Bonus share cost must be apportioned with original shares; nil valuation does not apply in capital gains computation.

For capital gains computation on sale of bonus shares, the cost of acquisition is not nil merely because the bonus issue involved no separate payment. The cost of the original shares must be spread over both the original and bonus shares, because the right to receive bonus shares is attached to the original holding. The shareholder's status as an investor, rather than a dealer in shares, does not alter this apportionment principle. On that basis, bonus shares cannot be treated as having nil cost, and the transaction cannot be computed as a capital loss on that footing.

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Issues: Whether, for the purpose of computing capital gain or capital loss on sale of bonus shares, the cost of the bonus shares could be treated as nil or whether the cost of the original shares had to be spread over the original shares and the bonus shares; and whether the assessee's status as an investor, rather than a dealer in shares, made any difference.

Analysis: The consideration paid for the original shares automatically carried with it the right to receive the bonus shares. On that basis, the cost of acquisition could not be confined to the original shares alone, nor could the bonus shares be assigned a nil cost merely because they were issued without separate payment. The cost had to be apportioned over the original and bonus shares together. The distinction between a dealer and an investor did not affect this principle.

Conclusion: The bonus shares were not to be valued at nil, and the assessee was not entitled to compute the transaction on the footing of a capital loss.

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