1967 (7) TMI 9

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..... from the judgment of the Calcutta High Court dated March 10, 1964, in Income-tax Reference No. 116 of 1960. The relevant assessment year is 1950-51 and the corresponding previous year ended on March 31, 1950. In respect of the said assessment year the Income-tax Officer made an order dated March 15, 1956, under section 23A(1) of the Income-tax Act, 1922 (hereinafter referred to as "the Act"). By the said order the Income-tax Officer held that Rs. 35,476 should be deemed as having been distributed as dividends by the respondent and the proportionate share thereof of each shareholder should be included in the total income of such shareholder for the purpose of assessing his total income. The balance-sheet of the respondent disclosed past l .....

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..... ide the order of the Appellate Assistant Commissioner and restored the order of the Income-tax Officer under section 23A. The Appellate Tribunal dealt with the question of past losses and the accounting of bonus shares and agreed with the findings of the Income-tax Officer and held that the past losses amounted to Rs. 6,509. The Appellate Tribunal further held that the Appellate Assistant Commissioner should not have taken into consideration the actual tax liability of Rs. 17,829. The Appellate Tribunal observed that the Appellate Assistant Commissioner was wrong in taking into consideration the subscribed and the paid up capital for the purpose of comparing it with the profits made in the year of account. Under section 66(1) of the Act the .....

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..... ed by the High Court must be taken to have been impliedly overruled by the judgment of this Court in Commissioner of Income-tax v. Dalmia Investment Co. Ltd. It was contended by counsel that there had to be recomputation of the value of the bonus shares on the principle enunciated in that case. In our opinion, the argument put forward on behalf of the appellant is well-founded and must be accepted as correct. In Commissioner of Income-tax v. Dalmia Investment Co. Ltd. it was held by this court that when bonus shares are issued in respect of ordinary shares held in a company by an assessee, their real cost to the assessee cannot be taken to be nil or their face value. The proper method of valuation is to spread the cost of the old shares ove .....

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