DAHANUKAR D M Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question in this reference relates to computation of capital gains when an assessee has sold the bonus shares allotted to him. THE question of law referred to us for our decision is as under :

(2.) THE assessee is the investor with reference to shares of Maharashtra Sugar Mills Ltd. held by him (hereinafter referred to as "sugar mills"). THE assessee received certain bonus shares from the sugar mills. THEse bonus shares were acquired by him without paying any amount by him. THE assessment relates to the asst. yr. 1960-61. During the relevant previous year, the assessee sold 600 bonus shares.

(3.) IN Gold Mohore INvestment Co. Ltd.'s case (supra), the Supreme Court took the view that in the case of a dealer in shares who values his stock at cost, where bonus shares issued in respect of ordinary shares held by him rank pari passu with the original shares, the correct method of valuing the cost to the dealer of the bonus shares is to take the cost of the original shares, spread it over the original shares and the bonus shares collectively and find out the average price of all the shares.