VEERASWAMI J. - The point in this writ petition bears on the valuation of bonus shares. There is no controversy that 4,000 shares of Bangalore Woollen Cotton and Silk Mills Ltd., were purchased by the petitioner for a total consideration of Rs. 15,09,376 though the face value of each share was Rs. 100. Each of such shares entitled the petitioner by reason of the purchase to two bonus shares so that the petitioner came to own 8,000 bonus shares, each of the face value of Rs. 100. All these shares were sold by the petitioner for a total consideration of Rs. 19,28,200. The petitioner valued the bonus shares at par, that is to say, at Rs. 8,00,000. He therefore, arrived at the result that there was a capital loss of Rs. 3,81,176. The department treated the 8,000 bonus shares as of nil value and arrived at capital gain of Rs. 4,18,824. That is the point of divergence between the petitioner and the department.
Though there were two decisions, one of this court and the other of the Patna High Court, which were in favour of the assessee, the decision of the Patna High Court has since been reversed by the Supreme Court in Commissioner of Income-tax v. Dalmia Investment Co. Ltd. There it was held that where bonus shares were issued in respect of ordinary shares held in a company by an assessee who was dealer in shares, their real cost could not be taken to be nil, or their face value. The majority judgment in this case stated that the bonus shares should be valued by spreading the cost of the ordinary shares over the old shares and the new issues taken together if they rank pari passu, and if they do not, the price may have to be adjusted either in proportion of face value they bear, or on equitable considerations based on the market price before and after issue. Learned counsel for the petitioner says that this decision will govern the instant case but for the fact that the petitioner, unlike the assessee in Commissioner of Income-tax v. Dalmia Investment Co. Ltd., is no dealer, but an investor. That, in our opinion, makes no difference at all. The point is that the purchase of the ordinary shares for consideration automatically entitled the assessee ipso facto to get the bonus shares and that is the basis for spreading over the consideration for the ordinary shares over the bonus shares as well. That basis is in no way affected by the character of the owner, either as a dealer, or as an investor.
The petition is dismissed with costs. Counsels fee, Rs. 250.