Capital gains on bonus shares: cost may be taken at half the original share cost, following prior valuation treatment.

For computing capital gains on transfer of shares, the cost of bonus shares was treated as 50 per cent of the cost of the original shares. The Court noted that this method of valuation had already been upheld in an earlier decision and that the value adopted as on 1 January 1964 was fixed for spreading the cost between original and bonus shares. The referred question was answered in the affirmative, and the Department's position was rejected.

---

---

Issues: Whether, for computing capital gains, the cost of bonus shares should be taken at 50 per cent of the cost of the original shares.

Analysis: The question referred arose from the computation of capital gains on transfer of shares where the authorities had adopted the cost of the bonus shares by applying 50 per cent of the cost of the original shares. The Court noted that the same mode of valuation had already been upheld in an earlier decision, and that the value adopted as on 1 January 1964 was to be treated as fixed for the purpose of spreading the cost over the original and bonus shares.

Conclusion: The referred question was answered in the affirmative and against the Department, thereby upholding the adoption of 50 per cent of the original share cost for the bonus shares.

---