MISS DHUN DADABHOY KAPADIA vs COMMISSIONER OF INCOME-TAX, BOMBAY

The Supreme Court held that under Section 12B(2) of the Income-tax Act, 1922, the net capital gain for the assessee must account for the depreciation in the value of her original shares when calculating capital gains from renouncing rights to new shares. The Court ruled that the capital gain of Rs. 45,262.50 should be reduced by the loss incurred due to the fall in value of the old shares, establishing that capital gains must reflect true economic loss and gain. The appeal was allowed, and the Income-tax authorities' rejection of the claim was overturned.