Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI ‘A’ BENCH,
Before: SHRI B.P. JAIN, & SHRI SUDHANSHU SRIVASTAVA
ORDER PER B.P. JAIN, ACCOUNTANT MEMBER, This appeal filed by the assessee is directed against the order dated 15.01.2016 passed by the CIT(A)-XII, New Delhi in appeal No.153/11-12 for the AY 2009-10 wherein the following grounds of appeal have been taken:
“1. That the Ld. CIT(A) has erred in law as well as on facts in confirming the action of A.O. for treating the income 1 arising on redemption of ICICI Money Multiplier Bonds and Sardar Sarover Bonds as “Income from Other Sources” as against “Long Term Capital Gain” declared by the assessee in his return.
2. That the Ld. CIT(A) has further failed to appreciate that a circular cannot make a provision which can put an assessee in a disadvantageous position that what the law provides. While doing so the Ld. CIT(A) has overlooked various judicial pronouncements relied on by the assessee.
3. That the Ld. CIT(A) has erred both in law as well as on facts in sustaining the charge of interest under section 234 B of the Income Tax Act.
The appellant craves leave to add, alter, amend, modify or withdraw all or any of the above grounds of appeal at any time on or before the hearing as may be advised.”
The relevant facts of the case are that the assessee had purchased 10 Bonds of Sardar Sarover Nigam Ltd. (SSNL) on 07.01.1995 for Rs.36,000/-, ICICI Bonds twice over: once 50 Nos. on 22.01.1995 for Rs.1,50,000/- and again 3 Bonds of the same on 17.08.1988 for Rs.12,000/-. All these Bonds were redeemed during the subject year for Rs.5,00,000/-, Rs.6,00,000/- and Rs.48,000/- respectively. Having held the Bonds for more than 12 months the assessee reduced the indexed cost at the acquisition from the sale consideration received and reported Long Term Capital Gain of Rs.7,83,461/- for assessment. Assessee had contended that the surplus received on the redemption of bonds on maturity ought not to be treated as interest income.
The Assessing Officer, however, disagreed with the assessee’s contention and held relying upon CBDT Circular that the income received on redemption of the bonds had to be assessed as interest income. While so computing the income, the benefit of indexation as available for computing capital gains, was denied. The Assessing Officer pointed out that the companies issuing the bonds had themselves treated the amount paid out by them as interest and TDS had been deducted u/s 194A of the Act by them.
The assessee carried the issue in appeal before the CIT(A). The CIT(A), for the reasons mentioned in detail in para 8 of her order, confirmed the findings of the Assessing Officer. She, in particular, noted that the judgment of the Mumbai Tribunal in the case of C.S. Gosalia vs. ITO (2008) 15 DTR (Mum. Trib) 271 was in respect of premature redemption of Deep Discount Bonds, which being different on facts, was clearly distinguishable and so inapplicable to the facts of the case.
During the course of hearing before us, ld. Sr. Counsel Sri K. Sampath appearing for the assessee pointed out that the Assessing Officer had wrongly held that income flowing from investment on the maturity of Bonds was in the nature of interest. According to him what mattered was the nature of the income; if the income lay in the capital field the same could not be denied merely because the investment had originally been made with the motive of earning interest. Ld. Counsel further pointed out that the CIT(A) had wrongly read the ratio of the Tribunal decision in the case of C.S. Gosalia (supra). Adverting to the decision Ld. Counsel for the assessee submitted that having surrendered the bonds on maturity assessee was entitled to the relief on the parity facts with the cited decision. The Ld. Counsel also filed copies of the orders of the Tribunal SMC Delhi Benches in the case of M/s Adishwar Lal Jain & Sons, and Sandeep Kumar Jain, HUF, ITA No.1455/Del/2016 both for the AY 2009-10 where, on similar facts and on identical grounds and relying upon the decision in the case of C.S. Gosalia v. ITO (supra) the relief on this point had been granted 4 to the respective Appellants. The Ld. DR strongly relied upon the orders of the Assessing Officer and the impugned order of the Ld. CIT(A).
We have considered the rival submissions along-with the material on record. The facts are not in dispute that the assessee had made investments in the bonds of Sardar Sarover Nigam Ltd. and ICICI. All the bonds had been surrendered on maturity and the usufruct therefrom had been returned as long term capital gains. The case of the assessee is that the income was capital in nature as held in the case of C.S. Gosalia v. ITO (supra). In that case the Hon’ble Tribunal was pleased to hold that the Circular No. 2of the CBDT dated 15.02.2002 creating additional civil liability was only prospective in operation. The assessee having purchased the bonds much before that date was not covered by the circular. The Tribunal in para 7 held as under:
“7. We have considered the submissions made by both sides, material on record and orders of authorities below. Admittedly, the said circular has been issued on 15th Feb., 2002 and the assessee has purchased the said deep discount bonds much before that. It was also noted that these deep discount bonds have been redeemed prematurely by IDBI on 31st March, 2002 on its own. It is also noted that assessee has 5 not offered any income thereon in the years of holding and such bonds have been held as investments. It is further noted that the CBDT issued the said circular for the reason that various disputes arose regarding the tax treatment of income arising from these deep discount bonds. It is further noted that prior to the issue of such circular, the profit on transfer of bonds before maturity was to be taxed as income from capital gains where bonds were held as investments. As per cl. 3 of the said circular, it has been stated that this circular was issued to resolve such disputes and income from such bonds had to be treated uniformally, thereafter, in the manner as prescribed therein. In our view, this circular is to be treated as having prospective effect because it results into an additional civil liability and also in view of the fact that it is treated of retrospective nature, it may result into situations where one person cannot comply its requirements for his past actions or omissions. We are further of the view that these deep discount bonds are capital assets, hence, profit arising on redemption thereof is to be treated as capital gain. In this view of the matter, we hold that the order of the learned CIT(A) is not correct in law. Accordingly, we reverse the same and direct the AO to accept the claim as made by the assessee. Thus, this ground of the assessee is accepted. “
We further find that in the cases of M/s Adishwar Lal Jain & Sons and Sri Sandeep Kumar Jain, HUF (supra) on similar facts, identical grounds of appeal
were taken by the Assessee before the Tribunal. The 6. Tribunal SMC Benches vide orders dated 03.01.2017 have abided by the decision in C.S. Gosalia supra and directed relief to the assessee. Since the facts in the subject case are identical, we are relying upon the decision of the Hon’ble Mumbai Tribunal in C.S. Gosalia v. ITO (supra) and the SMC Bench orders of the Delhi Tribunal in the case of M/s Adishwar Lal Jain & Son, & Sandeep Kumar Jain, HUF, ITA No.1455/Del/2016, hold that the transactions were in the nature of capital gains and, therefore, they had to be taxed as such instead of having been treated as interest income. Ordered accordingly. The appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed The order is pronounced in the open court on 20.11.2017.