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TMI Blog2023 (9) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... 61 (hereinafter referred to as "the Act") dated 28.12.2017 by the Assessing Officer, DCIT, Circle-16 (2), New Delhi (hereinafter referred to as "ld. AO"). 2. The revenue has raised the following grounds of appeal :- "1. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is justified in deleting the addition of Rs. 37,56,83,191/- made u/s 56(2)(vii)(c) of the Income Tax Act, 1961 for bonus shares received? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in holding that the provisions of section 56(2)(vii) of the Act would not apply to bonus shares." 3. We have heard the rival submissions and perused the materials available on record. We find that assessee is an ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers. It was also submitted that the market price of any share after the bonus issue gets reduced almost in proportion to the bonus issue and hence there would be no increase in the market value of shares held by the assessee pursuant to bonus issue. The overall wealth of a shareholder post bonus or pre bonus remains the same. Hence the assessee received no additional benefit or income on allotment of bonus shares because it is only a split of his total rights in the wealth of a company which remains the same even after bonus issue. The ld. AO however did not heed to the contentions of the assessee and proceeded to treat the bonus shares/bonus units issued to be taxed u/s 56(2)(vii)(c ) of the Act and added a sum of Rs 36,10,63,656/-. 4. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lhi has also followed its own decision in the case of Meenu Satija vs. Pr.CIT, Gurgaon dated 27.01.2017. The Hon'ble ITAT has also discussed those decisions referred to by AO. There is no scope of not following the Hon'ble jurisdictional ITAT's decision. 9.12 Further, the argument of the appellant has considerable merit and is an accepted fact that the market price of any share after the bonus issue gets reduced almost in proportion to the bonus issue. In fact, bonus shares are in the nature of Capitalization Shares. In case where 1:1 bonus is declared by a company; the market price would also become almost half. Therefore, on the sale of original shares held by an assessee, the assessee would undisputedly incur a loss. Howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uggested by the tax department that an assessee should sell his total holding immediately on allotment of bonus shares. Therefore, the assumption of the Assessing Officer that the appellant will get double benefit as per page 37 of his Assessment Order is not acceptable and is hereby rejected. 9.15 Further, the observation of the AO that the appellant has incurred loss on sale of shares on which the appellant got bonus shares and set off against the gain does not have any legal basis. The appellant can take advantage of legal provisions and arrange its affairs within the four corners of law. I am in agreement with the submissions made by appellant on this aspect. 9.16 In view of the above Grounds of Appeal No.1 and 2 are accordingly all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion was answered by the Hon'ble Court in favour of the assessee by observing as under:- "6. We have considered the submissions made by learned counsel for the parties and have perused the record. The issue which arises for consideration in this appeal is 'as to whether the fair market value of bonus shares computed as per Rule 11U and Rule 11UA of the Income Tax Rules can be considered as income from other sources as per Section 56(2)(vii) of the Act. A careful scrutiny of Section 56(2)(vii) of the Act contemplates two contingencies firstly, where the property is received without consideration and secondly, where it is received for consideration less than the fair market value. The issue of bonus shares by capitalization of reserves ..... X X X X Extracts X X X X X X X X Extracts X X X X
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