The DCIT, Circle-10, Ahmedabad V. Shri Areez P. Khambatta, Ahmedabad

ITA 795/AHD/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6891 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 27-09-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 12-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAY RAJKUMAR SRDR
• Assessee Lawyers: PF JAIN
• Keywords: Capital asset
• Section: 80IB; 56

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD .., ..!'#$, % BEFORE SHRI T.K. SHARMA, JUDICIAL MEMBER AND SHRI A.K.GARODIA, ACCOUNTANT MEMBER ITA NO.795/AHD/2009 ASSESSMENT YEAR:2005-06 DY. COMMISSIONER OF INCOME-TAX, CIRCLE-10, AHMEDABAD V/S. SHRI AREEZ P KHAMBHATTA B/4, ELLISBRIDGE GYMKHANA, ELLISBRIDGE, AHMEDABAD PAN NO.AAMPK6322L (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI JAY RAJKUMAR, SR-DR RESPONDENT BY:- SHRI P.F. JAIN, AR DATE OF HEARING 07-10-2011 DATE OF PRONOUNCEMENT 12 -12-2011 /O R D E R PER A.K. GARODIA, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE HAS BEEN DIRECTED AGAIN ST THE ORDER OF LD. CIT(A) XVI, AHMEDABAD DATED 15.01.2009 FOR THE ASSESSMENT YEAR 2004-05. GROUND NO. 1 AND 2 RAISED BY THE REVENUE ARE REPRODUCED AS UNDER : 1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.2,06,49,280/- MADE ON ACCOUNT OF DEDUCTION U/S 8 0IB, THOUGH A.O. HAS GIVEN A CLEAR FINDINGS THAT THE ASSESSEE IS NOT ELI GIBLE FOR THE DEDUCTION. 2) THE LD. CIT(A) HAS ERRED IN DELETING ADDITION TO WARD SALARY & WAGES OF RS.1,50,000/- EACH DISALLOWED BY A.O. 2. REGARDING GROUNDS NO.1 & 2, LD. D.R. RELIED ON T HE ORDER OF THE A.O. WHEREAS IT IS SUBMITTED BY THE LD. A.R. OF THE ASSESSEE THA T THESE ISSUES ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2003-04 AND 2006-07 IN ITA NOS.2061 /AHD/2007 AND ITA NO.795/AHD/2009 A.Y.2005-06 DCIT, CIR-10 ABD V. SH. AREEZ P KHAMBHATTA PAGE 2 1942/AHD/2009 DATED 12.08.2011. HE SUBMITTED THAT THE COPY OF THIS TRIBUNAL ORDER IS AVAILABLE ON PAGES 1 TO 9 OF THE PAPER BOOK. 3. WE HAVE CONSIDERED RIVAL SUBMISSIONS, PERUSED TH E MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT IN ASSESSMENT YEAR 2003-04 ALSO, THIS VERY ISSUE WAS THERE BEFORE THE TRIBUNAL FOR THIS ASSESSEE ITSELF AS TO WHETHER THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U /S 80-IB OR NOT. IN THAT YEAR ALSO, IT WAS THE BASIS OF THE A.O. FOR REJECTING THE CLAIM O F THE ASSESSEE THAT THE NUMBER OF WORKERS ATTENDING THE FACTORY AND WORKING IN THE MA NUFACTURING PROCESS WAS LESS THAN 10. THIS ISSUE HAS BEEN DECIDED BY THE TRIBUN AL IN FAVOUR OF THE ASSESSEE IN HIS OWN CASE AS PER PARA 6 & 8 OF THE TRIBUNAL ORDE R WHICH ARE REPRODUCED BELOW: 6. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THA T ON THE BASIS OF LOOSE MUSTER ROLL SHEETS FOUND DURING .THE COURSE OF SURV EY THE A.O. HAS HELD THAT ASSESSEE WAS NOT HAVING MORE THAN 10 WORKERS, THERE FORE, NOT ELIGIBLE FOR CLAIM OF DEDUCTION U/S.80IB. BY THE IMPUGNED ORDER, THE CIT (A) HAS ANALYZED THE STATEMENT RECORDED BY THE A.O. DURING THE COURS E OF SURVEY AND ITS REPLIES FILED BY HIM VIS-A-VIS, INSPECTION REPORT OF FACTOR Y INSPECTOR ON TWO OCCASIONS AND THE INSPECTION REPORT OF ESI INSPECTOR, WHEREIN NUMBER OF WORKERS AND ALSO THE NAME OF WORKERS ENGAGED IN THE BOTTLE WASH ING UNIT WAS MENTIONED. FROM, THE RECORDS WE FIND THAT A.O. HAS ONLY CONSID ERED WORKERS ENGAGED IN ONE UNIT, WHEREAS THE ASSESSEE WAS HAVING ANOTHER W ASHING UNIT OF SAME ACTIVITY, THEREFORE, THE WORKERS ENGAGED IN BOTTLE WASHING UNIT WAS ALSO REQUIRED TO BE TAKEN INTO CONSIDERATION WHILE COMPU TING TOTAL NUMBER OF WORKERS EMPLOYED BY THE ASSESSEE. FROM THE RECORD W E FIND THAT AS PER THE WAGES REGISTER, ATTENDANCE REGISTER AND INSPECTION REPORTS OF FACTORY AND ESI INSPECTORS FULLY SUPPORT THE CONCLUSION DRAWN BY TH E CIT (A) TO THE EFFECT: HIT ASSESSEE WAS HAVING BOTTLE WASHING UNIT ALSO, AND T HE WORKERS ENGAGED THEREIN ARE ALSO TO BE TAKEN INTO CONSIDERATION FOR COMPUTING THE TOTAL NUMBER O' WORKERS EMPLOYED. THE MUSTER ROLL ON WHICH THE A O HAS RELIED DID NOT CONTAIN THE NAMES OF THE WORKERS. THE NAME OF WORKE RS ENGAGED IN BOTTLE WASHING UNIT WERE NOT ENTERED INTO MUSTER ROLL, HOW EVER, IN THE WAGES REGISTER AND ATTENDANCE REGISTER THE NAMES OF ALL THESE WORK ERS WERE DULY MENTIONED. THE DETAILED FINDING RECORDED BY THE CIT (A) HAS NO T BEEN CONTROVERTED BY THE DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON REC ORD TO THIS EFFECT. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDING RECORDED BY THE CIT (A) THEREBY TREATING THE ASSESSEE AS ILLEGI BLE FOR CLAIM OF DEDUCTION U/S. 80IB ON THE BASIS OF NUMBER OF WORKERS EMPLOYE D IN ITS INDUSTRIAL UNDERTAKING. 8. THE NEXT GROUND OF THE REVENUE RELATES TO DELETI NG THE DISALLOWANCE OF SALARY EXPENSES INCURRED ON THE WORKERS. IN VIEW OF THE FINDING THAT ASSESSEE WAS EMPLOYING MORE THAN 10 WORKERS, THE ACTUAL SALA RY PAID TO THEM WAS HELD TO BE ALLOWABLE BY THE CIT (A). ACCORDINGLY, ON THE SAME REASONING AS GIVEN IN GROUND NO.L OF THE DEPARTMENT'S APPEAL, WE DO NO T FIND ANY INFIRMITY IN THE ITA NO.795/AHD/2009 A.Y.2005-06 DCIT, CIR-10 ABD V. SH. AREEZ P KHAMBHATTA PAGE 3 ORDER OF THE CIT (A) FOR ALLOWING CLAIM OF DEDUCTIO N ON ACCOUNT OF SALARY EXPENSES OF THE EMPLOYEES. ACCORDINGLY GROUND TAKEN BY THE REVENUE IN BOTH THE YEARS ON ACCOUNT OF SALARY EXPENSES ARE DI SMISSED. 4. SINCE, THE FACTS ARE IDENTICAL IN THE PRESENT YE AR, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW IN THE PRESENT YEAR AND HENCE, RESPECTFULLY FOLLOWING THE PRECEDENT, WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THESE TWO ISSUES AND GROUND NO.1 & 2 ARE REJECTED. 5. THE THIRD GROUND HAS RAISED BY REVENUE IS AS UND ER:- 3) THE LD. CIT(A) HAS ERRED IN ALLOWING INDEXATION ON UTI DEEP DISCOUNT BONDS DISALLOWED BY A.O. WHILE COMPUTING INCOME FRO M CAPITAL GAINS. 6. THE BRIEF FACTS ARE THAT IT IS STATED BY THE ASS ESSING OFFICER IN PARA-5 OF THE ASSESSMENT ORDER THAT ASSESSEE HAS OFFERED RS.1,39, 890/- UNDER THE HEAD CAPITAL GAIN AS SHORT TERM CAPITAL GAIN AND THE ASSESSEE H AS CLAIMED LOSS OF RS.82,13,555/- AS LONG TERM CAPITAL LOSS. THE AO FU RTHER NOTICED THAT AS PER THE STATEMENT OF CAPITAL GAINS, IT IS SEEN THAT THE ASS ESSEE HAS INCURRED A LOSS OF RS.2,28,12,956/- ON 1,14,00,000 UNITS OF UTI WHICH WERE CONVERTED BY UTI INTO TAX FREE BONDS PRIOR TO THE ACTUAL DATE OF REDEMPTION. THE AO HAS ALSO NOTED THAT THE PRICE OF ACQUISITION HAS BEEN SHOWN AT RS.11,08,75, 500/- IN THE YEAR 1999 AND THE SAME HAD BEEN SOLD IN THE YEAR 2004 FOR RS.11.40 CR ORES. THE ASSESSEE HAS CLAIMED THE BENEFIT OF INDEXATION AND INDEXED COST HAS BEEN WORKED OUT AT RS.13,68,12,956/- AND THEREBY, A LONG TERM CAPITAL LOSS OF RS.2,28,12,956/- HAS BEEN WORKED OUT AND WAS SET OFF AGAINST THE LONG TE RM CAPITAL GAINS OF RS.1,45,99,401/- AND THE BALANCE OF RS.82,13,555/- HAS BEEN CLAIMED AS LONG TERM CAPITAL LOSS. THE AO ALSO NOTED THAT THE NAME OF TH E SECURITY IN QUESTION WAS UTI MIP 99 AND THE SAME WAS PURCHASED BY THE ASSESSEE U /S.54EA TO CLAIM THE BENEFIT OF CAPITAL GAINS TAX EXEMPTION. IT WAS ALSO FOUND T HAT THERE WERE VARIOUS OPTIONS AVAILABLE REGARDING INTEREST OF THOSE UNITS AND THE ASSESSEE HAD OPTED SECOND OPTION I.E. ANNUAL INCOME OPTION, WHEREIN THE PAYOUT TO TH E ASSESSEE WAS FIXED @ 11.30% P.A. THE AO ASKED THE ASSESSEE AS TO WHY THE INDEXA TION BENEFIT CLAIMED BY THE ASSESSEE SHOULD BE ALLOWED TO THE ASSESSEE IN RESPE CT OF UTI MIP 99. THE ASSESSEE SUBMITTED SOME EXPLANATION BUT THE AO WAS NOT SATISFIED. HE FURTHER NOTED THAT THE SCHEME IN QUESTION WAS REQUIRED TO BE LIST ED ON WHOLESALE DEBT SEGMENT OF ITA NO.795/AHD/2009 A.Y.2005-06 DCIT, CIR-10 ABD V. SH. AREEZ P KHAMBHATTA PAGE 4 NSE, WHICH CLEARLY IMPLIED THAT IT IS A DEBT INSTRU MENT, WHEREIN A FIXED RATE OF INTEREST IS AVAILABLE WHICH IS IN THE NATURE OF FD/NSC, BOND S AND DEBENTURES AND OTHER FIXED INCOME INSTRUMENTS. THE AO INVOKED THE 3 RD PROVISO TO SECTION 48 AS PER WHICH NO INDEXATION IS ALLOWABLE ON BONDS AND DEBENTURES. TH E AO DISALLOWED THE CLAIM OF THE ASSESSEE REGARDING INDEXATION BENEFIT CLAIMED B Y ASSESSEE. 7. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFOR E LD. CIT(A), WHO HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY FOLLOWIN G THE TRIBUNALS ORDER RENDERED IN THE CASE OF MAANARAJ TRADING PVT. LTD. V. DCIT IN ITA NO.6695/M/2004 DATED 27-05- 2005. NOW, THE REVENUE IS IN APPEAL BEFORE US. 8. LD. DR OF THE REVENUE SUPPORTED THE ASSESSMENT O RDER, WHEREAS LD. AR OF THE ASSESSEE SUBMITTED THE ORDER OF LD. CIT(A). HE ALSO PLACED RELIANCE ON THE TRIBUNAL DECISION RENDERED IN THE CASE OF MAANARAJ TRADING PVT. LTD. (SUPRA) AND SUBMITTED THAT THE COPY OF TRIBUNALS DECISION IS A VAILABLE ON PAGES 10-21 OF THE PAPER BOOK AND HE ALSO SUBMITTED THAT THIS DECISION WAS FOLLOWED BY LD CIT(A) AND THERE IS NO CONTRARY DECISION AVAILABLE ON THIS ISS UE AND THEREFORE, THE ISSUE SHOULD BE DECIDED IN FAVOUR OF ASSESSEE BY FOLLOWING THE T RIBUNALS DECISION. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AN D ALSO GONE THROUGH THE COMMENTARY IN THE BOOK LAW OF INCOME TAX WRITTEN BY SHRI A.C. SAMPATH IYENGAR AS REVISED BY SHRI S. RAJARATNAM , 10 TH EDITION, VOLUME-3, PAGES 4330- 4332 WHICH CONTAINS THE DISCUSSION REGARDING INDEXA TION BENEFITS FOR BONDS AND DEBENTURES. THE RELEVANT PORTION OF THIS COMMENTARY BEING PARA-28 IS REPRODUCED BELOW:- 28. NO INDEXATION FOR BONDS AND DEBENTURES THE THIRD PROVISO TO SECTION 48 WAS INSERTED BY THE FINANCE ACT, 1997, WITH EFFE CT FROM 1 APRIL, 1998. IT EXCLUDES BONDS AND DEBENTURES OTHER THAN CAPITAL IN DEXED BONDS ISSUED BY THE GOVERNMENT FROM THE LIST OF CAPITAL ASSETS ELIG IBLE FOR THE BENEFIT OF INDEXATION. THE INTENTION IS CLEARLY TO DENY BENEFIT OF INDEXAT ION TO BONDS AND DEBENTURES. BONDS AND DEBENTURES HAVE NOT BEEN DEFINED UNDER TH E ACT. IT HAS TO BE UNDERSTOOD THAT THE ORIGIN OF BONDS COULD BE FOUND IN THE PRACTICE OF ISSUE OF NOTES BY THE BANK OF ENGLAND OR CENTRAL BANK CONTRO LLING CURRENCY AND CREDIT. THE NOTES UNDERTAKE ENCASHMENT IN CURRENCY. WHERE A PRIVATE BANK OR A ITA NO.795/AHD/2009 A.Y.2005-06 DCIT, CIR-10 ABD V. SH. AREEZ P KHAMBHATTA PAGE 5 PUBLIC COMPANY ISSUES SUCH NOTES, IT TAKES THE FORM OF BONDS AND DEBENTURES. THEY ARE CHARACTERIZED AS CASH CERTIFICATES OR TIME BONDS. DEPOSITS THEMSELVES WHEN HELD AS INVESTMENTS COULD BE TREATE D ON PAR WITH SUCH BONDS, WHEN THEY WERE ACCEPTED AS CAPITAL ASSETS. W HERE SUCH BONDS OR CERTIFICATES ARE ISSUED BY THE GOVERNMENT, THEY ARE USUALLY KNOWN AS SECURITIES. THE COMMON FACTOR OF ALL THESE INSTRUME NTS IS THAT THEY ARE PAYABLE IN TERMS OF AN ASSURED SUM OF MONEY, SO THAT THEY A RE ALSO KNOWN AS MONEY BONDS. THE OBJECT OF THE THIRD PROVISO TO SECTION 4 8 IS OBVIOUSLY TO DENY THE BENEFIT OF INDEXATION FOR SUCH MONEY BONDS. (1) BOND . BOND IS DEFINED IN MITRAS LEGAL AND COMMERCIAL DICTIONARY AS UNDER: A BOND IS AN INSTRUMENT UNDER SEAL, USUALLY A DEED POLL, WHEREBY ONE PERSON BINDS HIMSELF TO ANOTHER FOR THE PAYMENT OF A SPECIFIED SUM OF MONEY EITHER IMMEDIATELY OR AT A FIXED FUTURE DATE. THE PERSON WHO SO BINDS HIMSELF IS CALLED THE OBLIGER AND THE PERSON TO WHOM HE IS BOUND THE OBLIGE; AND THE INSTRUMENT ITSELF IS SOMETIMES CALLED AN OBLIGATION. HALSBURYS LAW OF ENGLAND, 3 RD ED. VOL. 3 P. 329. BOND INCLUDES ANY INSTRUMENT WHEREBY A PERSON OBLIG ES HIMSELF TO PAY MONEY TO ANOTHER, ON CONDITION THAT THE OBLIGATION SHALL BE VOID IF A SPECIFIED ACT IS PERFORMED, OR IS NOT PERFORMED, AS THE CASE MAY BE LIMITATION ACT, 1963, SECTION 2(D). BOND INCLUDES (A) ANY INSTRUMENT WHEREBY A PERSON OBLIGES HIMSELF TO PAY MONEY TO ANOTHER, ON CONDITION THAT THE OBLIGATION SHALL BE VOID IF A SPECIFIED ACT IS PERFORMED, OR IS NOT PERFORMED, AS THE CASE MAY BE; (B) ANY INSTRUMENT ATTESTED BY A WITNESS AND NOT PA YABLE TO ORDER OR BEARER, WHEREBY A PERSON OBLIGES HIMSELF TO PAY MON EY TO ANOTHER; AND (C) ANY INSTRUMENT SO ATTESTED, WHEREBY A PERSON OB LIGES HIMSELF TO DELIVER GRAIN OR OTHER AGRICULTURAL PRODUCE TO ANOT HER INDIAN STAMP ACT,1899, SECTION 2(5) (2) SECURITIES. SECURITIES ARE DEFINED IN THE SAME BOOK AS UNDER : A SECURITY, SPEAKING GENERALLY, IS ANYTHING THAT MA KES THE MONEY MORE ASSURED IN ITS PAYMENT OR MORE READILY RECOVERABLE, AS DISTINGUISHED FROM, E.G. A MERE I.O.U, WHICH IS ONLY EVIDENCE OF A DEBT STROUDS JUDICIAL DICTIONARY, 2 ND ED. NO DOUBT SECURITIES ARE WIDELY DEFINED UNDER SECURI TIES CONTRACTS (REGULATION) ACT, 1956 TO INCLUDE EVEN SHARES AND S CRIPS BESIDES STOCKS, BONDS, DEBENTURES OR OTHER MARKETABLE SECUR ITIES APART FROM WHAT IS GENERALLY UNDERSTOOD BY THE SECURITIES TO M EAN GOVERNMENT SECURITIES. STOCK WILL INCLUDE EITHER STOCK OF SHAR ES OR DEBENTURE STOCK OR STOCKS GIVEN AS SECURITIES FOR A SPECIFIED SUM D EMANDED AND NOT BY WAY OF ANY STANDARD DENOMJNATION. SINCE THE PROVISO DOES NOT USE THE WORD STOCKS , THE STOCK OF BONDS OR DEBENTURES WILL NOT BE ELI GIBLE FOR INDEXATION. HENCE, SECURITIES, WHEN THEY ARE ACQUIR ED AS STOCK WILL NOT ITA NO.795/AHD/2009 A.Y.2005-06 DCIT, CIR-10 ABD V. SH. AREEZ P KHAMBHATTA PAGE 6 BE SO ELIGIBLE, THOUGH STOCK OF SHARES WILL BE SO E LIGIBLE, THE TEST BEING THAT, WHAT IS ENCASHABLE ON MATURITY ON SPECIFIED A MOUNT WILL BE BONDS AND SECURITIES FOR THE PURPOSE OF INDEXATION IN THE LIGHT OF THE OBJECT OF THE PROVISION. IN THIS CONTEXT, ONE MAY ALSO REFER TO THE DEFINITI ON OF SECURITIES, WHEN INTEREST ON SECURITIES WAS ASSESSABLE UNDER SEPARAT E HEADS IN SECTIONS 18 TO 21 OMITTED BY THE FINANCE ACT, 1998 WITH EFFE CT FROM 1-4-1999. THE ITEMS COVERED ARE SECURITIES OF CENTRAL AND ST ATE GOVERNMENT AND DEBENTURES OR OTHER SECURITIES FOR MONEY ISSUED BY OR ON BEHALF OF A LOCAL AUTHORITY OR A COMPANY OR A CORPORATION ESP ECIALLY BY A CENTRAL, STATE OR PROVINCIAL ACT. THIS SOURCE HAS NOW BEEN SHIFTED TO SECTION 56 AS INCOME FROM OTHER SOURCES, WHERE IT IS NOT ASSES SABLE AS BUSINESS SINCE. SECTION 2(42C) PRIOR TO ITS BEING REPLACED BY THE P RESENT SECTION READS AS UNDER: 2(42C) SECURITY MEANS A GOVERNMENT SECURITY AS D EFINED IN CLAUSE (2) OF SECTION 2 OF THE PUBLIC DEBT ACT, 1944 (18 O F 1944). THE SAME DEFINITION IS FOUND UNDER SECTION 88(8)(V) AS WELL. SECTION 2(2) OF THE PUBLIC DEBT ACT, 1944 DEFINES GOVERNMENT SECURITY AS UNDER: GOVERNMENT SECURITY MEANS (A) A SECURITY, CREATED AND ISSUED, WHETHER BEFORE OR AFTER THE COMMENCEMENT OF THIS ACT, BY THE CENTRAL GOVERNMENT FOR THE PURPOSE OF RAISING A PUBLIC LOAN, AND HAVING ONE OF THE FOLLOWING FORMS, NAMELY:- (I) STOCK TRANSFERABLE BY REGISTRATION IN THE BOOKS OF THE BANK; OR (II) A PROMISSORY NOTE PAYABLE TO ORDER; OR (III) A BARER BOND PAYABLE TO BEARER; OR (IV) A FORM PRESCRIBED IN THIS BEHALF; (B) ANY OTHER SECURITY CREATED AND ISSUED BY THE CE NTRAL GOVERNMENT IN SUCH FORM AND FOR SUCH OF THE PURPOSES OF THIS ACT AS MAY BE PRESCRIBED. THE ABOVE DEFINITION WOULD CLEARLY INDICATE THAT GO VERNMENT SECURITIES COULD BE BY WAY OF STOCK, SO THAT STOCKS OF GOVERNM ENT SECURITIES WOULD ALSO COME WITHIN THE DEFINITION OF SECURITIES . SECTION 2(42A) OF THE INCOME-TAX ACT DEFINING SHORT -TERM CAPITAL ASSET HAS THIS DEFINITION: ITA NO.795/AHD/2009 A.Y.2005-06 DCIT, CIR-10 ABD V. SH. AREEZ P KHAMBHATTA PAGE 7 EXPLANATION 2. FOR THE PURPOSES OF THIS CLAUSE, THE EXPRESSION SECURITY: SHALL HAVE THE MEANING ASSIGNED TO IT I N CLAUSE (H) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 195 6 (42 OF 1956). SECTION 2(H) OF SECURITIES CONTRACT (REGULATION) AC T OF 1956 WHICH READS AS UNDER: (H) SECURITIES INCLUDE (I) SHARES, SCRIPS, STOCKS, BONDS, DEBENTURES, DEBE NTURES STOCK OR OTHER MARKETABLE SECURITIES OF A LIKE NATURE IN OR OF ANY INCORPORATED COMPANY OR OTHER BODY CORPORATE; (IA) DERIVATIVE; (IB) UNITS OR ANY OTHER INSTRUMENT ISSUED BY ANY CO LLECTIVE INVESTMENT SCHEME TO THE INVESTORS IN SUCH SCHEMES; (IC) SECURITY RECEIPT AS DEFINED IN CLAUSE (ZG) OF SECTION 2 OF THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSE TS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002; (I) GOVERNMENT SECURITIES; (IIA) SUCH OTHER INSTRUMENTS AS MAY BE DECIDED BY T HE CENTRAL GOVERNMENT TO BE SECURITIES; AND (II) RIGHTS OR INTEREST IN SECURITIES. THE ABOVE DEFINITION IS AN EXCLUSIVE ONE EVEN AS IN DICATED IN SECTION 2(42A) S CONFINED TO SHORT TERM CAPITAL GAINS. THE PROVISOS TO SECTION 48, IT MAY BE POINTED OUT, CLEARLY MAKES A DISTINCTION BETWEEN SH ARES BY A COMPANY (AS IN FIRST PROVISO) AND THE SECURITY AND DEBENTURES (IN THIRD PROVISO). THE WORD SECURITY OCCURS IN DIFFERENT CONTEXTS AS IN EXPLANATION TO SECTIONS 115AA, 194H, ETC. BUT MEANING HAS TO BE UNDERSTOOD WITH REFERENCE TO THE CONTEXT IN EACH CASE. IN THE CONTEXT OF THIRD PROVISO TO SECTION 48, BOND S AND DEBENTURES ARE THOSE WHICH ARE REPAYABLE IN TERMS OF MONEY, SO THAT THER E NEED BE NO DOUBT WHATSOEVER, THAT INDEXATION IS NOT AVAILABLE FOR BO NDS ISSUED BY INSTITUTIONS LIKE MTNL, ICICI, PSEB, ETC. STOCKS OF GOVERNMENT S ECURITIES ARE ALSO SIMILARLY NOT ELIGIBLE FOR INDEXATION. 10. FROM THE ABOVE COMMENTARY, IT EMERGES THAT THE RELEVANT TERMS BONDS & DEBENTURES ARE NOT DEFINED IN INCOME-TAX ACT, 196 1. OTHERWISE ALSO, IT IS A FACT THAT THESE TWO TERMS ARE NOT DEFINED IN THE INCOME TAX A CT. AS PER THE DEFINITION OF BONDS IN MITRAS LEGAL AND COMMERCIAL DICTIONARY , A BOND IS AN INSTRUMENT UNDER SEAL, WHEREBY ONE PERSON BINDS HIMSELF TO ANOTHER F OR THE PAYMENT OF A SPECIFIED ITA NO.795/AHD/2009 A.Y.2005-06 DCIT, CIR-10 ABD V. SH. AREEZ P KHAMBHATTA PAGE 8 SUM EITHER IMMEDIATELY OR AT A FIXED FUTURE DATE. H ENCE, IN OUR CONSIDERED OPINION, IT IS VERY MUCH RELEVANT TO EXAMINE, CONSIDER AND DECI DE AS TO WHETHER THE IMPUGNED CAPITAL ASSET IN THE PRESENT CASE I.E. UTI, MIP-99 IS A BOND OR NOT. IN THE TRIBUNAL ORDER RENDERED IN THE CASE OF MAANRAJ TRADING PVT. LTD. (SUPRA), THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE ON THIS BASIS THA T AS PER 3 RD PROVISO TO SECTION 48, THE BENEFIT OF INDEXATION IS NOT ALLOWABLE FOR A.Y 1998-99 ON BONDS & DEBENTURES AND SINCE THIS PROVISO IN RESTRICTED TO BONDS & DEB ENTURES, IT CANNOT BE APPLIED TO THE UNITS OF UTI MIP(II) 97. BUT THIS ASPECT WAS NOT EX AMINED AND CONSIDERED AT ALL AS TO WHETHER UTI MIP(II) 97 IS BOND OR NOT. RELEVANT PAR A OF THIS TRIBUNAL ORDER IS PARA- 16 , WHICH IS REPRODUCED BELOW:- 16. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE VIEW THAT THE THIRD PROVISION OF SECTION 48 PROVIDES THAT THE BENEFIT OF INDEXATI ON SHALL NOT BE ALLOWABLE FROM A.Y. 1998-99 ONWARDS ON THE SALE OF BONDS AND DEBENTURES OTHER THAN CAPITAL INDEXED BONDS ISSUED BY GOVT. THIS PROVISO IS RESTRICTED ONLY TO BONDS AND DEBENTURES AND IT DOES NOT REFER TO ANY OTHER I NVESTMENT WHICH IS OF THE SIMILAR NATURE. WHAT IS NOT PROVIDED IN THE SECTION , CANNOT BE READ INTO IT AND THE BENEFIT CANNOT BE DENIED TO THE ASSESSEE. THERE IS NO AMBIGUITY IN THE PROVISION AS IT APPLIES TO BONDS AND DEBENTURES ONL Y. EVEN IF IT IS PRESUMED THAT THERE IS AMBIGUITY IN THE PROVISION, THEN THE BENEFIT SHOULD BE GIVEN TO THE ASSESSEE AND THE INTERPRETATION FAVOURABLE TO THE A SSESSEE SHOULD BE APPLIED. ACCORDINGLY WE DIRECT THE A.O. TO RECOMPUTE THE CAS E AFTER ALLOWING THE BENEFIT OF INDEXATION ON THE UNITS OF UTI MIP(II) 9 7. 11. IN THE PRESENT CASE ALSO, UTI BINDS HIMSELF TO PAY TO THE HOLDER OF MIP-99, A FIXED SUM @ 11.3% PER ANNUM IN EACH MONTH AND TO PA Y BACK THE INVESTMENT/CAPITAL AMOUNT AFTER THE LAPSE OF FULL TERM OF 5 YEARS. HOW EVER, IN CASE OF PREMATURE WITH DRAWAL BY THE ASSESSEE, THERE IS NO GUARANTEE OF PR OTECTION OF CAPITAL AND THE SAME WILL BE REPAID AS PER NAV. THIS IS SIMILAR TO FD & NSC BECAUSE IN CASE OF FD & NSC, IF THERE IS PREMATURE WITHDRAWAL, PENALTY IS L EVIED & RATE OF INTEREST IS ALSO VARIED BEING APPLICABLE TO THE ACTUAL PERIOD OF HOL DING AND IN CASE INTEREST IS ALREADY PAID, SUCH DEDUCTION IN INTEREST & PENALTY FOR PREM ATURE WITHDRAWAL IS DEDUCTED FROM CAPITAL. MERELY FOR THIS REASON, IT CANNOT BE SAID THAT REPAYMENT IS NOT OF A SPECIFIED SUM. HENCE, IN OUR CONSIDERED OPINION, UTI, MIP-99 IS ALSO A BOND AS PER THIS DEFINITION OF BOND. 12. SINCE, THE TRIBUNAL IN THE CASE OF MAANRAJ TRADING PVT. LTD. (SUPRA) HAS NOT DECIDED THIS ASPECT AS TO WHETHER UTI-MIP IS BOND O R NOT, FOR DECIDING THIS ASPECT, THERE IS NO ORDER OF TRIBUNAL TO GUIDE US AND HENCE , WE DECIDE THIS ASPECT ON THE ITA NO.795/AHD/2009 A.Y.2005-06 DCIT, CIR-10 ABD V. SH. AREEZ P KHAMBHATTA PAGE 9 BASIS OF ABOVE DISCUSSION AND HOLD THAT UTI-MIP IS A BOND. ONCE, WE HOLD SO, THE TRIBUNAL ORDER CITED BY LD. AR OF THE ASSESSEE IS N OT APPLICABLE IN THE PRESENT CASE BECAUSE IN THAT CASE, THE TRIBUNAL HAS PROCEEDED ON THIS BASIS THAT UTI-MIP IS NOT A BOND OR DEBENTURE WITHOUT DECIDING OR EXAMINING THA T ASPECT. 13. AS PER ABOVE DISCUSSION, WE HOLD THAT UTI-MIP-9 9 IS A BOND & HENCE, THE ASSESSEE IS NOT ELIGIBLE FOR INDEXATION IN VIEW OF 3 RD PROVISO TO SECTION 48. THIS GROUND OF REVENUE IS ALLOWED. 14. IN THE RESULT, APPEAL OF REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 09/12/2011 & ' (') #* + 09 / 12 / 2011 ' %- . ' !/ 0 SD/- SD/- ( .., ) ( ..!'#$ ) ( 1 ) ( % ) (T.K.SHARMA) (A.K. GA RODIA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, *DKP #* + 09/ 12/2011 0 ' '' ' 234 234 234 234 54)3 54)3 54)3 54)3 / COPY OF ORDER FORWARDED TO:- 1. 78 / APPELLANT 2. 2:78 / RESPONDENT 3. 3 -< / CONCERNED CIT 4. -<- / CIT (A) 5. 4@! 23* , , / DR, ITAT, AHMEDABAD 6. !$ B& / GUARD FILE. BY ORDER/ , /TRUE COPY/ C/ D , 0