D K SRIVASTAVA, A M - (1.) THE appellant-assessee has filed the present appeal against the order dated 21/23.5.2002 passed by the Commissioner of Income-tax (Appeals) XXII, Kolkata (CIT(A) in short) on the following grounds: (a) THAT the Ld. CIT(A) erred in confirming the addition of Rs. 2,89,560/- on account of Long Term Capital Gain in sale of 1200 shares of ITC. He failed to appreciate that the bonus shares having been received on 17.11.94 merged with the value of original shares and therefore the average cost had to be taken while calculating the Long Term Capital Gain on sale of such shares." "(b) THAT the Ld. CIT(A) erred in holding that the amended law regarding valuation of bonus shares which came into effect from asstt Yr. 1996-97 was applicable to the Bonus shares received on 17.11.94 also." "2. (a) THAT the Ld. CIT(A) erred in not entertaining the addl. Ground of appeal with regard to the sale price of 1400 shares of ITC Classic Finance which was wrongly taken at page-2 of the assessment order at Rs. 3,19,754/- in place of Rs. 2,4l,606/- as per statement filed by the appellant. THE observation of the CIT(Appeals) in this respect reading as "It is a subsequent observation which is not very apparent from the assessment order filed by the appellant before me" is irrelevant and misleading. This mistake is apparent with reference to the sale figure shown in the statement filed by the appellant with the return and the figure adopted by the AO in the Asst. order." "(b) THAT in any case the unintended addition of Rs. 78,148/- by wrongly taking the sale price of ITC Classic Finance shares at Rs. 3,19,754/- is wrong and unjustified and the CIT(A) should have deleted such addition." "3. THAT the appellant craves leave to alter, amend, modify any of the grounds and/or tale additional ground/s before or at the time of this appeal." Ground No. 1: Cost of Acquisition of Bonus Shares for Computing the Capital Gains
(2.) Briefly stated, the facts of the case, as relevant to the first ground of appeal, are that the assessee had purchased 1200 shares of ITC Ltd. on 26.6.1992 for a consideration of Rs. 3,76,800/-. He was allotted and consequently received 1200 bonus shares on 17.11.1994 as a result of holding the said shares. The assessee did not make any payment for allotment and acquisition of the said bonus shares. Thus the total cost of 2400 shares of ITC Ltd. to the assessee remained the same as the cost of original shares, i.e., Rs. 3,76,800/-. The assessee sold ORIGINAL 1200 shares on 28.12.1994 for a consideration of Rs. 4,70,340/-. The capital gain on sale of the said original shares was computed at that time by taking the cost of the shares sold by the averaging method by spreading over the total cost over the 2400 shares and accordingly the cost of the shares sold was taken at Rs. 1,88,400/ - only. The assessee therefore claimed that the cost of the balance 1200 shares (bonus) to the assessee was Rs. 1,88,400/-. The aforesaid 1200 bonus shares were sold by the assessee during the previous year relevant to the assessment year under appeal for a consideration of Rs. 2,89,560/- on which he worked out the capital gain of Rs. 85,157/- as under: JUDGEMENT_6978_TLIT0_20030.htm The Assessing Officer, however, assessed the entire sale value of the aforesaid shares, i.e., Rs. 2,89,560/- as long term capital gain liable to tax in the hands of the assessee by taking the cost of acquisition as NIL in terms of the following provisions of Sub-clause (iiia) of Clause (aa) of Sub-section (2) of Section 55 of the Income-tax Act, 1961 which has been inserted, by the Finance Act, 1995 with effect from the assessment year 1996-97 (Sub-clause (iiia) in short). "Meaning of "adjusted", "cost of improvement" and "cost of acquisition". 55. (1) xxxxxxxxxxxxxxxxxxxxxx (2) For the purposes of sections 48 and 49, "cost of acquisition", - (a) xxxxxxxxxxxxxxxxxxx (aa) in a case where, by virtue of holding a capital asset, being a share or any other security, within the meaning of Clause (h) of Section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) (hereinafter in this clause referred to as the financial asset), the assessee - (A) becomes entitled to subscribe to any additional financial asset; or (B) is allotted any financial asset without any payment, then, subject to the provisions of sub-clauses (i) and (ii) of Clause (b) - (i) xxxxxxxxxxxxxxxxxxxxxxxxxx (ii) xxxxxxxxxxxxxxxxxxxxxxxxxx (iii) xxxxxxxxxxxxxxxxxxxxxxxxxx (iiia) in relation to the financial asset allotted to the assessee without any payment and on the basis of holding of any other financial asset shall be taken to be nil in the case of such assessee, (iv) xxxxxxxxxxxxxxxxxxxxxxxxxx (ab) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx (b) in relation to any other capital asset,- (i) xxxxxxxxxxxxxxxxxxxxxxxxxx (ii) xxxxxxxxxxxxxxxxxxxxxxxxxx (iii) xxxxxxxxxxxxxxxxxxxxxxxxxx (iv) xxxxxxxxxxxxxxxxxxxxxxxxxx (v) xxxxxxxxxxxxxxxxxxxxxxxxxx (3) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx" (emphasis supplied)
(3.) THE assessee appealed before the CIT(A) without success.;