COMMISSIONER OF INCOME TAX Vs. NINOCHAKA A KOTHARI

JUDGEMENT

(1.) IN the present reference under Section 256(1) of the Income -tax Act, 1961, the following question is referred to us for our decision :

(2.) THE assessee had in the relevant year sold 300 shares of Alembic Chemicals Industries and 200 shares of Alembic Glass Industries and the question arose as to computation of the capital gains arising from these sales, particularly the manner and method of computation of the cost price, to be taken into consideration. Accordingly the assessee, the purchase of shares of Alembic Chemicals Industries was at the specific rate of Rs. 130 per share on August 1, 1972.200 shares of Alembic Glass Industries were purchased by her - -50 shares on April 14, 1965, at Rs. 100 per share, and the remaining 150 shares on February 26, 1965, at the rate of Rs. 205 per share. According to the assessee, the cost of acquisition for the purpose of computation of capital gains should be worked out only on the basis of the actual cost incurred by the assessee, i.e., the price paid for the purchase of these shares. However, according to the Revenue, bonus shares had been issued to the assessee on the basis of the assessee's shareholding in the said companies, accruing on those shares purchased by the assessee from the market. Thus, according to the Revenue, the cost price of the shareholdings of the assessee should be worked out by the method of averaging out the cost price. In other words, the bonus shares issued upon the shares purchased from the market must also be taken into consideration for arriving at the cost of acquisition for the purpose of capital gains.

(3.) THE Tribunal appears to have taken the view that the specific shares which were sold, in respect of which the capital gains were required to be computed, were shares purchased from the market and in respect of which the cost of acquisition was specifically indicated by the assessee. The principle of averaging out was not applied by the Tribunal on the basis of its observation that the facts of the present case are distinguishable from the case of Dhun Dadabhoy Kapadia (Miss) v. CIT : [1967]63ITR651(SC) inasmuch as, in the cited case, the question was of acquisition of rights shares. The Tribunal, in that context, observed that, in the present case, such is not the case. However, there does not appear to be any controversy as regards the fact that the assessee, after having purchased the shares in question from the market, had also acquired further shares by way of a bonus issue. This puts the entire situation in a different perspective.