We find that even the CBDT Vide Circular No. 06/2014 issued on dated 11.02.2014 clarified that bonus units at the time of issue would not be subjected to additional income tax u/s 115R of the Act, since issue of bonus units is not akin to distribution of income by way of dividend. This may be inferred from provisions of section 55 of the Act which prescribed that “cost of acquisition” of bonus units shall be treated as Nil for purposes of computation of capital gains tax. CBDT vide circular 717 dated 14.08.1995 clarified that “in order to overcome the problem of complexity, a simple method has been laid down for computing of cost of acquisition of bonus shares. For the sake of clarity and simplicity, the cost of bonus shares is to be taken as “Nil” while the cost of original shares is to be taken as the amount paid to acquire them. This procedure will also applicable to any other security where a bonus issue has been made. The issue under consideration has been elaborately considered by the Hon’ble Tribunal in various cases such as Rajan Pai Bangalore Vs. Department of Income Tax [2016 (5) TMI 216 - ITAT BANGALORE] and Sudhir Menon HUF [2014 (3) TMI 534 - ITAT MUMBAI] and even by the Hon’ble Apex Court in the case of CIT v. Dalmia Investment Co. Ltd. [1964 (3) TMI 17 - SUPREME COURT] as relied upon by the Ld. Commissioner while holding that the provisions of section 56(2)(vii)(c) of the Act are not applicable to the bonus shares. Even otherwise we do not find any material and reason to controvert the findings of the ld. Commissioner on the issue under consideration, therefore in view of aforesaid analysis and respectfully following the Judgments referred above of the Hon’ble Apex Court and the Hon’ble tribunal and the Circulars issued by the CBDT, the appeal of the revenue is liable to be dismissed.
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