Judgment :- K. A. THANIKKACHALAM J. At the instance of the Department, the Tribunal referred the following questions for the opinion of this court under section 256(1) of the Income-tax Act, 1961 "1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the value of the shares as on January 1, 1954, should not be taken by averaging the cost taking into account the bonus shares received subsequently ? 2. Whether the Appellate Tribunal was right in holding that the provision for gratuity should be treated as a liability and should be deducted from the value of the assets for finding out the break up value of the shares ? 3. Whether the Appellate Tribunal was right in holding that the provisions of section 52(2) could not be invoked in the assessee's case ?" * In so far as question No. 2 is concerned, the point for consideration is whether the provision for gratuity should be treated as a liability and should be deducted from the value of the assets for finding out the break-up value of the shares. A similar question came up for consideration before this court in CWT v. S. Ram 1984 (147) ITR 2 78, wherein this court held that the provisions of Explanation II(ii)(f) to rule 1D of the Wealth-tax Rules, 1957, will not apply and for determining the value of unquoted shares for purposes of wealth-tax, gift-tax and estate duty, their value will have to be ascertained under the break-up value method after deducting the provision for gratuity based on actuarial valuation from the value of the assets of the company. Inasmuch as the order passed by the Tribunal on this aspect is in accordance with the decision of this court cited supra, we answer question No. 2 in the affirmative and against the Department In so far as question No. 3 is concerned, the point for consideration is whether the provisions of section 52(2) can be invoked on the facts of this case. A similar question came up for consideration before the Supreme Court in K. P. Varghese v. ITO 1981 AIR(SC) 1922, 1981 (131) ITR 597, 1981 (3) Scale 1315 , 1981 (4) SCC 173 , 1982 (1) SCR 629 , 1981 (24) CTR 358, 1981 (7) TAXMAN 13, 1981 (3) SCALE 1315 , 1981 TaxLR 1448, 8124 CTR(SC) 358, 1981 SCC(Tax) 293, 1981 (24) CTR(SO) 358. Wherein the Supreme Court held that sub-section (2) of section 52 of the Income-tax Act, 1961 In the present case, the amalgamating company is Madras Auto Service Private Limited., and the amalgamated company is T. V. Sundaram Iyengar and Sons. It is manifest that the 524 shares in T. V. Sundaram Iyengar and Sons acquired by the assessee consequent on the amalgamation of Madras Auto Service Private Ltd., with T. V. Sundaram Iyengar and Sons Ltd., in December, 1970, should be treated as long-term capital assets having been held by the assessee initially as Madras Auto Service Private Limited shares from before 1954, the total period being more than 60 months up to the date of sale (see section 2(42A)). The cost of acquisition of those T. V. S. Limited shares will be the cost of acquisition of the Madras Auto Service P. Ltd. shares (see section 55(2) read with section 47(vii)). Since the original Madras Auto Service P. Ltd. shares were admittedly acquired before January 1, 1954, their value as on January 1, 1954, has to be adopted at the assessee's option. With regard to the original shares, there is no warrant for averaging the cost taking into account the bonus shares subsequently received by the assessee having regard to the decision of the Supreme Court in Shekhawati General Traders Ltd. v. ITO 1981 AIR(SC) 1922, 1981 (131) ITR 597, 1981 (3) Scale 1315 , 1981 (4) SCC 173 , 1982 (1) SCR 629 , 1981 (24) CTR 358, 1981 (7) TAXMAN 13, 1981 (3) SCALE 1315 , 1981 TaxLR 1448, 8124 CTR(SC) 358, 1981 SCC(Tax) 293, 1981 (24) CTR(SO) 358. Therefore, the Tribunal held that the original shares in question were long-term capital assets for the purpose of capital gains in view of the provisions of sections 2(42A), 47, 49 and 55(2). The cost of acquisition of shares to the assessee for computing the capital gain should be the cost as on January 1, 1954, which the assessee had adopted. Therefore, the Tribunal held that the original shares in question were long-term capital assets for the purpose of capital gains in view of the provisions of sections 2(42A), 47, 49 and 55(2). The cost of acquisition of shares to the assessee for computing the capital gain should be the cost as on January 1, 1954, which the assessee had adopted. This view taken by the Tribunal is supported by an earlier decision of this court in T. C. No. 249 of 1980, judgment dated December 12, 1996 (S. Ram v. CIT 1998 (230) ITR 353, 1997 (143) CTR 65, 1998 (96) TAXMAN 156 , 1997 (143) CTR(Mad) 65), wherein this court, by following the decision of the Supreme Court in Shekhawati General Traders Ltd. v. ITO (supra) held that the value of the original shares acquired before January 1, 1954, should be taken the value as on January 1, 1954, when the assessee exercised its option. For original shares, we cannot take the average value of both the original shares and the bonus shares. Inasmuch as the order passed by the Tribunal on this aspect is in accordance with the earlier decision of this court cited supra, we answer the question referred to us as question No. 1 in the affirmative and against the Department. No costs.