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TMI Blog1959 (3) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the judgment of the High Court of Judicature at Bombay dated September 27, 1955, in Income-tax Reference No. 23 of 1955. In that reference, the following question was considered by the High Court : " Whether the computation of the loss by the assessee company at Rs. 35,801 is in accordance with law or whether the loss computed by the Income-tax Officer/Tribunal is in accordance with law ?" The High Court (Chagla, C.J., and Tendolkar, J.), decided that the loss by the assessee company computed by the Income-tax Officer was according to law. The facts leading to this appeal are as follows : The assessee company deals in shares, and values the closing stock of shares at cost price. It dealt in 1950-1951 in the shares of the Bom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng year, the bonus shares remained with the assessee company, and applying the same calculation as previously, including the cost of the bonus shares at the face value of Rs. 12,500, it declared a loss of Rs. 35,801 for the assessment year 1952-1953. The Income-tax Officer, following the course which was adopted in the previous year, computed the loss at Rs. 27,766. The appeal of the assessee company against the second assessment was taken finally to the Appellate Tribunal at Bombay, which computed the loss. at Rs. 27,748, but in view of the slight difference, did not interfere with the order of the Income-tax Officer who had placed the loss at Rs. 27,766. The Tribunal, however, came to the conclusion on application by the assessee co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchase of such shares by the shareholder, inasmuch as consideration therefor was to be found in the pro tanto diminution of the shareholder's interest in the reserves out of which the bonus shares were issued. The learned Solicitor-General in an equally able reply, relied upon a passage in Eisner v. Macomber, and contended that the issuance of the bonus shares added nothing to the interests of the shareholders, nor took away anything from the property of the said company. The property of the said company was not diminished, nor was the interest of the shareholders increased, the proportional interest of each shareholder remaining the same. According to him, the only change was in the evidence which represented the interest, the new bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in which the Tribunal handled it. To explain our meaning, we set out below the three different calculations which were made respectively by the assessee company, the Income-tax Officer and the Tribunal to compute the loss to the company. We may point out here that though we have set down below the figures for both the assessment years, we agree with the learned Solicitor-General that the assessment for the first year cannot be reopened, and the valuation of the stock as determined by the Income-tax Officer at the close of the first accounting year must be taken to be final. We have, however, given the figures of all the deals in the shares of the Bombay Dyeing Company to bring out the three methods of calculation, which have been applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------------- ------------------------- Profit Rs. 1,760 Account year 1951-52 Assessment year 1952-53 Opening stock : 100 ordy. plus Rs. 73,096 Sale 300 ordy. 50 bonus shares shares Rs. 1,20,550 Purchase 200 ordy. Rs. 99,939 Closing stock shares 50 bonus shares Rs. 24,719 1,73,035 x 50 -------------------- ---------------------------- ------------------------ Total Rs. 1,73,035 350 Total Rs. 1,45,269 ----------------------- ------------------------- Loss Rs. 27,766 Account year 1951-52 Assessment year 1952-53 Per Income-tax Appellate Tribunal : Purchase 100 ordy. shares ............... Rs. 48,359 " 200 ordy. shares ............... Rs. 99,939 -------------------- Total Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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