JUDGMENT : Hidayatullah, J. 1. Messers Emerald & Co. Ltd., Bombay (hereinafter referred to as "the assessee Company") have filed this appeal with special leave of this Court against the judgment of the High Court of Judicature at Bombay dated September 27, 1955 in Income Tax Reference No. 23 of 1955. In that reference, the following question was considered by the High Court: "Whether the computation of the loss by the assessee Company at Rs 35,801 is in accordance with law or whether the loss computed by the Income Tax Officer/Tribunal is in accordance with law?" The High Court (Chagla, C.J./and Tendolkar, J.) decided that the loss by the assessee Company computed by the Income Tax Officer was according to law. 2. The facts leading to this appeal are as follows: The assessee Company deals in shares, and values the closing stock of shares at cost price. It dealt in 1950-51 in the shares of the Bombay Dyeing and Manufacturing Co. Ltd. On November 11, 1950 it purchased 50 shares of the said Company for Rs 49,101. On January 9, 1951 the said Company issued one bonus share of the face value of Rs 250 in respect of one share held by its shareholders. The assessee Company therefore received 50 bonus shares of the face value of Rs 250 in respect of the shares held by it. The assessee Company then sold the 50 shares purchased by it on January 12, 1951 for Rs 26,125 . On March 5, 1951, the assessee Company purchased 100 shares of the said Company for Rs 48,359. In the books of account, the assessee Company debited the face value of the bonus shares (Rs 12,500 ) to the share account. For Assessment Year 1951-52, the Income Tax Officer, following the decision of the Bombay High Court in Manecklal Chunilal & Sons Ltd. (Income Tax Reference No. 16 of 1948), computed the profit of the Company at Rs 1760. The assessee Company had declared for the same year a loss of Rs 1365. It appears that in dealing with the question, the Department valued at nil the bonus shares. The assessee Company did not appeal. 3. In Accounting Year 1951-52, the assessee Company held 150 shares of the said Company including 100 shares purchased on March 5, 1951. The assessee Company thereafter purchased 200 shares of the said Company in two lots for Rs 99,939. The assessee Company did not appeal. 3. In Accounting Year 1951-52, the assessee Company held 150 shares of the said Company including 100 shares purchased on March 5, 1951. The assessee Company thereafter purchased 200 shares of the said Company in two lots for Rs 99,939. The assessee Company then sold, also in two lots, the 300 shares for a total sum of Rs 1,20,550 . At the end of the accounting year, the bonus shares remained with the assessee Company and applying the same calculation as previously, including the cost of the bonus shares at the face value of Rs 12,500, it declared a loss of Rs 35,801 for Assessment Year 1952-53. 4. The Income Tax Officer following the course which was adopted in the previous year, computed the loss at Rs 27,766. The appeal of the assessee Company against the second assessment was taken finally to the Appellate Tribunal at Bombay, which computed the loss at Rs 27,748 , but in view of the slight difference, did not interfere with the order of the Income Tax Officer who had placed the loss at Rs 27,766 . 5. The Tribunal, however, came to the conclusion on application by the assessee Company, that the question of law stated above arose from the facts of the case, and referred it accordingly. 6. The Bombay High Court following the decision given earlier by the same Court in Manecklal & Sons Ltd. (Income Tax Reference No. 16 of 1948) dated March 23, 1949 held that the computation of the loss incurred by the company was made correctly by the Department. In other words, the High Court did not accept the calculation of the loss as made by the assessee Company or the Income Tax Appellate Tribunal. 7. It was contended before us that the High Court was in error in accepting the calculation made by the Income Tax Officer. For the assessee Company, it was contended that the calculation made by the assessee Company was according to law, while on behalf of the Department the Solicitor-General claimed that the calculation made by the Tribunal was perfectly correct, regard being had to the transactions and the method of accounting of the assessee Company. 8. For the assessee Company, it was contended that the calculation made by the assessee Company was according to law, while on behalf of the Department the Solicitor-General claimed that the calculation made by the Tribunal was perfectly correct, regard being had to the transactions and the method of accounting of the assessee Company. 8. The assessee Company relying on the authorities in Eddystone Marine Insurance Company, (1893) 3 Ch D 9 In re Bouch v. Sproule, (1887) 12 AC 385 Swan Brewery Company, Limited v. Rex, 1914 AC 231 and IRC v. Greenwood, (1921) 2 AC 171 contended that it must be deemed to have paid for the bonus shares inasmuch as it lost a right to an equal extent in the reserves, whether of profits or capital, of the said company. According to Mr Sachin Chowdhary, who argued the case with great force and ability, the issuance of fully paid bonus shares was nothing but the purchase of such shares by the share holder, inasmuch as consideration therefor was to be found in the pro tanto dimunition of the shareholder's interest in the reserves out of which the bonus shares were issued. The learned Solicitor-General in an equally able reply, relied upon a passage in Eisner v. Macomber, 252 US 189, 203 : 64 L ED 521, 527 and contended that the issuance of the bonus shares added nothing to the interests of the shareholders, nor took away anything from the property of the said Company. The property of the said Company was not diminished, nor was the interest of the shareholders increased, the proportional interest of each share holder remaining the same. According to him, the only change was in the evidence which represented the interest, the new bonus shares together with the original shares representing the same proportional interest which the original shares had, before the issue of the bonus shares. According to him, the only change was in the evidence which represented the interest, the new bonus shares together with the original shares representing the same proportional interest which the original shares had, before the issue of the bonus shares. He submitted that, in view of the fact that the bonus shares were still retained by the assessee Company, the profit and loss could be calculated on the basis of the cost of the other shares and their sale price and the valuation of the bonus shares, whether at face value or at market value, or at nil or even at a notional value, did not enter into the question of the calculation of the loss in the transactions which were gone through with respect to shares actually bought and sold. He accordingly pressed us to leave the question, whether the issuance of the fully paid bonus shares involved an expenditure on behalf of the assessee Company, open for consideration till the bonus shares were actually sold. Till that time, he stated, the valuation in the account books of the Company would be adjusted on debit and stock sides by equal entries, whatever they might be. 9. Mr Sachin Chowdhary, however, pressed us very earnestly to answer this question, which had been considered by the High Court and answered against the assessee Company. While the question is an important one and a may have to be decided in future, we are of opinion that for the purpose of assessing the loss for the assessment year in question, it is not necessary to deal with this question at all, and that the matter can be adequately disposed of, in the manner in which the Tribunal handled it. To explain our meaning, we set out below the three different calculations which were made respectively by the assessee Company, the Income Tax Officer and the Tribunal to compute the loss to the Company. We may point out there that though we have set down below the figures for both the assessment years, we agree with the learned Solicitor-General that the assessment for the first year cannot be reopened, and the valuation of the stock as determined by the Income Tax Officer at the close of the first accounting year must be taken to be final. We have, however, given the figures of all the deals in the shares of the Bombay Dyeing Company to bring out the three methods of calculation, which have been applied in this case, by the assessee Company, the Income Tax Officer and the Tribunal respectively: Account Year 1950-51 --------- Assessment Year 1951-52 50 bonus shares Rs. 12,500 1,09,960x150 -------- Per assessee Company: 200 Purchases, Sale 50 ordy. Shares, Rs 49,101 50 ordy shares Rs 26,125 100 ordy. Shares Rs. 26,125,100 ordy. Shares 48,359 Closing stock (150 shares) Rs. 82,470---- ---- Total Rs. 1,09,960 Total Rs. 1,08,595 --- ---Loss Rs. 1,365 Account Year 1951-52 1,82,410x50 Assessment Year 1952-53 ------- Opening Stock 350 100 ordy. plus --- --- Total Rs. 1,82,410 Total Rs. 1,46,609 --- ----- Loss Rs. 50 bonus shares Rs. 82,471 Sale 300 ordy. Purchase 200 ordy shares Rs. 120,550 shares 99,939 Closing stocj (50 shares) Rs. 26,059 35,801 Account Year 1950-51 Purchase 100 ordy.Closing stock shares Rs. 48,359 (150 shares) Rs. 73,095 Assessment Year 1951-52 97,460x150 Per Income Tax Officer: ---- ----- 50 bonus shares Rs. nil 200 Purchase 50 ordy Rs. 49,101 Sale 50 ordy shares Rs. 26,125 sahres --- --- Total Rs. 97,460 Total Rs. 99,220 --- --- Profit Rs. 1,760 Account Year 1951-52 100 Ordy. plus 50 shares. Rs 73,096 Sale 300 ordy shares Rs 1,20,550 Purchase 200 ordy. shares Rs 99,939 Closing stock 50 bonus shares 1,73,035x50 Rs 24,729 Assessment Year 1952-53 --- --- Total Rs. 1,73,035,350 Total Rs. 1,45,269 Opening stock ---- Loss Rs. 27,766 Account Year 1951-52 -------- Assessment Year 1952-53 Sale of 300 ordy. shares Rs. 1,20,550 Per Income Tax Appellate Tribunal Total Loss rS. 27,748 Purchase 100 ordy shares ..... Rs. 48,359 " 200 ordy shares .... Rs. 99,939 -- Total Rs. 1,48,298 Balance 50 bonus shares 10. In our opinion, the Tribunal's calculation is according to law and correct. What the bonus shares cost is not the question at the present moment. They may have cost Rs 12,500 as the assessee Company claims, or nothing as stated by the Income Tax Officer or even something else according to some other principle. The bonus shares are still there, and have not been sold. When they are sold, the question will arise as to what they cost. The books of the assessee Company, as stated in the statement of the case, include the closing stock at cost price. The bonus shares are still there, and have not been sold. When they are sold, the question will arise as to what they cost. The books of the assessee Company, as stated in the statement of the case, include the closing stock at cost price. In calculating profit and loss in the manner done by the Tribunal, there is no departure from this system. All the ordinary shares which were bought were sold. Their purchase price is known, as also their sale price. The first assessment is closed, so far as the assessee Company is concerned. The trading loss in the second assessment year is calculated on the purchase price of the 300 shares bought and sold, and it is Rs 27,748. The loss, therefore, was calculated according to law, leaving out of consideration the price of 50 bonus shares, what it is and if any. These questions are left open. 11. We accordingly, answer the question in that the loss as calculated by the Tribunal is correct and according to law. In the circumstances of the case, there shall be no order about costs.