Average cost method for share valuation upheld where entire shareholding block includes bonus shares.

Where the entire shareholding block is transferred, bonus shares need not be separately valued and the average cost method may be used to determine the cost of acquisition for capital gains. The Tribunal applied that settled approach and reworked the share cost in line with earlier directions, which was held to be consistent with the governing legal position. The valuation method for computing taxable capital gains was therefore correct in law, and the issue was decided against the assessee.

---

---

Issues: Whether the Tribunal was correct in adopting the method for valuing the cost of shares for computing taxable capital gains, including by not separately valuing bonus shares when the entire shareholding block had been acquired.

Analysis: The reference was governed by the earlier decision holding that, where the whole block of shares is sold or acquired, the bonus shares need not be separately assessed and the average cost method may be adopted for determining the cost of acquisition. The Tribunal had followed that method and reworked the cost of acquisition in accordance with the earlier directions, which the Court found consistent with the settled legal position.

Conclusion: The method adopted by the Tribunal for valuing the cost of the shares for the purpose of computing taxable capital gains was correct in law, and the question was answered against the assessee.

---