M/S. ADISHWAR LAL JAIN & SONS,DELHI vs. ACIT, NEW DELHI

The Assessee has filed the present appeal against the impugned order dated 15/1/2016 passed by the Ld. Commissioner of Income Tax (Appeals)-12, New Delhi on the following grounds:-

1. That the Ld. CIT(A) has erred in law as well as on facts in confirming the action of AO for treating the income arising on redemption of ICICI Money Multiplier 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 234B of the Income Tax Act, 1961.

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.

“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 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 dispute 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 Ld. CIT(A) is not correct in law. Accordingly, we reverse the same and direct the AOI to accept the claim as made by the assessee. thus, this ground of the assessee is accepted.