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1. Valuation of bonus shares for income tax assessment. Analysis: The case involved the valuation of bonus shares for income tax assessment purposes. The assessee had purchased 50 shares of a company, and subsequently received 50 bonus shares. The dispute arose regarding the valuation of these bonus shares when the assessee sold a portion of the total shares held. The assessee valued the bonus shares at face value, while the Income-tax Department used an averaging method to determine the cost of all shares held by the assessee, including the bonus shares received for free. The Court rejected the assessee's contention that the bonus shares should be valued at face value, emphasizing that the bonus shares were received for free, and the assessee had not paid anything for them. The Court also disagreed with a method suggested by the Tribunal that completely ignored the bonus shares in determining the profit or loss on the sale of shares. The Court reiterated the importance of considering the cost of all shares held, including the bonus shares, and using an averaging method to arrive at the correct profit or loss figure. Based on a previous decision by the Court in a similar case, the Court held that the method of valuation adopted by the Income-tax Department, which considered the bonus shares in the averaging calculation, was correct. Therefore, the loss computed by the Department was deemed to be in accordance with the law, and the assessee was directed to pay the costs of the proceedings. In conclusion, the Court upheld the Income-tax Department's method of valuation for bonus shares, emphasizing the need to consider all shares held by the assessee, including bonus shares received for free, in determining the profit or loss on the sale of shares. The decision serves as a precedent for similar cases involving the valuation of bonus shares for income tax assessment purposes.
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