Bonus shares and paid-up capital were judged by actual allotment and payment, defeating the rebate claim.

Bonus shares were treated as issued only when they had actually moved from the company's unissued capital to identifiable shareholders by effective allotment and entry on the register; a resolution or future arrangement was insufficient, so the shares were not issued during the accounting year ended 31 December 1955. Paid-up capital was construed as capital actually paid up on the relevant date, not capital notionally created by resolution, so bonus shares capitalised later were not includible for the relevant assessment year. On that basis, the rebate claimed under the Finance Act provisions was unavailable and the assessee's claim failed.

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Issues: (i) Whether the bonus shares were issued to the shareholders during the accounting year ended 31 December 1955 for the purpose of the second proviso to Paragraph D of Part II of the Finance Act, 1956. (ii) Whether the bonus shares were includible in the paid-up capital of the assessee for the relevant assessment year under the Explanation to Paragraph D of Part II of the Finance Act, 1956.

Issue (i): Whether the bonus shares were issued to the shareholders during the accounting year ended 31 December 1955 for the purpose of the second proviso to Paragraph D of Part II of the Finance Act, 1956.

Analysis: The statutory phrase was construed to require more than a resolution to create or appropriate shares. Issue of shares was treated as complete only when the shares had moved from the company's unissued capital to identifiable shareholders and the process had culminated in the relevant entry and effective allotment to members on the register. The resolutions and subsequent agreement showed that the shares were to be distributed later, after the accounting year, and the capital remained in reserve until June 1955. The presence of conditions such as future registration and Reserve Bank approval also showed that the shares had not yet been issued within the relevant year.

Conclusion: The bonus shares were not issued during the accounting year ended 31 December 1955. This issue was decided against the assessee.

Issue (ii): Whether the bonus shares were includible in the paid-up capital of the assessee for the relevant assessment year under the Explanation to Paragraph D of Part II of the Finance Act, 1956.

Analysis: The expression "paid-up capital" was held to mean capital actually paid up, not notional or deemed capital. Since the undistributed profits were capitalised and brought into the paid-up capital only in June 1955, the increased capital was not in existence on the first day of the previous year relevant to the assessment. The resolution and agreement did not alter that position, because they contemplated future implementation rather than immediate paid-up capitalisation.

Conclusion: The bonus shares were not includible in the paid-up capital for the relevant assessment year so as to earn the rebate claimed. This issue was decided against the assessee.

Final Conclusion: The claimed rebate was not available, and the reference was answered in favour of the Revenue, leading to dismissal of the assessee's claim with costs.

Ratio Decidendi: For rebate under the Finance Act provisions, bonus shares are treated as issued only when they have actually reached the shareholders as members, and paid-up capital means capital actually paid up on the relevant date, not capital deemed to have been paid up by a prior resolution.

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