GAFOORUNNISA BEGUM Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) These two references made by the Income-tax Appellate Tribunal at the instance of the assessee relate to the assessment years 1977-78 and 1978-79. The question referred for the consideration of this court is :

(2.) The assessee subscribed to certain shares in Motor Industries Company Limited (MICO). The MICO subsequently declared bonus shares on more than one occasion and had also declared right shares. For the purpose of the present reference, we are concerned with the right shares which were offered at the rate of Rs. 175 per share and the assessee became entitled to subscribe for 137 right shares.

(3.) In the previous year relevant to the assessment year 1977-78, the assessee had sold 100 MICO shares and subsequently in the assessment year 1978-79, 300 MICO shares were sold. For both these assessments, the question arose about the determination of capital gain derived on the sale of the shares. There was no dispute before the Revenue that what was sold by the assessee in the previous years relevant to the assessment years 1977-78 and 1978-79 were not the right shares as such. They could have come from either the originally subscribed shares or the bonus shares. For the purpose of determining the actual cost of the original shares, the cost of the original shares was duly spreadover the bonus shares also following the principle set out by the Supreme Court in CIT v. Gold Mohore Investment Co. Ltd. [1969] 74 ITR 62. There is no dispute upto this point. The assessee claimed that the principle of spreading the original cost of the share on bonus share should also be applied to right share and the value of the share determined accordingly. The Revenue did not accept the aforesaid contention. The original cost of the share was determined at Rs. 617 on the basis above mentioned and the capital gain computed.