COMMISSIONER OF INCOME TAX Vs. R RAMACHANDRAN

JUDGEMENT

(1.) DURING the assessment year 1973-74, the assessee sold 500 shares in Madras Motor and General Insurance Company Limited, of which, the assessee had acquired 25 shares prior to fanuary 1, 1954, and in respect of which the assessee was entitled to opt for treating the fair market value as on January 1, 1954, as the cost of acquisition under Section 55(2) of the Income-tax Act, 1961. The assessee exercised that option. The assessee had received bonus shares in the subsequent years which were relatable in part to the shares subsequently purchased by the assessee, and in part relatable to the shares held prior to January 1, 1954. It is not in dispute that 17 bonus shares received in subsequent years are1 relatable to the 25 shares held by the assessee prior to January 1, 1954.

(2.) WHILE computing the capital gains, the Income-tax Officer did not assign any value to the bonus shares. He, however, adopted the cost as given by the assessee for the other shares which was the statutory cost for 25 shares, and the cost of acquisition of the shares purchased in the subsequent years. That order having been confirmed by the Commissioner, the assessee appealed to the Tribunal which held that the bonus shares were required to be assigned a value by spreading the cost of acquisition over the original shares and the bonus shares, but in respect of the shares held prior to January 1, 1954, the cost of acquisition of shares could not be disturbed. The Tribunal also held that the actual cost of acquisition for the shares held subsequent to January 1,1954, should also be left undisturbed.

(3.) THE assessee through his counsel has placed before us a working of the values by applying the method set out in the preceding paragraph. THE difference in the amount of the capital gain worked out in that manner, and the capital gain as determined by the Income-tax Officer is only Rs. 155. In place of the amount determined by the Income-tax Officer, the amount of capital gain for the purpose of taxation shall be the sum of Rs. 66,301 and the tax liability of the assessee is to be calculated accordingly. We make this direction as the working placed before us has been accepted as correct by the Revenue.