Income Tax Appellate Tribunal - Delhi
S.A. Growth Fund (P) Ltd. vs Assistant Commissioner Of Income Tax. ... on 29 May, 1997
ORDER
Vimal Gandhi, J.M.
1. These three appeals by the assessee, all for asst. yr. 1992-93 are directed against different orders of CIT(A) on identical lines refusing claim of exemption of premium received on maturity of Special Bearer Bonds under s. 10(15)(i) of IT Act.
2. Both the parties before us admitted that facts in all the appeals were identical. Accordingly, arguments were heard in ITA No. 673 in the case of S.A. Growth Fund (P) Ltd.
The facts in brief are that the assessee, a private limited company was incorporated on 11th February, 1991. It had acquired 885 Special Bearer Bonds issued by the Central Government under the Special Bearer Bonds (Immunities and Exemptions) Act, 1981 (for short the "Bearer Bonds Act"). During the relevant previous year which ended on 31st March, 1992, the assessee encashed the above bonds on maturity at a premium of Rs. 2,000 per bond. The total amount realised by the assessee on such redemption was :
Rs.
(i) Against the face value of Rs. 10,000 per bond (885 bonds) 88,50,000
(ii) As premium of Rs. 2000 per bond for 885 bonds : 17,70,000
------------
1,06,20,000
------------
The assessee claimed total exemption of the above sum in terms of the Bearer Bonds Act. The Asstt. CIT however, asked the assessee to explain the source of the funds for the acquisition of the said bonds. The assessee pointed out that the Asstt. CIT was debarred from such an enquiry not only under the Bearer Bonds Act but also under the circular issued by the CBDT itself explaining the provisions of that statute.
The Asstt. CIT rejected the above claim. He held that immunity from enquiry was given only to those persons who were 'alive' at the time of the issue of the bonds in 1981. Since the assessee-company was incorporated only in February, 1991, the said immunity could not be given to the assessee, according to the Asstt. CIT. He, therefore, taxed the full redemption sum of Rs. 1,06,20,000 under s. 68 of the IT Act, 1961 (for short 'the Act').
The CIT(A) deleted the addition of Rs. 88,50,000 accepting the assessee's claim that immunity from enquiry was available to the assessee also because of the phrase 'otherwise acquired' found in s. 3(1)(a) of the Bearer Bonds Act.
As regards the premium of Rs. 17,70,000, however, the CIT(A) confirmed the addition rejecting the assessee's claim that it was specifically exempted under s. 10(15)(ib) of the Act. CIT(A)'s reasons were two-fold in this regard viz :
(i) The Special Bearer Bonds Scheme conferred a special immunity. Any such scheme must, therefore, refer to the provisions of the Act. There was no such reference to s. 10(15)(ib) in the Special Bearer Bonds Scheme of 1981.
(ii) Sec. 10(15)(ib) covers only bonds offered and purchased in the normal course and not to the Special Bearer Bonds Scheme of 1981 which was for bringing out concealed income.
3. The learned counsel for the assessee Dr. S. Narayanan during the course of arguments submitted that CIT(A) has erred on both the counts. Firstly s. 5(b) of the Bearer Bonds Act inserted a new sub-cl. (ib) in sub-s. (15) of s. 10 of IT Act as under :
"(ib) Premium on redemption of Special Bearer Bonds, 1991."
The learned CIT(A) was, therefore, in error in thinking that there was no reference to s. 10(15)(ib) in the Bearer Bonds Act. The above-mentioned amendment was duly incorporated in the IT Act w.e.f. 12th January, 1981. However, Direct Tax Laws (Amendment) Bill, 1987, proposed w.e.f. 1st April, 1989, deletion of above provision along with various other clauses of exemption under sub-s. (15) of s. 10 from the Act itself. The reason for this was that legislature intended to grant exemption from tax to incomes which are notified. This is clear from notes on clauses 'Direct Tax Laws (Amendment) Bill, 1987' reported in (1987) 168 ITR 305 (St.). A copy of above Bill is enclosed at p. 10 of the paper-book. The government subsequently issued Notification No. SO 144(E) as amended by Notification dt. 27th March, 1990, 1st July, 1992, and 27th January, 1995. The Special Bearer Bonds 1991 are exempt as per item No. 3 of the Notification. The effect of above amendment is that Bearer Bonds now fall under cl. (i) of s. 10(15). That premium on above bonds was exempt as per clarificatory notes issued at the time of introduction of Special Bearer Bonds. As per Circular No. 318, dt. 1st January, 1982 question No. 11 and answer thereto is as follows :
"Question No. 11 : Is the premium receivable on which redemption of the Bonds taxable ? Ans. : No. It is exempt from income-tax under s. 10(15)(ib) of the IT Act."
Dr. Narayanan also brought to our notice that on identical circumstances, CIT(A) granted exemption of premium received on encashment of these very bonds in the following cases :
1. Nahar Growth Funds (P) Ltd.,
2. Neelam Growth Funds (P) Ltd.
3. Rishi Growth Funds (P) Ltd.
No second appeal was filed by the Revenue and above order had been accepted. It was accordingly argued that premium received on encashment of bonds be directed to be treated as exempt. The learned Departmental Representative, supported impugned order of CIT(A).
4. After careful consideration of rival submissions we are of view that there is no justification to tax premium received on encashment of bonds at their maturity. Sec. 5 of Special Bearer Bonds (Immunity & Exemptions) Act, 1981, inserted sub-cl. (ib) after sub-cl. (ia) in cl. (15) of s. 10 of IT Act exempting "premium on redemption of Special Bearer Bonds, 1991". The aforesaid provision was maintained in amending cl. 15 in s. 10 whereby sub-cl. (i) provided omnibus exemption to all sorts of exemptions on securities, bonds, savings, service deposits, etc. as are notified in sub-cl. (i) of cl. (15). The notification was subsequently issued exempting premium on bonds and said notification is available at p. 11 of the paper-book. Further clarification issued by the CBDT in Circular No. 318, dt. 1st January, 1982 leave no amount of doubt that premium received on Bond is not taxable and is exempt. We, therefore, accept arguments advanced by Dr. S. Narayanan and direct the Revenue authorities to delete addition made on account of premium on encashment of bonds in question in all the three cases.
5. In the result, all the three appeals of the assessees are allowed.