Bonus Shares Affect Capital Gains Calculation: Escorts Farms (Ramgarh) Limited v. CIT

The Supreme Court held that in calculating capital gains from the transfer of original shares, the subsequent issue of bonus shares must be factored in for averaging and reducing the acquisition cost. The decision was rendered in the case of Escorts Farms (Ramgarh) Limited v. CIT [1996] 222 ITR 509. The appeal was resolved in favor of the Revenue, with no costs awarded.

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The Supreme Court ruled that in computing capital gains from the transfer of original shares, subsequent issue of bonus shares should be considered for averaging and reducing the cost of acquisition. The decision was based on the case of Escorts Farms (Ramgarh) Limited v. CIT [1996] 222 ITR 509. The appeal was disposed of in favor of the Revenue with no costs ordered.

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