M/S. EBRAHIM BROTEHRS (Pvt.) LIMITED vs THE COMMISSIONER OF INCOME
This petition for leave to appeal arises from a judgment of the High Court of Sindh regarding the computation of capital gains for tax purposes. The core legal question concerns the correct valuation method for bonus shares: whether the cost of bonus shares should be calculated based on their face value or by averaging the cost of all shares, including the bonus shares. The High Court of Sindh answered this question in the negative, holding against the assessee's position. The petitioner contends that there is a conflict of judicial opinion on this matter, citing a contrary decision by the Lahore High Court in Commissioner of Income-Tax, Lahore v. Umar Saigol. The Supreme Court, noting the existence of this conflicting interpretation between the High Courts, granted leave to appeal to resolve the legal inconsistency regarding the appropriate method for determining the cost of bonus shares for capital gains computation.
- Is the cost of bonus shares for the computation of capital gains to be determined by their face value or by the average cost of all shares?
- Does a conflict of view between High Courts on a tax interpretation matter warrant the grant of leave to appeal by the Supreme Court?
- Section 66(1), Income Tax Act 1922
ORDER
AJMAL MIAN, J.---This is a petition for leave to appeal against the judgment dated 10-1-1991 passed by a Division Bench of the High Court of Sindh in I.T.R. No.83 of 1982, filed by the respondent under section 66(1) of the Income Tax Act, 1922, for soliciting the opinion of the High Court on the following question:---- "Whether on the facts and in the circumstances of the case, the`Tribuna1 was justified in holding that for computation of capital gain the cost of bonus shares should be taken as its face value and not the average cost of all shares including bonus shares."
The above question has been answered by the High Court in the negative. The petitioner/assessee has, therefore, filed the present petition for leave to appeal.
2 Dr. Nasim Ahmed Khan, learned A.S.C. Appearing for the petitioner, has contended that there is conflict of view between the Lahore High Court and the Sindh High Court on the above question, inasmuch as in the case Commissioner of Income-Tax, Lahore v. Umar Saigol 1973 PTD 450 the Lahore High Court has taken a contrary view what has been found favour with the learned Judges of the Sindh High Court in the impugned judgment.
3. We are inclined to grant leave to appeal in order to resolve the above conflict and to consider the question, whether the High Court was justified in answering the above-quoted question in the negative. Security Rs. 5,000.