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TMI Blog1987 (3) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... st of original shares with bonus." 2. The assessee is a limited company deriving income from inter alia share dealings during the previous year under consideration which was the calendar year 1980. The assessee claimed that it had suffered a loss in its share dealings. It has purchased 19900 shares of Kesoram Cotton Industries Ltd. at a cost of Rs. 8,32,230. During the previous year under consideration, it received 4950 bonus shares with it. The assessee had to calculate the difference between the cost and sale proceeds of the 19900 original shares which were sold. For this purpose, the assessee took the cost of 4950 bonus shares at nil so that the entire sum of Rs. 8,32,230 became the cost of the original shares. As the sale proceeds o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. 4. Shri S. K. Lahiri, the learned representative for the department, urged before us that the learned Commissioner (Appeals) erred in his decision. He pointed out that the case of Smt. Protima Roy was decided on different facts. In that case, the assessee had certain shares and received certain bonus shares after 1-1-1964. The assessee sold both the original as well as the bonus shares after 1-1-1964. She elected the cost as on 1-1-1964 under section 55(2) of the Act as the basis for computing capital gains. The Revenue took the stand that the cost of the original shares was reduced by the subsequent issue of bonus shares. The High Court did not agree. Relying on the decision in the case of Shekhawati General Traders Ltd. v. ITO [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost to the dealer of the bonus shares is to take the cost of the original shares, spread it over the original shares and the bonus shares collectively and find out the average price of all the shares. This decision approved the earlier decision in the case of Dalmia Investment Co. Ltd.. He pointed out that in the case of Gold Mohore Investment Co. Ltd. the bonus shares were sold while in the case of Dalmia Investment Co. Ltd. the original shares were sold. Both were dealers in shares and so whether the original or the bonus shares were sold was of no consequence. In the circumstances, he urged that the learned Commissioner (Appeals) wrongly applied the decision in the case of Smt. Protima Roy to the facts of this case while the ITO had ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re Investment Co. Ltd. gives as complete answer to this issue. It has been held therein that the cost of the shares sold has to be determined by spreading the original cost over the total shares inclusive of the bonus shares. We find that in that case the Supreme Court had also taken note of the fact that the assessee was valuing the shares at cost. Hence, it cannot be said that the method of valuation of closing stock was not considered in the said case. Besides, one of the recognised methods is cost or market value, whichever is less. The question which arises in this appeal is as to what is the cost for the purpose of determining whether the same is lower or higher that the market value. It is for determining this cost that the case of G ..... X X X X Extracts X X X X X X X X Extracts X X X X
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