Summary
The respondent company was a dealer in shares. In respect of each of its holdings of shares in two different companies, it was allotted a set of bonus shares which were to rank pari passu with the old shares. Upon allotment of these bonus shares, the respondent company credited an amount representing the face value of the bonus shares received free of cost to a capital reserve account. Later, both the old as well as the bonus shares were sold and, in, its assessment to income tax for the assessment years 1949- 50 and 1950-51, the respondent assessee company showed a loss in respect of the sale of one company's shares and a small profit on the sale of the second company's shares.
Both the profit as well as the loss on each transaction was calculated by taking the actual price paid for the 'Old shares together with the face value of the bonus shares as the cost of acquiring all the shares. The Income-tax Officer did not accept this method of calculation and he calculated the profit and the loss on the two transactions by spreading the cost of acquiring the old shares over the total number of shares including the bonus shares acquire d free of cost. The Appellate Assistant Commissioner as well as the Tribunal upheld his view but, the High Court, on a reference, held in favour of the respondent assessee.On appeal to this Court,HELD : The correct method of determining the profit or loss on the sale of bonus shares in cases where bonus shares rank pari passu is to take the cost of the original shares and spread it over all the original as well as the bonus shares and to find out the average price of all the shares. [203 B]Dalmia Investment Company Ltd. v. Commissioner of Income- tax, Bihar 41, I.T.R. 705; Commissioner of Income-tax, Bihar v. Dalmia Investment Co. Ltd. 52 I.T.R. 567; Commissioner of Income-tar, Central Calcutta v. Gold Mahore Investment Co.Ltd. 68 I.T.R. 213 referred to.Emerald & Co. Ltd. v. Commissioner of Income-tax Bombay 36I.T.R. 257 considered and distinguished.See the full content of this document
Extract
Commissioner Of Income-tax, Central Calcutta VS. Gold Mohore, Investment Co.Ltd.
PETITIONER: COMMISSIONER OF INCOME-TAX, CENTRAL CALCUTTA Vs.RESPONDENT: GOLD MOHORE, INVESTMENT CO.LTD.DATE OF JUDGMENT: 03/04/1969BENCH: HIDAYATULLAH, M. (CJ)BENCH: HIDAYATULLAH, M. (CJ)SHAH, J.C.RAMASWAMI, V.MITTER, G.K.GROVER, A.N.CITATION: 1969 AIR 1183 1970 SCR (1) 199 1969 SCC (1) 460ACT: Company-Allotment of bonus shares against original holding of shares -Method of calculating profit or loss on sale of original and bonus shares.JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1236 and 1237 of 1967.Appeal from the judgment and or...
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