9911796707
TMI Blog1996 (6) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... fair market value of the original shares as on January 1, 1964, i.e., half of Rs. 258.50 ?" The assessee held 382 shares in the Coimbatore Pioneer Mills Ltd. He had been holding these shares even prior to January 1, 1964. On February 9, 1975, he received bonus shares in the ratio 1 : 1 in respect of those 382 shares. Thus, as on February 9, 1975, he was holding 764 shares. During the accounting year relevant to the assessment year 1978-79, the assessee sold 167 original shares and 382 bonus shares for a total consideration of Rs. 60,340 (the original shares were sold for Rs, 20,113 and the bonus shares were sold for Rs. 40,227). In the return of income filed, the assessee showed a loss of Rs. 32,204. This loss has resulted by reason of adoption of the actual cost of the original shares at Rs. 258.50 per share being the fair market value as on January 1, 1964, and the adoption of the actual cost of the bonus shares at half the value of the original shares, viz., at Rs. 129.25 per share. The Income-tax Officer accepted the loss returned and completed the assessment accordingly. Later, the order of the Income-tax Officer came to be scrutinised by the Commissioner of Income-tax. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titled to exercise his option to adopt the fair market value as on January 1, 1964, when the shares were purchased prior to January 1, 1964. But, according to learned standing counsel, the value adopted for the bonus shares is not in order. Learned standing counsel submitted that the bonus shares were acquired after January 1, 1964, and, therefore, the value of original shares pegged as on January 1, 1964, cannot be adopted for the purpose of valuing the bonus shares. Therefore, according to learned standing counsel, the original cost of acquisition of the original shares, viz., Rs. 100 per share alone should be adopted for valuing the bonus shares. Inasmuch as both the original shares and the bonus shares were clubbed together for the purpose of ascertaining the value of bonus shares, half of Rs. 100, viz., Rs. 50, should be adopted for valuing each of the bonus shares. On the other hand, learned counsel appearing for the assessee submitted that the original shares were acquired at the rate of Rs. 100 per share prior to January 1, 1964. While valuing the original shares the assessee adopted the option and valued the original shares at the rate of Rs. 258.50 per share. The bonus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be taken at half the original cost incurred for acquiring the original share, viz., Rs. 50 for each bonus share. If this method is adopted, the assessee would be liable to pay more capital gains tax. In a matter like this, what is the correct method to be adopted is pointed by the Supreme Court in CIT v. Dalmia Investment Co. Ltd. [1964] 52 ITR 567, that : " What was previously owned by the shareholder by virtue of the original certificates is after the issue of bonus shares, held by them on the basis of more certificates. In point of fact, however, what the shareholder gets is not cash, but property from which income in the shape of money may be derived in future. In this sense, there is no payment to him but an increase of issued capital and the right of the shareholder to it is evidenced not by the original number of certificates held by him but by more certificates. There is thus no payment of dividend. A dividend in the strict sense means a share in the profits and a share in the profits can only be said to be paid to the shareholder when a part of the profits is released to him in cash and the company pays that amount and the shareholder takes it away. The convers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words, if the shares do not rank pari passu, assistance may have to be taken of other evidence to fix the cost price of the bonus shares. It may then be necessary to examine the result as reflected in the market to determine the equitable cost. " While considering a similar issue, the Supreme Court is Shekhawati General Traders Ltd. v. ITO [1971] 82 ITR 788, held as under : " We have set out the facts of this case in detail in order to demonstrate that that decision was not at all apposite for the purpose of deciding the point which has arisen in the present case. No question arose there of the calculation of the capital gain or loss in accordance with the statutory provisions in pari materia with sections 48 and 55(2) of the Act. In the present case we are confined to the express provisions of section 55(2) relating to the manner in which the cost of acquisition of a capital asset has to be determined for the purpose of section 48. Where the capital asset became the property of the assessee before the first day of January, 1954, the assessee has two options. It can decide whether it wishes to take the cost of acquisition of the asset to it as the cost of acquisition for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
