RAJESH ROHITBHAI MEHTA v. INCOME TAX OFFICER
[Citation -1987-LL-0320-2]

Citation 1987-LL-0320-2
Appellant Name RAJESH ROHITBHAI MEHTA
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 20/03/1987
Assessment Year 1982-83
Judgment View Judgment
Keyword Tags double taxation
Bot Summary: The assessee earned capital gains as a result of sale of certain bonus shares and the ITO levied tax thereon. In calculating the capital gains the ITO did not take into consideration the cost of the original shares as laid down in the Supreme Court decision in the case of CIT vs. Dalmia Investment Co. Ltd. 52 ITR 567(SC). The reason for doing so was that the assessee had sold the original shares in the preceding assessment year and the entire cost thereof had been allowed as a deduction in that year. Before us the assessee s advocate submitted that the Madras High Court was concerned with a case where all the shares, bonus as well as original were acquired compulsorily at the same time. In the grounds of appeal it has been submitted that if the value of bonus shares is considered Nil acceding to the working of the ITO the principles laid down by the Supreme Court in the case of CIT vs. B.C. Srinivasa Setty 21 CTR 138: 128 ITR 294 should be applied and there can be no capital gains of an asset in the acquisition of which no cost at all has been incurred. In doing so we have to apply the decision of the Supreme Court in the case of Dalmia Investment Co. Ltd. It may be true that the deduction in respect of the original shares might have been given in the preceding year but for the present question that is irrelevant. The cost of the original shares should have been considered in the light of the issue of the bonus shares.


assessee earned capital gains as result of sale of certain bonus shares and ITO levied tax thereon. In calculating capital gains ITO did not take into consideration cost of original shares as laid down in Supreme Court decision in case of CIT vs. Dalmia Investment Co. Ltd. (1964) 52 ITR 567(SC). reason for doing so was that assessee had sold original shares in preceding assessment year and entire cost thereof had been allowed as deduction in that year. ITO relied upon decision of Madras High Court in case of CIT vs. T.V.S. and Sons Ltd. (1983) 37 CTR (Mad) 142: (1983) 143 ITR 644 (Mad). CIT (A) has confirmed ITO s order. That is why assessee is in appeal. Before us assessee s advocate submitted that Madras High Court was concerned with case where all shares, bonus as well as original were acquired compulsorily at same time. ld. departmental representative stated that whether they were compulsorily acquired or sold, was not relevant and it was equally irrelevant whether they were acquired at same time or separately. He argued that just as there could not be double taxation there could also not be double deduction. In grounds of appeal it has been submitted that if value of bonus shares is considered Nil acceding to working of ITO principles laid down by Supreme Court in case of CIT vs. B.C. Srinivasa Setty (1981) 21 CTR (SC) 138: (1981) 128 ITR 294 (SC) should be applied and, therefore, there can be no capital gains of asset in acquisition of which no cost at all has been incurred. In our view, this is not case of allowing any deduction. question before us is of valuation of bonus shares. In doing so we have to apply decision of Supreme Court in case of Dalmia Investment Co. Ltd. (supra). It may be true that deduction in respect of original shares might have been given in preceding year but for present question that is irrelevant. It is seen from ITO s order that deduction has been given as per order of CIT(A). cost of original shares should have been considered in light of issue of bonus shares. For that purpose Department could have taken suitable action under s. 263 or under s. 147 or appeal from order of Commr. as case may be but that cannot affect question before us. Therefore, valuation here has to be done as per decision of Supreme Court in case of Dalmia Investment Co. Ltd. (supra). appeal is allowed. *** RAJESH ROHITBHAI MEHTA v. INCOME TAX OFFICER
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