Law:

Section:

Section 55 of the Income-tax Act, 1961 - Capital gains - Cost of acquisition - Applicant, a foreign company, was allotted shares in Indian company during financial year 1964-65 - In course of time, it was allotted bonus shares - Applicant sold all its shares to an Indian individual - While computing capital gains on such transaction, Assessing Officer took cost of acquisition of bonus shares as Nil and, accordingly, Indian buyer deducted amount of tax while remitting sale proceeds to applicant - Whether in case of bonus shares acquired before 1-4-1981, fair market value prevailing as on 1-4-1981 ought to be taken as cost of acquisition in view of provisions of section 55(2)(aa)(iiia), read with section 55(2)(b), for purpose of computing capital gains - Held, yes - Whether therefore, applicant can adopt normal procedure by filing a return and claim refund under section 139 in prescribed form - Held, yes FACTS The applicant, a foreign company, was allotted shares in the Indian company during financial year 1964-65 as a consideration for the sale of plant and machinery. In the course of time, bonus shares were allotted to the applicant and it also subscribed to rights issues. The applicant sold all its shares to an Indian individual. It filed an application before the Assistant Commissioner (International Taxation) for determination of the appropriate tax which was to be deducted on sale consideration of the shares and computed the capital gains by taking the cost of acquisition of bonus shares allotted before 1-4-1981 as equivalent to their fair market value as on 1-4-1981. The Assessing Officer, however, took the cost of acquisition of the bonus shares as 'Nil' and pursuant thereto, the Indian buyer deducted the amount of tax while making payment to the applicant and deposited the amount with the Government. The applicant filed an application seeking advance ruling on the following questions : (i) whether in case of bonus shares acquired before 1-4-1981, fair market value prevailing as on 1-4-1981 can be taken as the cost of acquisition in view of provisions of section 55(2)(aa)( iiia), read with section 55(2)(b), for the purpose of computing capital gains; and…

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