COMMISSIONER OF INCOME TAX Vs. HARSH CHEMICAL LTD

JUDGEMENT

(1.) ON an application under S. 256(1) of the IT Act, 1961, the Tribunal has referred the following questions set out at p. 7 of the paper book.

(2.) THE assessee M/s. Harsh Chemicals Ltd. is a company. The relevant assessment year is 1992- 93. The assessee has 55,000 equity shares in M/s Russell Industries Ltd. The shares were purchased in the account year relevant to the asst. yr. 1994-95 (sic). In respect of those shares the assessee was allotted bonus shares on 27th May, 1991, in the ratio 1:1. Thus, the assessee obtained 55,000 bonus shares. All these shares were sold in two lots on 27th Aug., 1991, and 3rd Sept., 1991, for a total consideration of Rs. 3,91,82,000. A subsidiary part of the sale price was deposited in the units under the Capital Gains Scheme, 1983, in order to claim exemption of the entire capital gain under S. 54A. The AO has seen that the bonus shares were held by the assessee for a very short period, that is less than a year and, therefore, they give rise to short-term capital gains and the second reason for assessing the capital gain tax on bonus shares was that they have the average cost. Therefore, the case of CIT vs. B.C. Srinivasa Setty (1981) 21 CTR (SC) 138 : (1981) 128 ITR 294 (SC) : TC 20R.148 has no application.

(3.) NONE appeared for the assessee. Heard the learned counsel for the Revenue.