TaxTMI 
TaxTMI 
2011 (7) TMI 153
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.... circumstances of the case and in law, the CIT(A) grossly erred in not considering bonus shares received on account of original investments made in foreign currency as a foreign exchange asset covered by the provisions of section 115F." 2. Briefly stated the facts are that the assessee is a non-resident Indian and filed his return of income declaring income of Rs. 60,000, which was processed under section 143(3) on 24-10-2007 determining the total income at Rs. 11,23,265. In the assessment order, the Assessing Officer had not treated the bonus shares as foreign exchange assets and had not allowed the benefits available under section 115C of the Act. Aggrieved, the assessee carried the matter in appeal before the CIT(A). Before the CIT(A) a....
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....ough convertible foreign exchange. The calf might have been derived from the cow which was purchased with foreign convertible foreign exchange but definitely the calf is not purchased in convertible foreign exchange. Similar is the case with regard to the bonus shares. In this regard it is worthwhile to mention that the cost of bonus shares is always taken as Nil for the purpose of capital gain. It was not at all linked with the cost price of the original shares purchased. In view of all the above, I uphold the action of the Assessing Officer, hence, ground No. 2 is dismissed." 3. Aggrieved by the order of CIT(A), the assessee is in appeal before us. 4. Before us, the learned counsel for the assessee submitted that the bonus shares receiv....
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....ift and are acquired for nothing? At first sight, it looks as if they are so, but the impact of the issue of bonus shares has to be seen to realize that there is an immediate detriment to the shareholder in respect of his original holding. The Income-tax Officer, in this case, has shown that in 1945 when the price of shares became stable it was Rs. 9 per share, while the value of the shares before the issue of bonus shares was Rs. 18 per share. In other words, by the issue of bonus shares pro rata, which ranked pari passu with the existing shares, the market price was exactly halved, and divided between the old and the bonus shares. This will ordinarily be the case but not when the shares do not rank pari passu and we shall deal with that c....
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....he assessee must be taken to have acquired both the bonus and the original shares. In other words, the issue of the bonus shares, though subsequent, has the effect of altering the original cost of acquisition of the shares. There is nothing illegal in this, as the price paid by the assessee originally was not only for the shares themselves but also for such shares that it may yield subsequently, if any. The right to acquire bonus shares is a right embedded in the original shares, and they are a legal accretion thereto. The method of spreading over on both the bonus and the original shares the cost of acquisition of the original shares would appear to be the proper method of determining the value of the asset. For, there is no doubt that on....
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....ongly relying upon the orders of the authorities below, submitted that Chapter XII is the special provisions and the cases relied upon by the learned counsel for the assessee have no application to the facts of the case of the assessee. He further submitted that the assessee has not invested anything on foreign exchange asset and only by virtue of original investment bonus shares were allotted to the assessee. 9. We have considered the rival submissions, perused the relevant material on record, and gone through the orders of the authorities below as well as decisions cited. The issue involved in this appeal for our consideration is whether the assessee is eligible for benefit under section 115F of the Act, on the bonus shares received by h....