THE COMMISSIONER OF INCOME-TAX, CENTRAL ZONE, LAHORE vs UMREEN
This matter involves 29 petitions for special leave to appeal filed by the Commissioner of Income-tax, Central Zone, Lahore, against the judgment of the Lahore High Court. The petitions were initially barred by time, but the Supreme Court condoned the delay due to the significant public importance of the legal question involved. The core legal question concerns the method for computing capital gains, specifically whether the cost of bonus shares should be calculated based on their face value. The High Court had previously answered this in the negative, relying on its earlier decision in Commissioner of Income-tax v. Umar Saigol. The petitioner contended that this view was erroneous, citing an Indian Supreme Court precedent suggesting that the cost of original shares should be spread over both the original and bonus shares to determine an average price. Finding that the question requires further examination and authoritative settlement, the Supreme Court granted leave to appeal, directing the parties to prepare the appeals for hearing and to provide information regarding the status of any appeals filed against the cited precedent.
- Is the face value of bonus shares the correct basis for computing capital gains?
- Should the cost of original shares be spread over both original and bonus shares to determine the average price for capital gains computation?
ORDER
' SAAD SAOOD JAN, These are 29 petitions for special leave to appeal from the judgment of the Lahore High Court, Lahore, Petitions Nos. 696, 697, 698, 699, 700, 701, 702, 703, 704, 709, 710 and 724 arc barred by time. As in all these petitions before us the same question of law arises and the question is of considerable public importance, we condone the delay.
2. The question for consideration is whether while computing capital gains the costs of the bonus shares is to be taken as the face value of the shares. This I question has been answered by the High Court in the negative on the basis of an earlier decision of that Court reported as Commissioner of Income-tax v. Umar Saigol PLD 1973 Lah. 834:
3. In support of this petition it is contended that the view taken by the High Court in the said precedent is erroneous and in support of this contention reference has been made to a decision of the Indian Supreme Court in Commissioner of Income-tax, Calcutta v. G.M, Investment Company AIR 1969 SC 1183 where it was held that the proper course was to take the costs of the original shares and to spread it over the original as well as the bonus shares and to find out the average price of all the shares.
4. The question raised in these petitions needs examination. Leave to appeal is granted. The appeals may be made ready for hearing on the present record with permission to the parties to file additional necessary documents, if any, within two months. The learned counsel for the petitioner may also find out if any petition for leave to appeal was filed from the precedent case cited above --- and if so, whether it has since been decided or is still pending. He shall give this information to the Office before the appeals arc listed for hearing,