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TMI Blog1969 (4) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... ri passu is to follow the third method, namely, to take the cost of the original shares and to spread it over all the original as well as the bonus shares and to find out the average price of all the shares. The cases will be disposed of in the light of our observations by the Income-tax Appellate Tribunal by calculating the profit and loss by spreading the cost over the original and the bonus shares and finding out the average cost per share. The appeals are allowed. - C.A. 1236 OF 1967 - - - Dated:- 3-4-1969 - Judge(s) : V. RAMASWAMY., M. HIDAYATULLAH., J. C. SHAH., G. K. MITTER., A. N. GROVER JUDGMENT The judgment of the court was delivered by HIDAYATULLAH C. J.--These are two appeals by the Commissioner of Income-tax, Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7-8-0 (old) (old) 21-6-48 Cost of 1,379-4-0 18-3-49 (2750) sh. transfer (bonus) 70,125-0-0 of shares " (1000) sh. (bonus) 25,125-0-0 2-7-48 By crediting capital Loss to reserve a/c P L a/c with the 6250 sh. 84,041-12-0 face value of bonus shares received free of cost (3750) 37,500-0-0 --------------------- ------------------------- 2,51,379-4-0 2,51,379-4-0 " --------------------- ------------------------- The bonus shares when they were issued were included in the trading account. According to the assessee-company the bonus shares had fetched as profit Rs. 95,250 less the face value of the shares, Rs. 37,500. This profit was set off against the loss on the original shares--Rs. 2,12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-0 C.S. (122) Profit P L a/c 1,997-0-0 1st Pref. 23,883-12-0 -------------- (12) 2nd (259) Pref. 1,200-0-0 ----------------------- -------------- --------------------- 39,583-12-0 (259) 39,583-12-0". ----------------------- -------------- --------------------- It will be seen that the cost of bonus shares was shown at the face value of the shares plus a minor charge of Rs. 3. Rs. 13,703 were credited to capital reserve. The Income-tax Officer spread out the cost of 122 1st preference shares (Rs. 23,883-12-0) over the 122 shares (first preference) and 137 shares (second preference). He worked out the average cost at Rs. 92-3-6 per share and found the profit to be Rs. 2,973. His method of calculation was as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t dated August 27, 1963, following its decision in Income-tax Reference No. 54/1960 (from which Civil Appeal No. 1239 of 1967 is also being decided today) held in favour of the assessee-company. The High Court purported to follow a decision of the Patna High Court in Dalmia Investment Co. Ltd. v. Commissioner of Income-tax. Mr. Sen, in dealing with these appeals, points out that the decision of the Patna High Court in Dalmia Investment Co. Ltd. v. Commissioner of Income-tax was reversed by this court in Commissioner of Income-tax v. Dalmia Investment Co. Ltd. and the decision of this court has further been followed in Commissioner of Income-tax v. Gold Mohore Investment Co. Ltd. He contends that the method adopted by the Income-tax Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose because in an earlier decision in Emerald and Co. Ltd. v. Commissioner of Income-tax, this court seemed to have approved of another method. In that case the bonus shares were not sold. In applying different methods, the difference was only Rs. 18 and the court did not, therefore, express a final view on the matter and accepted the calculation of the Tribunal which was to ignore the bonus shares which were not sold and to calculate the profit and loss on the basis of the original shares, their cost and sale prices. The court observed as follows: "The bonus shares are still there, and have not been sold. When they are sold, the question will arise as to what they cost. The books of the assessee-company, as stated in the statement of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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