SHYAMAL KUMAR SEN, J.

( 1 ) PURSUANT to the direction of this court under Section 256 (2) of the Income-tax Act, 1961, the Tribunal has referred the following question :"whether, on the facts and in the circumstances of the case, the Tribunal was justified in computing the cost of acquisition of right shares issued by Messrs. East India Hotels Limited at Rs. 6. 25 per share as against Rs. 1. 79 taken by the Income-tax Officer ?"

( 2 ) THE facts relevant for the said question as found by the Tribunal are as follows :

( 3 ) THE assessee is a company deriving income from business and other sources. It held certain shares of Messrs. East India Hotels Limited as investment. During the previous year under consideration, Messrs. East India Hotels Limited declared bonus shares as well as right shares in the holding of one share for every five shares held in both the cases. Simultaneously, it also issued new equity shares for the public. The assessee sold its right to purchase 29,000 right shares at Rs. 3. 50 per right share. As these shares were held in the investment portfolio, the surplus of the sale proceeds over the cost, if any, was assessable as short-term capital gains. On the contrary, if the cost of the right shares sold exceeded the sale proceeds, the deficit would constitute short-term capital loss. The assessee found that the quotation of the shares of Messrs. East India Hotels Limited went down from Rs. 42. 75 to Rs. 30. 25 per share as a result of the issue of the aforesaid right shares and bonus shares. The depreciation in the value amounted to Rs. 12. 50 per share. The assessee claimed that it suffered a short-term capital loss of Rs. 9 per share.

( 4 ) THE Income-tax Officer, however, did not agree with the said view of the assessee. He spread the cost of original shares held by the assessee over a large number of shares including the bonus shares. Thereafter, he calculated the depreciation in value at Rs. 5. 37 per share. Out of the same, he attributed only one-third of the value to the right share. Thus, the Income-tax Officer calculated the cost of acquisition at Rs. 1. 79 per share so that there was a profit of Rs. 1. 71 per share instead of Rs. 2. 50 per share taken by the assessee. Accordingly, he computed the capital gain at Rs. 49,590.

( 5 ) THE assessee preferred an appeal before the Commissioner of Income-tax (Appeals) who held that there could be no profit or loss on the sale of the shares under consideration.

( 6 ) THEREAFTER, both the Revenue and the assessee preferred appeals. The Tribunal, following the decision in the case of ITO v. Oberoi Properties (P.) Ltd. [1986] 16 ITD 206 (Cal) (I. T. A. No. 370/ (Cal) of 1984), held that the cost of acquisition of right shares would be taken at Rs. 6. 25 per share and the short-term capital gain or loss should be computed accordingly. The income-tax appeal of Oberoi Properties (P.) Limited which had decided the said question did not come up by way of reference.

( 7 ) MR. Bagchi, learned advocate, for the Revenue, also relied upon the judgment and decision in the case of Miss Dhun Dadabhoy Kapadia v. CIT, and submitted that the Tribunal was not correct in making the said calculation and according to him the reasoning of the Tribunal in arriving at its finding cannot be sustained in the aforesaid judgment of the Supreme Court. He also relied upon the decision in the case of Gafoorunnisa Begum v. CIT, and in the case of CIT v. K. A. Patch [1971] 81 ITR 413 (Bom), in support of his aforesaid contention.

( 8 ) DR. Pal, learned advocate for the assessee, on the other hand submitted that the decision in the case of Miss Dhun Dadabhoy Kapadia v. CIT, really supports his case.

( 9 ) IT has been argued by Dr. Pal on behalf of the assessee that the Tribunal came to its finding on the basis of the reasoning stated hereinafter. 10. The calculation of the value of right shares which had been enunciated by the assessee for 4,000 right shares is very simple. The right an

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