Commissioner Of Income-Tax, Bihar vs Dalmia Investment Co. Ltd on 13 March, 1964
The view that we have taken finds support from the principle
laid down by this Court for valuation of bonus shares issued
by a company to holders of original shares in the case of
Commissioner of income-tax, Bihar v. Dalmia Investment Co.
Ltd.(1)
The High Court, in dealing with this question, had expressed
the view that principles of Accountancy applicable to
valuation of such right to receive new shares issued by a
company are not applicable when computation has to be made
for purposes of taxation; but we are unable to accept this
proposition. In working out capital gain or loss, the
principles that have to be applied are those which are a
part of the commercial practice or which an ordinary man of
business will resort to when making computation for his
business purposes. The principles of accounting indicated
by us above are clearly the principles that must be applied
in order to find out the net capital gain or loss arising
out of a transaction of the nature with which we are
concerned. The application of those principles indicates
that the claim of the appellant that the net capital gain by
her is not represented by the whole amount of Rs. 45,262/50P
realised by her on renouncement of her right to
(1) [1964]7S.C.R.210;521.T.R.567.