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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 ..... s shares in the assessment years ending March 31, 1950, and 1951, respectively. The previous years corresponding to the assessment years were the financial years ending 31st March, 1949, and 1950, respectively. The assessee-company is a dealer in shares. Its method of valuation at the opening and closing of the stocks is to value shares at the cost in the assessment year 1949-50. The company held 2,500 shares of the face value of Rs. 10 each in the Howrah Mills Co. Ltd. They had been purchased at Rs. 85 per share and the total cost to the assessee-company was Rs. 2,12,500. In June, 1948, bonus shares were issued by the Howrah Mills Co. Ltd. in the proportion of three shares for every two original shares. The bonus shares were to rank pari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O.S. 2500 sh. (sold) 2,12,500-0-0 2-8-48 (2500) sh. 72,087-8-0 21-6-48 Cost of old transfer 1,379-4-0 18-3-49 (2750) 70,125-0-0 of shares bonus 2-7-48 (3700)sh. Nil ... (1000) 25,125-0-0 bonus (sc) bonus Loss to P & L a/c 46,541-12-0 --------------------------- ---------------------- 2,13,879-4-0 2,13,879-4-0. --------------------------- ---------------------- On appeal to the Tribunal as to which method was correct, the Tribunal accepted the method of valuation of the Income-tax Officer. In the assessment year 1950-51, the account year being 1949-50, the assessee-company held 122 first preference shares of Fort Gloster Jute Company Ltd. which had cost to the assessee-company Rs. 22,893-12-0. In the year of account ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------- (259) 26,857-5-0 (259) 26,857-5-0 --------------- ------------------------- -------------- --------------------- The Tribunal confirmed the assessment as made by the Income-tax Officer. It may be pointed out that the Appellate Assistant Commissioner had in each case confirmed the order of the Income-tax Officer. The Income-tax Appellate Tribunal then made a reference to the High Court and referred the following questions for the determination of the High Court: 1949-50: "Whether, in the facts and circumstances herein stated, the assessee carrying on share dealing business, can add Rs. 37,500 being the face value of bonus shares issued to it free of cost on the basis of its old shareholding, as cost of its shareholding for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchased at the average cost and that the profit or loss is to be calculated accordingly. In the decision of this court in Dalmia Investment Co. Ltd., four methods of calculation were considered. The first method is to take the cost as equivalent to the face value of the bonus shares. This method was followed by the assessee-company. The second method is to take the cost of the bonus shares at nil, a method adopted by the Income-tax Officer in relation to the Howrah Mills Co. Ltd. A third method is to take the cost of the original shares and to spread it over the original shares and the bonus shares taken collectively, and a fourth method is to find out the fall in the price of the original shares at the stock exchange and to attribute th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed, so far as the assessee-company is concerned." In other words, this court did not go into the question of the valuation of the bonus shares at all but decided the case on the basis of the original holding, its cost price and its sale price. The matter was gone into more closely in the Dalmia's case and every method of calculation was considered there. We were invited to depart from the decision in the Dalmia's case and to take the view which appeared to have been taken in the Emerald's case. We have considered the matter once again and are of opinion that the method followed in the Dalmia's case is the correct method and there seems to be some error in stating that the method of the Tribunal in Emerald's case was finally accepted. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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