Document Fragment View

Matching Fragments

93,68,348 x 2,95,531                       Rs. 31,22,779
      8,86,594
                                         Rs. 1,24,91,127
10. On the other hand, the Assessing Officer took a view that the cost of acquisition of the original shares has to be spread over the original shares as well as the bonus shares, as held by the Supreme Court in the case of CIT v. Dalmia Investment Co. Ltd. [1964] 52 ITR 567 and CIT v. Gold Mohore Investment Co. Ltd. [1969] 74 ITR 62 (SC). It was held in these cases that if the bonus shares ranked paripassu with the old shares, they should be valued by spreading original cost over the old and new shares. It is not in dispute here that the bonus shares ranked paripassu with the original shares. With these observations, the Assessing Officer adopted the cost of the original shares as the fair market value on 1-4-1974, i.e., Rs. 15.85 per share and arrived at the cost of 5,91,063 original shares as well as 2,95,531 bonus shares together at Rs. 93,68,348 (5,93,063 original shares x Rs. 15.85).

17. Ground No. 3 of the appeal requires a clarification. Inasmuch as in case the cost of acquisition of the original shares numbering 5,91,063 has been rightly taken at Rs. 93,68,348, as we have held above and if the cost of acquisition of the original shares as well as 2,95,531 bonus shares is also taken at Rs. 93,68,348, as held in the assessment order, then it must follow that the cost of acquisition of 2,95,531 bonus shares in the assessment order has been taken at 'nil' With this clarification, we will now proceed to understand the impact of the issue of bonus shares, as explained by the Supreme Court in the case of Dalmia Investment Co. Ltd. (supra). It was held in that case that where bonus shares are issued in respect of ordinary shares held in a company by an assessee who is a dealer in shares, their real cost to the assessee cannot be taken to be nil or their face value. The court further held that they have to be valued by spreading the cost of the old shares over the old shares and the new issue of the bonus shares taken together if they rank paripassu. In the present case, it is not in dispute that they rank paripassu and, therefore, we heed not consider a circumstance contrary to it. We may also mention that it is not in dispute before us that the cost to an investor in shares is not different from that of a dealer in shares and, in any case, it has been held by the Bombay High Court in DM. Dahanukar v. CIT[ 1973] 88 ITR 454 that a case of an investor in shares is not different in this regard.