COMMISSIONER OF INCOME TAX BIHAR Vs. DALMIA INVESTMENT COMPANY LIMITED

JUDGEMENT

(1.) THE following Judgments Qf the court were delivered by

(2.) THIS matter has come before us on a case stated by the Income-tax Appellate tribunal. The question is how to determine the cost of acquisition of bonus shares for ascertaining the profits made on a sale of them. The assessment year concerned is 1949-50 for which the accounting year is the calendar year 1948.

(3.) I think the preferable view is that taken by the majority of the Judges. When the articles permit the issue of bonus shares and thetransfer of undivided profits direct to the share capital account, it cannot be said that a cash dividend must be deemed to have been declared which could be set off against the liability to pay for the shares. This is not what was done in fact. What in fact was done, and legally done, was to transfer the profits to the share capital account by a resolution passed by the majority of the shareholders so that the shareholders never acquired any right to any part of it. The view taken by the majority has since been followed unanimously, and even if it was open to doubt, for myself, at this distance of time, I would not be prepared to depart from it: Commissioners of Inland Revenue v. Fisher's Executors(1) and Commissioner of Income-tax, Bengal v. Mercantile Bank of India Limited(2). It is of some significance to observe that the latter is a case from India.