Case Law Details
JCIT Vs Sh. Bhanu Chopra (ITAT Delhi)
The only issue involved in the instant case relates to acquiring of bonus shares and applicability of the provisions of section 56(2)(vii)(c) of the Act to the same.
It was held by the Tribunal that allotment of bonus shares cannot be considered as received for an inadequate consideration and therefore, it is not taxable as income from other sources u/s 56(2)(vii)(c) of the Act. Further, the issue of bonus share is by capitalization of its profit by the issuing company and when the bonus shares are received it is not something which has been received free or for a lesser FMV. Consideration has flown out from the holder of the shares may be unknown to him/her, which is reflected in the depression in the intrinsic value of the original shares held by him/ her.
ITAT find that even the CBDT Vide Circular No. 06/2014 issued on dated 11.02.2014 clarified that bonus units at the time of issue would not be subjected to additional income tax u/s 115R of the Act, since issue of bonus units is not akin to distribution of income by way of dividend. This may be inferred from provisions of section 55 of the Act which prescribed that “cost of acquisition” of bonus units shall be treated as Nil for purposes of computation of capital gains tax.
Further, the CBDT vide circular 717 dated 14.08.1995 clarified that “in order to overcome the problem of complexity, a simple method has been laid down for computing of cost of acquisition of bonus shares. For the sake of clarity and simplicity, the cost of bonus shares is to be taken as „Nil’ while the cost of original shares is to be taken as the amount paid to acquire them. This procedure will also applicable to any other security where a bonus issue has been made.”
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