Shyamal Kumar Sen, J. - (1.) Pursuant to the direction of this court under Section 256(2) of the Income-tax Act, 1961, the Tribunal has referred the following question : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in computing the cost of acquisition of right shares issued by Messrs. East India Hotels Limited at Rs. 6.25 per share as against Rs. 1.79 taken by the Income-tax Officer ?"
(2.) The facts relevant for the said question as found by the Tribunal are as follows :
(3.) The assessee is a company deriving income from business and other sources. It held certain shares of Messrs. East India Hotels Limited as investment. During the previous year under consideration, Messrs. East India Hotels Limited declared bonus shares as well as right shares in the holding of one share for every five shares held in both the cases. Simultaneously, it also issued new equity shares for the public. The assessee sold its right to purchase 29,000 right shares at Rs. 3.50 per right share. As these shares were held in the investment portfolio, the surplus of the sale proceeds over the cost, if any, was assessable as short-term capital gains. On the contrary, if the cost of the right shares sold exceeded the sale proceeds, the deficit would constitute short-term capital loss. The assessee found that the quotation of the shares of Messrs. East India Hotels Limited went down from Rs. 42.75 to Rs. 30.25 per share as a result of the issue of the aforesaid right shares and bonus shares. The depreciation in the value amounted to Rs. 12.50 per share. The assessee claimed that it suffered a short-term capital loss of Rs. 9 per share.;