Dismissing the appeal of the revenue the Court held that  section 56(2)(vii) of the Act  contemplates two contingencies , firstly , where the property is received without consideration and secondly , where it is received for consideration less than fair market value . The issue of bonus shares by the capitalization of reserves is merely  a reallocation of companies funds . There is no inflow of fresh funds or increase in the capital employed , which remains the same . In substance , when a share holder gets bonus shares , the value of original shares held by him goes down and the market value as well as intrinsic value of two shares put together  will be the same as per the value of original share before issue of bonus shares . The Court was of the view that any profit derived by the assessee on account of receipt of bonus shares is adjusted by the depreciation in the value of equity shares held by him . Court also held that in the instant case , there was no material on record  to infer that bonus shares have been transferred to evade tax . Accordingly the Court held that Tribunal rightly held that  when there  is an issue of bonus shares the money remains with the company and nothing comes to the shareholders as there is no transfer of the property and the provisions of section 56(2) (vii)(c ) of the Act are not attracted . Appeal of the revenue was dismissed .  ( ITA No. 501 of 2016 dt 15-2 -2020)