Law:

Section:

Section 48 of the Income-tax Act, 1961 - Capital Gains - Computation of - Assessment year 1962-63 - In 1956, two companies were amalgamated into one unit pursuant to scheme of amalgamation sanctioned by High Court - On amalgamation taking place assets of transferor-company were taken over by transferee-company at respective book values - Transferor company sold said assets during relevant accounting year - Whether since book value of said assets were taken into account for framing scheme of amalgamation, book value of assets in books of transferor company would represent cost to transferee company for computation of capital gains - Held, yes FACTS With effect from 1-1-1956, two companies were amalgamated into one unit pursuant to a scheme of amalgamation which was sanctioned by the High Court on 26-11-1956. On the amalgamation taking place all the assets and liabilities of the transferor company. Stood transferred to and vested in the transferee company. Prior to its amalgamation the transferor-company was holding certain shares of a company's of the face value of Rs. 15 each which became the property of the transferee-company after the scheme became effective. On 20-3-1954, the shareholders of 'S' were allotted and distributed one fully paid up share of Rs. 5 in respect of each fully paid up share of Rs. 15 held by them. The result was that the transferor-company notionally obtained as free scrip 22,500 shares of company 'S' of the face value of Rs. 5 each. By another resolution passed at the ordinary annual general meeting of the shareholders of company 'S' held on 20-3-1954, the two types of shares (one of the face value of Rs. 15 and the other of the face value of Rs. 5) were consolidated into one share of the face value of Rs. 20 each. The effective result was that the 22,500 shares of the face value of Rs. 15 purchased by the transferor company stood converted into 22,500 shares of the face value of Rs. 20 each. On the passing of the resolutions of 20-3-1954, and the consequential enhancement in the face value of the shares, the transferor-company in its books showed the enhanced cost of acquisition of the said shares by Rs. 1,12,500 which came to Rs.…

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