R NARESH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AS directed by this Court in TC Petn. Nos. 166 to 177, 190, 194, 215, 216, 241 and 256 to 261 of 1978, etc. , cases, dt. 14th November, 1978, the Tribunal referred the following question for the opinion of this court under s. 256 (2) of the IT Act, 1961 (for short'it Act'). "whether, on the facts and in the circumstances of the case, the method adopted by the Tribunal for valuing the cost of the shares in the hands of the respective assessees for the purpose of arriving at the taxable capital gains is correct in law "" *

(2.) ALL these Tax Case References relate to the asst. yr. 1973-74. Since the facts arising in all the above said Tax Cases are common, the facts relating to the case of Sri R. Naresh (in TC No. 239 of 1980) were taken into consideration by the Tribunal in order to elucidate the issue arising in all these Tax Cases.

(3.) NOT satisfied with the order passed by the AAC, the assessee filed a second appeal before the Tribunal. The assessee contended before the Tribunal that the real cost to the assessee of the bonus shares should not be taken to be'nil'; but, they had to be valued by spreading the cost of the old shares over the old shares and the new issue, that is, the bonus shares taken together where they ranked pari passu and otherwise, on a proportionate basis, referring, inter alia, to the Gujarat High Court judgment in the case of CIT vs. Chunilal Khushaldas 1974 (93) ITR 369, 1974 (44) CC 90 (Guj) : TC 20r. 810. The assessee contended that the cost of the bonus shares determined in the aforesaid manner had to be added to the actual cost paid for the original shares to arrive at the cost of acquisition of 696 shares, which were sold.