M/S. SHRI GOPAL PAPER MILLS CO. LTD. vs COMMISSIONER OF INCOME TAX, CENTRAL CALCUTTA

The Supreme Court held that the appellant company had the authority to convert its accumulated undivided profits into bonus shares, which were to be allotted to shareholders as per the resolution passed on December 30, 1954. The Court clarified that the bonus shares should be included in the paid-up capital of the company for the assessment year 1956-57, as they were effectively issued on the date of the resolution, despite dividends being payable only from January 1, 1955. The High Court's ruling was overturned, affirming the company's entitlement to the rebate under the Finance Act, 1956, specifically under sub-clause (a) and (b) of clause (1) of the second proviso to paragraph D of Part II.