Satish Chandra, C.J. - (1.) Ralli International Limited is a non-resident foreign company. During the accounting period 1972-73 (relevant to the assessment year 1973-74), this company sold 10,000 shares in Oriental Carpet Manufacturers (I) Private Ltd., Amritsar. The sale was effected with the sanction of the Reserve Bank of India at the price fixed by the Reserve Bank at Rs. 245 per share. The sale of these 10,000 shares was in favour of Shri J. L. Mehra and his relations. These shares had been acquired by the assessee company prior to 1954. The question for the assessment year 1973-74 related to the quantum of capital gains that this transaction of sale entailed. In relation to this problem, the Income-tax Appellate Tribunal has referred the following question of law for the opinion of this court: "Whether, on the facts and in the circumstances of the case, the method of valuation adopted by the Tribunal in valuing the shares in question under Section 55(2) of the Income-tax Act, 1961, is sustainable in law ? If not, what would be the correct basis ?"
(2.) Section 55(2) relates to capital gains. It provides for determining "the cost of acquisition" of a capital asset. It says : "(2) For the purposes of sections 48 and 49, 'cost of acquisition', in relation to a capital asset- (i) where the capital asset became the property of the assessee before the 1st day of January, 1954, means the cost of acquisition of the asset to the assessee or the fair market value of the asset on the 1st day of January, 1954, at the option of the assessee,"
(3.) In the present case, the shares in question were admittedly acquired by the assessee prior to 1954. They were sold in 1972-73. The assessee opted for the fair market value of the shares as on 1st day of January, 1954, as their cost of acquisition. There is hence no dispute between the parties so far as Section 55(2) of the Income-tax Act, 1961, is concerned.;