1959 (3) TMI 8

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....y the assessee company at Rs. 35,801 is in accordance with law or whether the loss computed by the Income-tax Officer/Tribunal is in accordance with law ?" The High Court (Chagla, C.J., and Tendolkar, J.), decided that the loss by the assessee company computed by the Income-tax Officer was according to law. The facts leading to this appeal are as follows : The assessee company deals in shares, and values the closing stock of shares at cost price. It dealt in 1950-1951 in the shares of the Bombay Dyeing and Manufacturing Co. Ltd. On November 11, 1950, it purchased 50 shares of the said company for Rs. 49,101. On January 9, 1951, the said company issued one bonus share of the face value of Rs. 250 in respect of one share held by its share....

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.... The Income-tax Officer, following the course which was adopted in the previous year, computed the loss at Rs. 27,766. The appeal of the assessee company against the second assessment was taken finally to the Appellate Tribunal at Bombay, which computed the loss. at Rs. 27,748, but in view of the slight difference, did not interfere with the order of the Income-tax Officer who had placed the loss at Rs. 27,766. The Tribunal, however, came to the conclusion on application by the assessee company, that the question of law stated above arose from the facts of the case, and referred it accordingly. The Bombay High Court following the decision given earlier by the same court in Manecklal & Sons Ltd. (Income-tax Reference No. 16 of 1948) da....

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....ally able reply, relied upon a passage in Eisner v. Macomber, and contended that the issuance of the bonus shares added nothing to the interests of the shareholders, nor took away anything from the property of the said company. The property of the said company was not diminished, nor was the interest of the shareholders increased, the proportional interest of each shareholder remaining the same. According to him, the only change was in the evidence which represented the interest, the new bonus shares together with the original shares representing the same proportional interest which the original shares had, before the issue of the bonus shares. He submitted that, in view of the fact that the bonus shares were still retained by the assessee ....

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....t here that though we have set down below the figures for both the assessment years, we agree with the learned Solicitor-General that the assessment for the first year cannot be reopened, and the valuation of the stock as determined by the Income-tax Officer at the close of the first accounting year must be taken to be final. We have, however, given the figures of all the deals in the shares of the Bombay Dyeing Company to bring out the three methods of calculation, which have been applied in this case, by the assessee company, the Income-tax Officer and the Tribunal respectively : Account year 1950-51 Assessment year 1951-52 Per assessee company : Purchases : Sale 50 ordy. shares Rs. 49,101 50 ordy. shares Rs. 26,125 100 ordy. ....

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....,719 1,73,035 x 50 -------------------- ---------------------------- ------------------------ Total Rs. 1,73,035 350 Total Rs. 1,45,269 ----------------------- ------------------------- Loss Rs. 27,766 Account year 1951-52 Assessment year 1952-53 Per Income-tax Appellate Tribunal : Purchase 100 ordy. shares ............... Rs. 48,359 " 200 ordy. shares ............... Rs. 99,939 -------------------- Total Rs. 1,48,298 -------------------- Sale of 300 ordy. shares Rs. 1,20,550 -------------------- Total loss Rs. 27,748 -------------------- Balance 50 bonus shares In our opinion, the Tribunal's calculation is according to law and correct. What the bonus shares cost is not the question at the present momen....