TMI Blog1995 (5) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... 900 shares on 6-2-1975 ; and 9,800 shares on 30-7-1977. The face value of the bonus shares was also Rs. 100. 3. The assessment year is 1984-85 and the year of account ended on 31-3-1984. 4. The assessee sold 7,833 shares on 16-7-1983 and again 6,300 shares on 23-7-1983. On 26-10-1983, the remaining 5,467 shares were sold. The original and bonus shares had together fetched a sale price of Rs. 9,80,000. 5. In the return filed on 15-5-1984 an income of Rs. 6,30,000 was shown as capital gains. A second return was filed on 18-10-1985 revising the capital gains to Rs. 3,92,454. 6. There was a change in the computation of cost of the shares between the first and the second returns. The ITO did not accept the change. He held that capital ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the highest court ranging from Emerald Co. Ltd v. CIT [1959] 36 ITR 257 (SC) down to Shekhawati General Traders Ltd v. ITO [1971] 82 ITR 788 (SC) were cited. The governing principle is clear and past all disputes. The method of valuation of shares, original and bonus, either for the purpose of capital gain or for the sake of making entry in accounts to show the closing or opening stock value, is the same. It is a case of original shares purchased for a price and bonus shares allotted by the company for which no cost had in fact been incurred. The Supreme Court has, on more than one occasion, ruled that the correct method to be applied in such cases is to take up the cost of the original shares and to spread it over to the original as we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Madras High Court in the case of CIT v. T.V.S. Sons Ltd [ 1983] 143 ITR 644. In this case, both original shares and bonus shares had been sold and there was a question of determining the cost of those shares for the capital gains. Their Lordships held that when the entire block of shares had been sold the question of determining the cost of acquisition of bonus shares separately would not arise. 13. We may also refer to the subsequent decision of the Madras High Court in the case of CIT v. Prema Ramanujam [1991] 192 ITR 692. In this case, the assessee had received shares as gift prior to 1-1-1954. Bonus shares had been issued in July 1966, March 1968 and March 1970. During the year ending March 31, 1975, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) has held that the assessee was entitled to opt for market value in terms of section 55(2) as they had been purchased on 21-7-1962. In view of this option exercised by the assessee and the CIT(A)'s approval to substitute the market value for the cost, we have to deal with a different situation. We have to, therefore, direct the ITO to take the market value of 3,500 original shares as on 1-1-1964 as the substituted cost. 16. The bonus shares had been acquired subsequent to 1-1-1964. Therefore, the market value of 3,500 shares alone will be the substituted cost. In the result, we compute the capital gains as hereunder : A. Cost of bonus shares on averaging Rs. 2,87,546 B. Fair market value of 3,500 original shares as on 1-1-196 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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