Capital gains on bonus shares must allocate original cost across original and bonus shares; certificate for appeal refused.

Binding Supreme Court precedent on bonus shares governed the computation of capital gains on sale of shares, so the original cost had to be apportioned over both the original and bonus shares when working out the gain. The reference was therefore answered in favour of that allocation and against the assessee. As the substantive question was already settled by the Supreme Court, no arguable ground remained for certification of an appeal to the Supreme Court, and the prayer for a certificate of fitness was rejected.

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Issues: (i) Whether, for computing capital gains on sale of shares, the cost of the original shares had to be spread over the original and bonus shares. (ii) Whether the case was fit for certification of appeal to the Supreme Court.

Issue (i): Whether, for computing capital gains on sale of shares, the cost of the original shares had to be spread over the original and bonus shares.

Analysis: The question referred was treated as directly covered by binding Supreme Court authority on allocation of cost where bonus shares are issued. Following that precedent, the Court held that the original cost had to be spread over both the original and bonus shares for the purpose of working out capital gains.

Conclusion: The issue was answered in the affirmative and against the assessee.

Issue (ii): Whether the case was fit for certification of appeal to the Supreme Court.

Analysis: As the reference question was already concluded by the Supreme Court, no arguable ground remained to justify certification for appeal.

Conclusion: The prayer for a certificate of fitness for appeal to the Supreme Court was rejected.

Final Conclusion: The reference was answered against the assessee, and no certificate for appeal to the Supreme Court was granted.

Ratio Decidendi: Where the computation of capital gains on sale of shares is governed by binding Supreme Court precedent, the cost of the original shares may be apportioned over the original and bonus shares, and certification for further appeal is unwarranted.

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