Ajit K.Sengupta, J. - (1.) In this reference under Section 256(2) of the Income-tax Act, 1961, for the assessment year 1981-82, the following question of law has been referred to this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the cost of the original shares were to be reduced spreading it over the bonus shares ?"
(2.) Shortly stated, the facts are that the assessee is a limited company deriving income from, inter alia, share dealings during the previous year under consideration which was the calendar year 1980. The assessee claimed that it had suffered a loss in its share dealings. It had purchased 19,900 shares of M/s. Kesoram Cotton and Industries Ltd. at a cost of Rs. 8,32,230. During the previous year, it received 4,950 bonus shares from the same company against its original holding of 19,900 shares. The original 19,900 shares were sold during the previous year for Rs. 6,97,120. The assessee retained the bonus shares with it. The assessee had to calculate the difference between the cost and sale proceeds of 19,900 original shares which were sold. For this purpose, the assessee took the cost of 4,950 bonus shares at "nil" so that the entire sum of Rs. 8,32,230 became the cost of the original shares. As the sale proceeds of those shares amounted only to Rs. 6,97,120, the assessee claimed the difference of Rs. 1,35,110 as loss from its business in share dealing. The Income-tax Officer did not accept the above computation of loss made by the assessee. Relying on the decisions of the Supreme Court in the cases of Dalmia Investment Co. Ltd. [1964] 52 ITR 567 and Gold Mohore Investment Co. Ltd. [1969] 74 ITR 62, he held that the original cost of 19,900 shares had to be spread over the total holding of 19,900 plus 4,950 shares amounting in all to 24,850 shares. He calculated the average cost of each of the above 24,850 shares on the above basis and arrived at a lower figure of cost for the 19,900 shares. On the above basis, he computed a profit of Rs. 30,500 instead of the loss of Rs. 1,35,110 shown by the assessee on the aforesaid sale of the original 19,900 shares. He made the assessment accordingly.
(3.) Being aggrieved, the assessee appealed to the Commissioner of Income-tax (Appeals) and contended that the calculation made by it should have been accepted. Reliance was placed on the decision in the case of Smt. Protima Roy. It was also urged before the Commissioner of Income-tax (Appeals) that the two decisions relied on by the Income-tax Officer were not applicable to the facts of this case because, in the case of this assessee, the assessee sold the original shares and not the bonus shares. The Commissioner of Income-tax (Appeals) agreed with the contention of the assessee and directed the Income-tax Officer to accept the computation of loss as made by the assessee.;