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Issues:
1. Determination of ownership period for capital gains tax calculation. 2. Classification of National Defence Gold Bonds and primary gold as capital assets. 3. Treatment of capital gain from the sale of primary gold as short-term or long-term. Analysis: Issue 1: The primary issue in this case was the determination of the ownership period for calculating capital gains tax. The Tribunal considered the period of ownership by the donor in addition to the donee's period of ownership. The Tribunal held that the assessee became the owner of the gold from the date of acquisition by the mother, the donor, in 1965. The Tribunal concluded that the capital gain from the sale of gold should be treated as a long-term capital gain based on the combined ownership period. Issue 2: The second issue revolved around the classification of National Defence Gold Bonds and primary gold as capital assets. The Tribunal differentiated between the two assets, emphasizing that the gold bonds were excluded from the definition of capital assets under the Income-tax Act. The Tribunal rejected the argument that the gold bonds and the gold received on redemption were identical assets, asserting that the conversion of bonds into gold constituted a new acquisition of a capital asset. Issue 3: Lastly, the question of whether the capital gain from the sale of primary gold should be considered short-term or long-term was addressed. The Tribunal's decision was based on the distinct identities of the gold and gold bonds as separate assets. The Tribunal's interpretation aligned with Circular No. 415, which clarified that capital gains tax would apply to the subsequent sale of gold received on redemption, with the classification as short-term or long-term depending on the time elapsed between redemption and sale. In conclusion, the High Court ruled in favor of the Revenue, rejecting the assessee's claims. The Court held that the period of ownership for capital gains tax calculation should include the donor's ownership period, distinguished between gold bonds and primary gold as separate capital assets, and determined that the capital gain from the sale of primary gold should be treated as a long-term capital gain. The judgment emphasized the distinct nature of the assets involved and aligned with relevant provisions of the Income-tax Act and circulars issued by the Central Board of Direct Taxes.
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