THE ACIT CIR 6(1), MUMBAI V. M/S. ABC BEARINGS LTD, MUMBAI

ITA 6430/MUM/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1113 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 24-06-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 19-10-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K PAHAD
• Keywords: Capital asset; Cost of acquisition; Bad and doubtful debts; Corroborative evidences; Scheme of amalgamation; Capital receipt; Set aside; Capital Gains
• Section: 64; 2; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI R.V.EASWAR [PRESIDENT] & SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NO.6430/MUM/2007 - A.Y 2004-05 ASST. COMMISSIONER OF I.T., CIRCLE 6(1), MUMBAI VS. M/S ABC BEARINGS LTD. [FORMERLY KNOWN AS M/S ANTIFRICTION BEARINGS CORPN. LTD.] 402-B, POONAM CHAMBERS, DR. ANNIE BESANT ROAD, WORLI, MUMBAI 400 018 PAN NO.AAACT 5018 Q (APPELLANT) (RESPONDENT) REVENUE BY : SHRI S.K.PAHAD [CIT] ASSESSEE BY : SMT. AARTI VISSANJI. O R D E R PER T.R.SOOD, AM: IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWIN G THREE GROUNDS:. 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT[A] IS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.3 .88 CRORES EVEN THOUGH THE ASSESSEE FAILED TO PRODUCE RELEVANT ACCOUNT BOOKS, BILLS AND VOUCHERS BEFORE THE AO. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT[A] IS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.87,05,400/- EVEN THOUGH THE AO HAD GIVEN A FINDI NG THAT THE SAID DEBT HAD NOT BECOME BAD DURING THE RELEVAN T ACCOUNTING YEAR. IN SUPPORT OF THIS GROUND, RELIANC E IS PLACED UPON MADRAS HIGH COURT DECISION IN THE CASE OF SOUT H INDIA SURGICAL (153 TAXMAN 491) AND GUJARAT HIGH COURT DE CISION IN THE CASE OF DHALL ENTERPRISES (207 ITR 729). 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT[A] IS JUSTIFIED IN DELETING THE DISALLOWANCE OF LONG TERM CAPITAL LOSS OF RS.37,04,987/- MADE BY THE AO AND H OLDING THAT CONVERSION OF UTI-64 UNITS INTO UTI 6.75% TAX FREE BONDS AMOUNTS TO TRANSFER WITHIN THE MEANING OF SECTION 2 [47] OF THE I.T.ACT. IN THIS CONNECTION IT IS SUBMITTED THAT DE FINITION OF TRANSFER U/S.2[47][IV] COVERS ONLY CONVERSION OF AS SET INTO STOCK IN TRADE OF BUSINESS WHICH IS NOT THE CASE HERE. 2. GROUND NO.1 : AFTER HEARING BOTH THE PARTIES, WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAD DEBITED 2 MANUFACTURING EXPENSES IN PROFIT & LOSS ACCOUNT A MOUNTING TO RS.7763.41 LAKHS. ASSESSEE WAS SPECIFICALLY ASKED T O GIVE DETAILS OF THESE EXPENSES AND PRODUCE BOOKS OF ACCOUNTS AND BI LLS AND VOUCHERS FOR VERIFICATION OF THESE EXPENSES. IN RESPONSE TO THE SAME, ASSESSEE FILED ONLY GROUPINGS OF PROFIT & LOSS ACCOUNT GIVIN G HEAD-WISE EXPENDITURES. ASSESSEE WAS AGAIN ASKED TO PRODUCE B OOKS OF ACCOUNTS, BILLS AND VOUCHERS. HOWEVER, NO COMPLIANCE WAS MADE . IN THIS BACKGROUND, AO OBSERVED THAT THE BURDEN WAS ON THE ASSESSEE TO PROVE THAT EXPENSES HAVE BEEN INCURRED FOR THE PURP OSE OF BUSINESS AND SINCE NO DOCUMENTARY EVIDENCE WAS FILED, AN ADH OC DISALLOWANCE OF 5% AMOUNTING TO RS.3.88 CRORES WAS MADE TO THE I NCOME OF THE ASS. 3. BEFORE THE CIT(A), IT WAS MAINLY SUBMITTED THAT NO SUCH ADDITION HAS BEEN MADE IN PAST AND THE BOOKS OF ACCOUNTS WER E DULY AUDITED. IT WAS FURTHER SUBMITTED THAT ACCOUNTING RECORDS WERE BEING MAINTAINED AT THREE LOCATIONS, VIZ., BHAROCH PLANT, LONAVALA P LANT AND MUMBAI OFFICE. THE ACCOUNTING RECORDS RUN INTO 175 TO 200 BOX FILES CONTAINING DETAILS IN RESPECT OF PAYMENTS AND RECEIPT VOUCHERS [APPROXIMATELY NO.3000], CASH AND BANK PAYMENT VOUCHERS [APPROXIMA TELY NO.10,000], GENERAL VOUCHERS [APPROXIMATELY NO.88], EXPENSES VOUCHERS [APPROXIMATELY NO.13000], GOODS RECEIPT VO UCHERS [APPROXIMATELY NO.11000] AS WELL AS INVOICES [APPRO XIMATELY NO.1500] ETC. THEREFORE, IT WAS NOT PRACTICABLE AND RATHER T HAN VERY DIFFICULT TO PRODUCE SUCH VOLUMINOUS RECORDS WHICH WERE BEING MA INTAINED AT 3 THREE DIFFERENT OFFICES. THE LD. CIT(A) ACCEPTED TH E SUBMISSIONS AND DELETED THE ADDITION VIDE PARA 6.3 OF HIS ORDER, WH ICH IS AS UNDER: 6.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE AR AN D IN MY VIEW THE AO IS NOT JUSTIFIED IN DISALLOWING 5% OF THE EX PENDITURE DEBITED TO P&L A/C SIMPLY ON THE GROUND THAT THEY ARE NOT FOR THE BUSINESS. THE AR HAS ALREADY MADE HIS POINT THAT THE EXPENSES ARE ONLY FOR THE BUSINESS AND NOT PERSONAL IN NATURE. ALL THESE EXPE NSES ARE DULY AUDITED BY COMMISSIONER OF INCOME TAX (APPEALS) AND THEY HAVE NOT POINTED OUT ANY EXPENDITURE WHICH IS NOT RELATED TO THE BUSINESS. HENCE THE DISALLOWANCE IS UNWARRANTED AND NEED TO B E DELETED. I AGREE WITH THE VIEW OF THE AR THAT THE DISALLOWANCE OF 5% OF THE TOTAL MANUFACTURING AND OTHER EXPENSES ARE NOT WARRANTED UNLESS IT IS PROVED THAT ANY OF THE EXPENDITURE ARE NOT FOR THE BUSINESS OF THE ASSESSEE. THE AO IS DIRECTED TO DELETE THIS ADDITIO N. THIS GROUND OF APPEAL IS ALLOWED. 4. BEFORE US, THE LD.DR SUBMITTED THAT THE AO HAD S PECIFICALLY ASKED TO PRODUCE BILLS AND VOUCHERS FOR VERIFICATIO N AS WELL AS BOOKS OF ACCOUNTS WHICH WERE NOT SUBMITTED BEFORE THE AO OR EVEN BEFORE THE CIT(A), STILL, CIT(A) HAS ALLOWED THE RELIEF. HE AR GUED THAT THE ONUS IS ALWAYS ON THE ASSESSEE TO PROVE THE EXPENDITURE FOR WHICH ASSESSEE WAS DUTY BOUND TO PRODUCE THE BOOKS OF ACCOUNTS AND OTHER SUPPORTING DOCUMENTS, WHICH IT FAILED TO DO SO. MER ELY BECAUSE, ACCOUNTS WERE AUDITED, ASSESSEE CANNOT SHY AWAY FRO M PRODUCING RECORDS. 5. ON THE OTHER HAND, THE LD.COUNSEL OF THE ASSESSE E REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A). SHE ARGUED THAT IN PAST NO SUCH ADDITIONS HAVE BEEN MADE. SINCE THE ADDITIONS HAVE BEEN MADE ON AN ADHOC BASIS, THE SAME ARE NOT SUSTAINABLE. SHE ALSO EMPHASIZED THAT ASSESSEE WAS HAVING VOLUMINOUS RECORDS AND, THEREFO RE, IT WAS NOT POSSIBLE TO PRODUCE THE SAME. SHE ALSO POINTED OUT THAT NOTICE TO PRODUCE BOOKS OF ACCOUNTS AND BILLS AND VOUCHERS WA S GIVEN ONLY ON 4 26-10-006 AND ASSESSMENT HAS BEEN FINALIZED ON 18-1 2-2006 AND, THUS, VERY LITTLE TIME WAS GIVEN TO PRODUCE THESE V OLUMINOUS RECORDS. WHILE CONCLUDING, SHE SUBMITTED THAT IF BENCH IS OF THE OPINION THAT SUCH RECORDS STILL NEED TO BE PRODUCED, THEN AN OPP ORTUNITY MAY BE GIVEN FOR THE SAME. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND AGREE WITH THE SUBMISSIONS OF THE LD.DR THAT ONCE THE AO WANTED TO VERIFY THE EXPENSES, ASSESSEE WAS DUTY BOUND TO PRODUCE TH E BOOKS OF ACCOUNTS AND OTHER BILLS AND VOUCHERS FOR HIS VERIF ICATION. MERELY BECAUSE, RECORDS ARE VOLUMINOUS, THAT CANNOT BE A R EASON FOR NON PRODUCTION OF SUCH RECORDS BEFORE THE ASSESSING AUT HORITY. HOWEVER, WE FIND MERIT IN THE SUBMISSIONS OF THE LD.COUNSEL OF THE ASSESSEE THAT VERY LITTLE TIME WAS GIVEN TO PRODUCE THESE RECORDS AND, THEREFORE, IN THE INTERESTS OF JUSTICES, WE SET ASIDE THE ORDER O F THE LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO GIVE SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO PRODUCE B OOKS OF ACCOUNTS AND BILLS AND VOUCHERS AND THEN DECIDE THE ISSUE AC CORDINGLY. ASSESSEE IS ALSO DIRECTED TO PRODUCE ALL BOOKS OF ACCOUNTS A ND RELEVANT SUPPORTING EVIDENCE FOR VERIFICATION OF THE AO. 7. GROUND NO.2 : AFTER HEARING BOTH THE PARTIES, WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS AO NOTICED THAT T HE ASSESSEE HAS MADE A CLAIM OF BAD DEBTS AMOUNTING TO RS.72,07,735 /-. IN RESPONSE TO THE NOTICE, THE ASSESSEE SUBMITTED AS UNDER: FROM PROVISION F.Y PROVISION AMOUNT TR. TO BAD DEBTS IN F.Y. 03-04 DESCRIPTION BALANCE 1999-00 31,748 31,748 NIL 2000-01 1,922,718 1,922,718 AS PER LIST NIL 2001-02 1,099,020 1,099,020 AS PER LIST NIL 2002-03 7,199,688 5,651,953 AS PER LIST 1,467,735 16,173,174 8,705,440 1,467,735 BALANCE IN BOOKS OF ACCOUNT AS ON 31.03.04 2,965,439 COMPUTATION OF INCOME ATTACHED WITH RETURN OF INCOM E FOR F.Y 2003-04 LESS: FROM INCOME FOR BAD DEBTS W/O RS. 8,705,440 5 ADD: FOR PROVISION FOR BAD DEBTS RS. 1,497,704 NET AMOUNT REDUCED FROM INCOME COMPUTATION AS SINGL E ITEM 7.207,735 PROVISION MADE IN EARLIER YEAR WAS NOT CONSIDERED A S ALLOWANCE IN RESPECTIVE YEARS. THE AMOUNTS CLAIMED AS BAD DEBTS HAVE BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT. THE AMOUNT ARE IN THE NATURE OF DISCOUNTS, CLAIMS P RICE DIFFERENCE ETC. BY CUSTOMERS. AFTER CONSIDERING THE ABOVE, AO OBSERVED THAT INSTE AD OF SHOWING THAT HOW CONDITIONS HAVE BEEN FULFILLED FOR CLAIMING OF BAD DEBTS, ASSESSEE HAS MERELY GIVEN CALCULATION OF BAD DEBTS. HE FURTH ER OBSERVED THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT DEBTS HAD REALLY BECOME BAD AND, THEREFORE, DISALLOWED THIS CLAIM. 8. BEFORE THE CIT(A), IT WAS MAINLY ARGUED THAT THE ASSESSEE HAD MADE PROVISION FOR DEBTS IN THE EARLIER YEAR, BUT T HE SAME WAS NOT CLAIMED AS BAD DEBTS. IT WAS FURTHER EXPLAINED THAT THESE AMOUNTS WERE NOW BEING CLAIMED BECAUSE SOME OF THE DEBTS HA D BECOME BAD AND SOME OF THE DEBTS WERE DISPUTED ON ACCOUNT OF Q UALITY ISSUE, PRICE DIFFERENCE ETC. IT WAS ALSO EXPLAINED THAT THERE WA S A FIRE IN THE CHAMBERS OF THE ASSESSEE COMPANY AT POONAM CHAMBERS , WORLI, MUMBAI AND EVERYTHING IN THE OFFICE TURNED INTO ASH ES AND MOST OF THE RECORDS MAINTAINED WAS REALLY DESTROYED AND, THEREF ORE, IT WAS DIFFICULT TO PRODUCE FURTHER DETAILS. IT WAS POINTED OUT THAT MOST OF THE DEBTS WERE OUTSTANDING FOR LONG PERIOD AND DETAILS OF THE SAME WERE FILED AS PER ANNEXURE E. THE LD. CIT(A) AFTER EXAMINING TH E SUBMISSIONS, 6 AGREED WITH THE SAME AND DELETED THE DISALLOWANCE V IDE PARA 4.3 AS UNDER: 4.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE AR AN D FINDINGS OF THE AO. THE AO HAS DISALLOWED THE CLAIM OF THE APPE LLANT ON THE GROUND THAT THE ASSESSEE HAS NOT PROVED THAT THE DE BT HAS BECOME BAD. UNDER THE AMENDED PROVISIONS OF SECTION 36[1][ VII] THE ASSESSEE IS NOT REQUIRED TO FURNISH DEMONSTRATIVE PROOF THAT THE DEBT HAS BECOME BAD. IF ANY DEBT IS NOT RECOVERABLE BY THE A SSESSEE, A MERE WRITING OFF IN THE BOOKS OF ACCOUNTS IS SUFFICIENT TO CLAIM THE DEBT. I AGREE WITH THE SUBMISSION OF THE AR THAT THE DECISI ON OF ITAT MUMBAI IN THE CASE OF DCIT VS. OMAN INTERNATIONAL BANK S.A .O.G. [100 ITD 285] WOULD HOLD GOOD AND THE ASSESSEE IS NOT REQUIR ED TO GIVE DEMONSTRATIVE PROOF THAT THE DEBT HAS BECOME BAD. T HE AO IS DIRECTED TO DELETE THIS ADDITION. HENCE THE CLAIM OF THE APP ELLANT IS ALLOWED. 9. BEFORE US, THE LD.DR SUBMITTED THAT NO DOUBT, AF TER THE CHANGE IN LAW W.E.F. 1-4-1989 IT IS NO MORE THE DUTY OF TH E ASSESSEE TO PROVE THAT THE DEBT HAD REALLY BECOME BAD, HOWEVER, STILL , ASSESSEE WAS DUTY BOUND TO SHOW THAT SUCH CLAIM OF BAD DEBT HAS BEEN WRITTEN OFF ON BONA FIDE BASIS AND IN THIS REGARD HE RELIED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF OMAN INTERN ATIONAL [313 ITR 128]. 10. ON THE OTHER HAND, THE LD.COUNSEL OF THE ASSESS EE SUBMITTED THAT DURING THE YEAR, THE CLAIM FOR ONLY RS.72,07,7 35/- WAS MADE DURING THE YEAR. SHE EXPLAINED THAT THE PROVISION F OR BAD DEBTS WAS MADE IN THE EARLIER YEAR WHICH WAS NOT CLAIMED, BUT NOW THE DEBTS HAVE REALLY BECOME BAD AND THAT IS WHY CLAIM WAS BE ING MADE AND THE AMOUNT WAS BEING WRITTEN OFF BY DEBITING THE PROVIS ION FOR DOUBTFUL DEBTS BECAUSE PARTIES ACCOUNTS HAVE ALREADY BEEN CL OSED WHEN PROVISION FOR DOUBTFUL DEBTS WAS CLAIMED. SHE FURTH ER SUBMITTED THAT ALL THESE DEBTS ARE OLD AND THE CLAIMS WERE BEING WRITT EN OFF BECAUSE FEW 7 OF THE CONCERNS FROM WHOM DEBTS WERE RECOVERABLE HA VE BEEN CLOSED IN MANY OTHER CASES, THE DEBTORS HAVE REFUSED TO PA Y MAINLY RAISING DISPUTES REGARDING QUALITY ISSUES AND PRICE. IN ANY CASE, THERE IS NO FURTHER CONDITION IN LAW THAT CLAIMING BAD DEBTS EX CEPT FOR WRITING OFF THE BAD DEBT AND IN THIS REGARD SHE RELIED ON THE D ECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. TRF L TD. [323 ITR 395]. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY AND FIND FORCE IN THE SUBMISSIONS OF THE LD.COUNSEL OF THE A SSESSEE. WE FIND THAT ASSESSEE HAD CREATED A PROVISION FOR BAD DEBTS FOR VARIOUS YEARS AS UNDER: F.Y PROVISION AMOUNT TR. TO BAD DEBTS IN F.Y. 03-04 1999-00 31,748 31,748 2000-01 1,922,718 1,922,718 2001-02 1,099,020 1,099,020 2002-03 7,199,688 5,651,953 16,173,174 8,705,440 OUT OF THE ABOVE PROVISION, A SUM OF RS.14,97,704/- WAS STILL KEPT AS A PROVISION AND BALANCE OF BAD DEBTS AMOUNTING TO RS. 72,07,735/- WAS CLAIMED. THIS SHOWS THAT THE CLAIM WAS FOR THE EARL IER YEARS AND, THEREFORE, ASSESSEE HAS WRITTEN OFF THE SAME ON BON A FIDE BASIS. AFTER THE AMENDMENT IN SEC.36 W.E.F. 1-4-1989. THE MAIN R EQUIREMENT OF LAW IS THAT SUCH DEBTS SHOULD HAVE BEEN WRITTEN OFF , WHICH IN THE PRESENT CASE HAS BEEN COMPLIED WITH. THE BONAFIDES OF THE ASSESSEE ARE FURTHER CLEAR FROM THE FACT THAT IN THE EARLIER YEAR ONLY PROVISION WAS CREATED AND NO CLAIM FOR BAD DEBT WAS MADE. IN ANY CASE, THERE WAS A FIRE IN THE ASSESSEES OFFICE AND NO FURTHER RECORDS WERE AVAILABLE 8 TO PROVE THIS POINT. IN THIS BACKGROUND, WE FIND NO THING WRONG IN THE ORDER OF THE LD. CIT(A) AND CONFIRM THE SAME. 12. GROUND NO.3: AFTER HEARING BOTH THE PARTIES, WE FIND THAT DURIN G THE ASSESSMENT PROCEEDINGS, AO NOTICED THAT ASSESSE E HAS CLAIMED A CAPITAL LOSS OF RS.37,04,987/- ON ACCOUNT OF CONVER SION OF UNITS OF UTI US-64 INTO UTI 6.75% TAX FREE BONDS. ON QUERY REGARD ING UNDER WHICH PROVISION OF THE ACT THIS LOSS WAS ALLOWABLE, ASSESSEE FILED ONLY DETAILS EVIDENCING CONVERSION OF UTI US-64 UNITS INT O TAX FREE BONDS. AO WAS OF THE VIEW THAT CONVERSION OF UNITS INTO BO NDS DID NOT AMOUNT TO TRANSFER, HENCE THERE WAS NO QUESTION OF ANY CAP ITAL GAIN OR LOSS ARISING OUT OF SUCH CONVERSION AND, ACCORDINGLY, TH IS LOSS WAS DISALLOWED. 13. BEFORE THE CIT(A), IT WAS MAINLY SUBMITTED THAT THE TERM TRANSFER DEFINED IN SEC.2[47] OF THE ACT WOULD IN CLUDE SALE, EXCHANGE OR RELINQUISHMENT OF AN ASSET AND HENCE ASSESSEE WA S ELIGIBLE FOR THE LOSS. THE LD. CIT(A) ALLOWED THE LOSS AS PER PARA-9 .3 WHICH IS AS UNDER: 9.3 I AGREE WITH THE FINDINGS OF THE AR THAT CONVE RSION IS INCLUDED IN THE TERMS TRANSFER AS ENVISAGED IN SECTION 2[4 7]. HENCE ANY LOSS ON ACCOUNT OF SALE OR EXCHANGE OR RELINQUISHMENT OF THE ASSETS WOULD BE ALLOWABLE. THE AO IS DIRECTED TO ALLOW THE CLAIM OF CAPITAL LOSS. THIS GROUND OF APPEAL IS ALLOWED. 14. BEFORE US, THE LD.DR SUBMITTED THAT THE TERM T RANSFER HAS BEEN DEFINED U/S.2[47] AND CONVERSION OF UTI US-64 UNITS INTO TAX FREE BONDS WOULD NOT BE COVERED BY SUCH DEFINITION BECAU SE IT IS NOT A CASE OF SALE OR EXCHANGE OR RELINQUISHMENT OR EVEN EXTIN GUISHMENT OF ANY RIGHTS. HE FURTHER REFERRING TO SEC.47[X] WHICH TAL KS OF TRANSFER BY WAY 9 OF CONVERSION OF BONDS OR DEBENTURES AND PROVIDES T HAT SUCH CONVERSION OF UNITS IS NOT TO BE TREATED AS TRANSFE R. 15. ON THE OTHER HAND, THE LD.COUNSEL OF THE ASSESS EE SUBMITTED THAT THERE SEEMS TO BE A CONFLICT IN THE ARGUMENT O F THE LD.DR WHEN HE REFERS TO THE PROVISIONS OF SEC.2[47] AND SECTIO N 47[X] BECAUSE, SEC.47 ITSELF STARTS WITH THE PHRASE THAT NOTHING CONTAINED IN SEC.45 SHALL APPLY TO FOLLOWING TRANSFER, WHICH MEANS THA T FIRST A TRANSACTION HAS TO BE TRANSFER AND ONLY THEN THE QUESTION OF NOT TREATING THE SAME AS TRANSFER WOULD ARISE. SHE THEN REFERRED TO SEC.2[47] WHICH DEFINES THE TERM TRANSFER, AND SUBMITTED THAT ASS ESSEES CASE WOULD BE COVERED UNDER EXCHANGE OR RELINQUISHMENT OR IN A NY CASE CLAUSE [II] OF SEC.2[47] I.E. EXTINGUISHMENT. SHE EXPLAINED THA T UTI WAS IN FINANCIAL DIFFICULTY IN THE YEAR 2003 AND, THEREFOR E, PROPOSED A SCHEME BY WHICH UNIT HOLDERS WERE GIVEN TWO OPTIONS I.E. [ I] TO SURRENDER THE UNITS AND OBTAIN THE CASH OR [II] TO SURRENDER THE UNITS AND OBTAIN FRESH TAX FREE BONDS WHICH WERE TO BE ISSUED TO SUCH UNIT HOLDERS. THE UNIT HOLDERS OF LESS THAN 5000 UNITS WERE TO BE ALLOTTED TAX FREE BONDS @ RS.12 PER UNIT AND THE BALANCE OF THE UNITS WERE TO BE ISSUED @ RS.10/- PER UNIT. SHE FURTHER SUBMITTED THAT SINCE ASSESSEE EXERCISED THE SECOND OPTION THAT WOULD PRACTICALLY MEAN THAT ASSESSEE SURRENDERED THE EXISTING HOLDING OF THE UNITS AGAIN ST WHICH A NEW INSTRUMENT WAS ISSUED BY THE UTI. ACCORDING TO HER, THIS WOULD MEAN EXCHANGE, BECAUSE ONE INSTRUMENT WAS EXCHANGED FO R ANOTHER OR SALE AS UTI HAD BROUGHT THE OLD UNITS AND ISSUED THE NEW UNITS. IN THIS 10 REGARD, SHE RELIED ON THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF ANARKALI SARABHAI VS. CIT [224 ITR 422] WHE REIN EVEN REDEMPTION OF SHARES BY THE COMPANY HAS BEEN HELD T O BE A TRANSFER. SHE ALSO FILED THE COPY OF THE SCHEME ANNOUNCED BY ADMINISTRATOR OF SPECIFIED UNDERTAKING OFFICE UNIT TRUST OF INDIA AS WELL AS COPY OF THE COMPUTATION SHEET FOR CAPITAL LOSS. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY IN THE LIGHT OF THE MATERIAL ON RECORD AS WELL AS THE DECISIONS CITED BY THE PARTIES. WE FIND THAT UNIT TRUST OF INDIA WAS EARLIER ISSUIN G US-64 UNITS WHICH WERE READILY TRADABLE IN THE MARKET AND PROCEEDINGS OF SUCH UNITS USED TO BE INVESTED IN VARIOUS SECURITIES SUCH AS SHARES OF VARIOUS LISTED COMPANIES, GOVERNMENT BONDS ETC. IN THE YEAR 2002-03 , UNIT TRUST OF INDIA FACED SEVERE FINANCIAL CRUNCH AND NET ASSET VA LUE [NAV] OF THE US-64 UNITS PERHAPS WENT BELOW THE FACE VALUE I.E. RS.10/- PER UNIT. TO HELP VARIOUS UNIT HOLDERS OF US-64, GOVERNMENT OF IN DIA DECIDED TO CLOSE THE VARIOUS SCHEMES FORMULATED BY UNIT TRUST OF INDIA AND IT WAS DECIDED TO GIVE TWO OPTIONS TO THE VARIOUS INVESTOR S I.E. [I] EITHER TO SURRENDER THE UNITS AND TAKE CASH OR [II] GET THE U NITS CONVERTED INTO 6.75% TAX FREE BONDS GUARANTEED BY THE GOVERNMENT O F INDIA. THE PRICE FIXED FOR FIRST 5000 UNITS WAS RS.12/- PER UN IT TO HELP THE SMALL INVESTORS AND BEYOND THAT THE PRICE WAS FIXED AT RS .10/- PER UNIT. THE EXACT SCHEME ANNOUNCED BY THE UNIT TRUST OF INDIA, C OPY OF WHICH HAS BEEN FILED BY THE LD. COUNSEL OF THE ASSESSEE, IS A S UNDER: 11 ADMINISTRATOR OF THE SPECIFIED UNDERTAKING OF THE UNIT TRUST OF INDIA MUMBAI -400 020 THE ANTIFRICTION BEARINGS INVESTOR ID: 136366645 UNITS : 5610.000 DEAR UNIT HOLDER, CONVERSION OF UNIT SCHEME 64 UNITS TO 6.75% TAX FREE US 64 BONDS GUARANTEED BY GOVERNMENT OF INDIA WE ARE PLEASED TO INFORM YOU ABOUT THE EXCLUSIVE OF FER TO THE INVESTORS OF UNIT SCHEME 1964. RECOGNISING THE CON TINUED AND VALUABLE SUPPORT EXTENDED BY YOU IN REMAINING INVES TED IN THE SCHEME TILL NOW, THE GOVERNMENT OF INDIA BACKED 6.75% TAX- FREE BOND IN LIEU OF US 64 UNITS IS BEING OFFERED TO YOU. IT HAS BEEN DECIDED TO TERMINATE UNIT SCHEME 64 IN ITS PRESENT FORM, WITH EFFECT FROM JUNE 1, 2003. TO ADD VALUE TO YOU R REDEMPTION, YOUR ARE BEING GIVEN THE OPTION OF CONVERTING THE UNITS INTO TAX-FREE TRADEABLE BONDS. THOSE BONDS HAVE A 5-YEAR TENURE WITH A COUPON RATE OF 6.75% P.A. PAYABLE HALF-YEARLY. INTEREST A ND THE PRINCIPAL AT MATURITY CARRY SOVEREIGN GUARANTEE OF THE GOVERNMEN T OF INDIA. LIQUIDITY IS OF HIGHEST ORDER SINCE THESE BONDS ARE TRANSFERABLE AND ARE TRADEABLE IN THE MARKET. THIS OFFER BACKED BY GOVE RNMENT OF INDIA PROVIDES SUPERIOR RETURNS AS COMPARED TO RETURNS CU RRENTLY AVAILABLE IN THE MARKET. THE THREE REQUIREMENTS OF SAFELY, LIQU IDITY AND SUPERIOR RETURNS HAVE BEEN INCORPORATED IN THE BOND. THE OFFER FOR CONVERTING THE US 64 UNITS INTO BONDS IS AVAILABLE ONLY TO THOSE UNIT HOLDERS WHOSE REPURCHASE VALUE OF THEIR UNITS UNDER THEIR INVESTOR IDENTIFICATION NUMBER (ID) AS ON 31ST MAY 2003 IS RS 5,000 OR ABOVE. THE BOND CAN BE HELD BY BANKS, PSUS, CORPOR ATES ETC., IN ADDITION TO INDIVIDUALS I.E. ALL CATEGORIES OF INVE STORS THAT MAY RESULT IN HIGHER DEMAND OF THE INSTRUMENT IN DUE COURSE. THE SALIENT FEATURES OF THE TAX TREE BONDS ARE AS U NDER: 1. THE RATE OF INTEREST IS 6.75% PER ANNUM PAYABLE HAL F YEARLY (ANNUALIZED YIELD =6.86) 2. INTEREST INCOME IS FULLY EXEMPT FROM INCOME-TAX. THE PRE-TAX RETURNS WILL BE MUCH HIGHER DEPENDING O N THE TAX SLAB OF THE INVESTOR TAX SLAB 35% TAX SLAB 30% TAX SLAB 20% TAX SLAB 10% 10.38% 9.64% 8.44% 7.50% 3. TENURE OF THE BOND IS 5 YEARS 4. ISSUE DATE WILL BE JUNE 1, 2003 AND THE BONDS WILL MATURE ON JUNE 1, 2008 5. FACE VALUE OF A BOND IS RS 100. 6. THE BOND IS TRANSFERABLE 7. THE BOND IS TRADEABLE IN THE MARKET PROVIDING LIQUI DITY AFTER 1ST JUNE 2003 ALSO 8. BONDS CAN BE HELD BY ALL CATEGORIES OF INVESTORS. 9. THE PRINCIPAL AND THE INTEREST ARE GUARANTEED BY GO VERNMENT OF INDIA (COI). 12 EXAMPLE FOR ISSUE OF BONDS: IF THE INVESTOR HOLDS 15,000 UNITS, THE FIRST 5,000 UNITS ARE COVERED UNDER CATEGORY A @ RS 12 IN MAY 2003 AND THE BALA NCE 10,000 UNITS ARE UNDER CATEGORY B @ RS 10 AS ON 31ST MAY 2003, THE TOTAL PURCHASE VALUE OF THE UNITS IS RS 1,60,000/- (RS 60 ,000/- + RS 1,00,000/-). INVESTOR WILL BE ISSUED 1600 BONDS, O F FACE VALUE RS 100/- EACH, EFFECTIVE FROM 1ST JUNE 2003. OPTION IF YOU WISH TO OPT FOR CONVERSION, NO ACTION IS REQ UIRED AT YOUR END. YOU WILL RECEIVE THE NEW CERTIFICATES OF TAX-FREE B ONDS TO YOUR ADDRESS BY MAY 1, 2003. ALTERNATIVELY, IF YOU WISH TO REPURCHASE THE UNITS AT THE RATES APPLICABLE IN MAY 2003 (RS 12 OR RS 10), THE ENCLOSED OPTION F ORM DULY SIGNED, MAY BE SUBMITTED TO THE NEAREST UTI BRANCH OR THE R EGISTRAR (ADDRESS PRINTED ON REVERSE) LATEST BY 4TH APRIL 2003. IN THE CASE OF REPURCHASE OPTION GIVEN BY 4TH APRIL 2003, THE REPURCHASE CHEQUES DATED 1ST MAY 2003 (FOR CATEGORY A UNITS / 31ST MAY 2003 (FOR CATEGORY B UNITS) WILL BE SENT BY T HE FIRST WEEK OF MAY 2003). FOR UNIT HOLDERS WHERE THE REPURCHASE VALUE IS LESS THAN RS 5000/-, THE CHEQUE TOWARDS THE REPURCHASE PROCEEDS WILL BE ISSUED DURING MAY 2003. IN CASE WE DO NOT RECEIVE THE OPTION FORM, IT WOULD BE PRESUMED THAT YOU HAVE CONSENTED TO TAKE THE TAX-FREE US64 BONDS. THE BOND CERTIFICATE WOULD BE DISPATCHED BY 1ST MAY 2003. E VEN AFTER RECEIPT OF BOND CERTIFICATE, YOU STILL HAVE THE OPTION OF REPU RCHASING US64 UNITS TILL 31 MAY 2003 BY SURRE3NDERING BOND CERTIFICATE DULY DISCHARGED. I AM SURE YOU HAVE REASONS ENOUGH FOR CONTINUING YO UR INVESTMENT IN THE FORM OF 6.75% TAX-FREE US 64 BONDS GUARANTEED B Y GOVERNMENT OF INDIA. THE ABOVE SCHEME CLEARLY SHOWS THAT EVERY INVESTOR WHO WAS HOLDING UNITS OF UNIT TRUST OF INDIA HAD TWO OPTIONS I.E. [I ] EITHER TO TAKE THE MONEY BACK FROM UNIT TRUST OF INDIA BY SURRENDERING THE UNITS OR [II] RECEIVE 6.75% TAX FREE US-64 BONDS GUARANTEED BY TH E GOVERNMENT OF INDIA. THUS, THIS IS A CLEAR CUT CASE OF CONVERSION IN A CASE WHERE ASSESSEE CHOOSES TO REPLACE ONE TYPE OF SECURITY I. E. US-64 UNITS WITH ANOTHER TYPE OF SECURITY I.E. TAX FREE BONDS, AS HA S HAPPENED IN THE CASE OF THE ASSESSEE BEFORE US. WE, FURTHER FIND TH AT THE ASSESSEE HAD COMPUTED THE CAPITAL GAIN [LOSS] DURING THE YEAR AS UNDER: 13 ABC BEARING LTD ASSESSMENT YEAR : 2004-2005 STATEMENT SHOWING LONG TERM CAPITAL GAINS/(LOSS) ON SALE OF SHARES/UNITS OF MF SR. N NAME OF THE CO NO OF SHARES DT OF PURCHASE COST INFL. INDEX COST (RS) DT OF SALE SALE PROCEEDS INDEX COST INDEXED LOSS LTCG WITHOUT INDEX 1 CONVERSION OF UTI US 64 UNITS TO UTI 6.75% TAX FREE BONDS BONUS 25,100 8,300 32,200 26,300 18,380 11,208 1981-82 1982-83 1983-84 1993-94 1994-95 1994-95 100 109 116 244 259 - 335,799 111,041 430,786 351,853 245,895 - 2003-04 2003-04 2003-04 2003-04 2003-04 2003-04 261,308 86,409 335,224 273,801 191,348 114,809 1,554,749 471,670 1,719,430 667,655 439,573 - 1,293,441 385,261 1,384,206 393,854 248,224 - - - - - 114,809 121,308 1,475,374 1,262,900 4,853,078 3,704,98 7 114,809 THE ABOVE CHART CLEARLY SHOWS THAT ASSESSEE HAS TRE ATED CONVERSION OF US-64 UNITS INTO TAX FREE BONDS AS A CASE OF SALE. 17. WE FURTHER FIND THAT ANY CAPITAL RECEIPT WHICH CAN BE BROUGHT UNDER THE PROVISIONS OF SEC.45, THERE HAS TO BE DIS POSAL OF AN ASSET BY WAY OF ANY OF THE MODES REFERRED TO IN THE DEFINITI ON OF TRANSFER U/S.2[47]. UNLESS AND UNTILL THERE IS A TRANSFER OF AN ASSET AS ENVISAGED BY SEC.2[47], NO CAPITAL GAIN OR LOSS CAN BE COMPUT ED U/S.45, WHICH MEANS, IF THERE IS ANY GAIN OR LOSS ON ACCOUNT OF A NY RECEIPT BUT TRANSFER OF THE ASSET IS NOT INVOLVED, THEN PROVISI ONS OF SEC.45 CANNOT BE APPLIED. THIS BECOMES CLEAR FROM SEC.45[1] WHICH READS AS UNDER: 45(1) ANY PROFITS OR GAINS ARISING FROM THE TRAN SFER OF CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHALL. THUS, IT IS CLEAR FROM THE PROVISION ITSELF THAT TR ANSFER OF AN ASSET IS A PRIMARY CONDITION WHICH MUST BE SATISFIED BEFORE TH E RECEIPT CAN BE TREATED AS CAPITAL GAIN AND/OR CAPITAL LOSS U/S.45. THE WORD TRANSFER HAS BEEN DEFINED IN SEC.2[47] AND THE RELEVANT PORT ION IS AS UNDER: 14 SEC.2(47) : TRANSFER, IN RELATION TO A CAPITAL ASSET, INCLUDE S, ( I ) THE SALE , EXCHANGE OR RELINQUISHMENT OF THE AS SET ; OR ( II ) THE EXTINGUISHMENT OF ANY RIGHTS THEREIN ; OR (III) .. .. .. (IV) .. .. .. FROM THE ABOVE COMPUTATION OF LOSS FILED BY THE ASS ESSEE, IT IS CLEAR THAT ASSESSEE HAS TREATED THE TRANSFER AS THAT OF S ALE, BUT THE SAME DOES NOT AMOUNT TO SALE. BECAUSE WHAT HAS HAPPENED IS THAT, THE ASSESSEE HAS SURRENDERED THE OLD UNITS OF US-64 IN LINE WITH THE SCHEME ANNOUNCED BY THE UNIT TRUST OF INDIA AND GOT THE NEW TAX FREE BONDS. THE LD. COUNSEL OF THE ASSESSEE HAD STRONGLY RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F ANARKALI SARABHAI VS. CIT [SUPRA]. HOWEVER, IN THAT CASE THE FACTS AR E QUITE DIFFERENT. IN THAT CASE THE INDIVIDUAL ASSESSEE WAS HOLDING 297 R EDEEMABLE PREFERENCE SHARES OF UNIVERSAL CORPORATION PVT. LTD . THE COMPANY DECIDED TO REDEEM THE PREFERENCE SHARES AND ASSESSE E RECEIVED A SUM OF RS.2,97,000/- WHICH WAS MORE THAN THE AMOUNT ASS ESSEE HAD PAID FOR ACQUIRING THESE SHARES. IT WAS URGED THAT NO CA PITAL GAIN TAX IS ATTRACTED U/S.45 BECAUSE REDEMPTION OF SHARES DOES NOT AMOUNT TO TRANSFER. HOWEVER, THE HON'BLE SUPREME COURT REFERR ED TO THE DEFINITION OF TRANSFER AND HELD THAT IN THIS CASE REDEMPTION WOULD AMOUNT TO TRANSFER. IT IS PERTINENT TO NOTE THAT AT PAGE 426 OF THE REPORT, THE HON'BLE SUPREME COURT HAS GIVE THE REAS ONING WHICH IS AS UNDER: CLAUSE (47) OF SECTION 2 GIVES AN INCLUSIVE DEFINI TION TO TRANSFER. THIS IS NOT AN EXHAUSTIVE DEFINITION. CLAUSE [I] OF SUB-SECTION [47] OF SECTION 15 2 SPEAKS OF SALE, EXCHANGE OR RELINQUISHMENT OF TH E ASSET. THIS IMPLIES PARTING WITH ANY CAPITAL ASSET FOR GAIN WHI CH WILL BE TAXABLE UNDER SECTION 45. IN THE INSTANT CASE, WHAT HAS HAP PENED IS THAT THE ASSESSEE HAD PURCHASED THE PREFERENCE SHARES AT LESS THAN F ACE VALUE. WHEN THE SHARES WERE REDEEMED BY THE COMPANY , SHE RECEIVED MORE THAN WHAT SHE HAD PAID FOR THE SHARES . IN ORDER TO GET THIS AMOUNT THE ASSESSEE HAD TO GIVE UP OR ABANDON OR SURRENDER THE SHARES HELD BY HER. THE MEANING OF THE WORD RELINQ UISH AS GIVEN IN WEBSTERS COMPREHENSIVE DICTIONARY, INTERNATIONAL EDITION, 1984, IS 1. TO GIVE UP; ABANDON; SURRENDER. 2. TO CEASE TO DEMAND RENOUNCE; TO RELINQUISH A CLAIM. 3. TO LET GO [A HOLD OR SOME THING HELD]. THE ASSESSEE IN THIS CASE HAS GIVEN UP THE SHARES AND HAS RECEI VED IN LIEU THEREOF A SUM OF MONEY. THIS, IN OUR VIEW, COMES CL EARLY WITHIN THE MISCHIEF OF SECTION 2[47][I]. THAT APART, IN OUR VIEW, THE TRANSACTION AMOUNTS TO SALE. THE HON'BLE SUPREME COURT HAS DISCUSSED THE ISSUE I N FURTHER DETAILS AND REFERRED TO VARIOUS PROVISIONS OF THE COMPANIES ACT. THE FUNDAMENTAL REASON IS THAT IN CASE OF REDEMPTION TH E CAPITAL OF COMPANY STANDS REDUCED, WHICH MEANS, THAT THE COMPA NY ITSELF HAS BOUGHT ITS SHARES AND FOR THAT MATTER IN THE HANDS OF A PERSON WHO HAS SURRENDERED THE SHARES FOR THE PURPOSE OF REDEMPTIO N, THE TRANSFER WOULD AMOUNT TO SALE. THEREFORE, IN OUR UNDERSTANDI NG, THIS DECISION CANNOT ASSIST THE CASE OF THE ASSESSEE. 18. TO FURTHER UNDERSTAND THE MEANING OF THE TRANS FER, LET US REFER TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RASIKLAL MANEKLAL [HUF] 177 ITR 198. IN THAT CASE, THE ASSESSEE WAS HOLDING 90 SHARES IN ONE S. COMPANY OF FACE VALUE O F RS.100/- EACH. PURSUANT TO THE SCHEME OF AMALGAMATION SANCTIONED B Y THE HIGH COURT, THE HOLDERS OF THE SHARES IN S. COMPANY WERE TO BE ALLOTTED ONE SHARE OF RS.125/- EACH OF NS COMPANY FOR TWO SHARES IN S. COMPANY AND S. COMPANY WAS TO BE DISSOLVED. THE ASSESSEE I N THAT CASE WAS ALLOTTED 45 SHARES IN N.S COMPANY. A QUESTION AROSE , WHETHER THIS 16 WOULD AMOUNT TO TRANSFER AND THE HON'BLE SUPREME CO URT HELD THAT THERE WAS NEITHER AN EXCHANGE NOR A RELINQUISHME NT IN THIS TRANSACTION. THE HON'BLE SUPREME COURT OBSERVED AS UNDER: AN EXCHANGE INVOLVES THE TRANSFER OF PROPERTY BY ONE PERSON TO ANOTHER AND RECIPROCALLY THE TRANSFER OF PROPERTY B Y THAT OTHER TO THE FIRST PERSON. THERE MUST BE A MUTUAL TRANSFER OF OW NERSHIP OF ONE THING FOR THE OWNERSHIP OF ANOTHER. A RELINQUISHMENT TAKES PLACE WHEN THE OWNER WITHD RAWS HIMSELF FROM THE PROPERTY AND ABANDONS HIS RIGHTS THERETO. IT PRESUMES THAT THE PROPERTY CONTINUES TO EXIST AFTER THE RELINQUIS HMENT. WHERE, UPON AMALGAMATION, THE COMPANY IN WHICH THE ASSESSEE HOLDS SHARES STAND DISSOLVED, THERE IS NO RELINQUISHMENT BY THE ASSESSEE . THE APEX COURT HAD ALSO OBSERVED THAT IN CASE OF EX CHANGE THAT ONE PERSON TRANSFERS A PROPERTY TO ANOTHER PERSON IN EX CHANGE OF ANOTHER PROPERTY, THE PROPERTY CONTINUES TO BE IN EXISTENCE . IN THAT CASE, SHARES OF S. COMPANY HAD CEASED TO BE IN EXISTENCE AND THEREFORE THE TRANSACTION DID NOT INVOLVE ANY TRANSFER. SIMILARLY , IN THE CASE BEFORE US, THE UNITS OF US-64 OF UNIT TRUST OF INDIA CEASE D TO BE IN EXISTENCE AFTER THE ASSESSEE OPTED FOR CONVERSION OF THE UNIT S INTO TAX FREE BONDS AND THEREFORE NO EXCHANGE CAN SAID TO HAVE TAKEN PL ACE WHICH CAN BE CONSTRUED AS TRANSFER. SIMILARLY, IN THE CASE OF RE LINQUISHMENT ALSO, THE OWNER WITHDRAWS HIMSELF FROM THE PROPERTY AND ABAND ON HIS RIGHTS, BUT THE PROPERTY CONTINUES TO BE IN EXISTENCE. IN THE C ASE BEFORE US, FIRST OF ALL, THE ASSESSEE HAS NOT ABANDONED HIS RIGHTS BECA USE ASSESSEE GOT NEW TAX FREE BONDS ON THE STRENGTH OF ITS RIGHTS IN THE OLD US-64 UNITS WHICH IT WAS HOLDING. FURTHER, THESE UNITS HAD CEAS ED TO BE EXISTING AFTER SUCH CONVERSION. THE COURT HAD FURTHER OBSERV ED THAT ASSESSEE HAD GOT NEW SHARES IN THE NS COMPANY BECAUSE OF HOL DING OF 90 17 SHARES IN THE S. COMPANY WHICH WAS A QUALIFYING CON DITION. IN THE CASE BEFORE US ALSO, THE ASSESSEE COMPANY GOT THE NEW TA X FREE BONDS ON THE BASIS OF ITS HOLDINGS OF US-64 UNITS. 19. THOUGH THE OLD US-64 UNITS HAD CEASED TO EXIST AND IN PLACE OF THEM AND ON THE STRENGTH OF THOSE HOLDINGS, THE ASS ESSEE HAS BEEN ALLOTTED NEW TAX FREE BONDS AND, THEREFORE, EVEN TH E EXTENDED DEFINITION OF RELINQUISHMENT IS NOT APPLICABLE. WE FURTHER FIND THAT EVEN THE TERM EXTINGUISH IS NOT APPLICABLE IN THIS CAS E BECAUSE, THOUGH, OLD UNITS OF US-64 HAS CEASED TO BE EXISTING, BUT IN PL ACE OF THEM A NEW ASSET IN THE FORM OF UTI TAX FREE BONDS HAVE COME IN TO EXISTENCE. THUS, IT IS NOT A CASE OF EXTINGUISHMENT BUT A SIMP LE CASE OF CONVERSION OF ONE ASSET INTO ANOTHER. IN VIEW OF THE ABOVE DIS CUSSION, WE ARE OF THE HUMBLE OPINION, THAT THE TRANSACTION REGARDING SURRENDER OF US-64 UNITS FOR CONVERTING THE SAME INTO UNIT TRUST OF IN DIA 6.75% TAX FREE BONDS IN TERMS OF THE SCHEME OF THE UNIT TRUST OF IN DIA WHICH WAS GUARANTEED BY THE GOVERNMENT OF INDIA, WOULD NOT AM OUNT TO TRANSFER. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT[A] AND RESTORE THAT OF THE AO. 20. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 16 TH DAY OF JULY, 2010. SD/- SD/- (R.V.EASWAR) (T.R.SOOD) PRESIDENT ACCOUNTANT MEMBER MUMBAI: 16 TH JULY, 2010. 18 P/-*