1997 (5) TMI 83 - AT - Income Tax

Summary

Issues:
- Exemption of premium received on maturity of Special Bearer Bonds under s. 10(15)(i) of IT Act.

Detailed Analysis:
1. The appeals by the assessee were against orders of CIT(A) refusing exemption of premium received on maturity of Special Bearer Bonds under s. 10(15)(i) of IT Act. The facts were identical in all appeals. The assessee, a private limited company, acquired 885 Special Bearer Bonds and encashed them on maturity at a premium. The Asstt. CIT questioned the source of funds for bond acquisition, leading to a dispute. The CIT(A) deleted part of the addition but confirmed the premium addition, citing reasons related to the Special Bearer Bonds Scheme and provisions of the IT Act.

2. The counsel for the assessee argued that the CIT(A) erred in not considering the amendment inserting sub-cl. (ib) in sub-s. (15) of s. 10 of IT Act, exempting premium on redemption of Special Bearer Bonds, 1991. The counsel highlighted legislative intent behind the amendment and subsequent notifications exempting premium on specified bonds. Circulars and past decisions granting exemption were also presented. The Departmental Representative supported the CIT(A)'s decision.

3. After considering the submissions, the Tribunal found no justification to tax the premium received on bond encashment. The Special Bearer Bonds Act exempted premium on redemption of specific bonds, which was reinforced by subsequent notifications and clarifications by CBDT. The Tribunal accepted the arguments presented by the assessee's counsel and directed the Revenue authorities to delete the addition made on account of premium in all three cases, ultimately allowing the appeals of the assessees.

This judgment clarifies the interpretation and application of provisions related to the exemption of premium received on maturity of Special Bearer Bonds under the IT Act. It emphasizes legislative intent, notifications, circulars, and past decisions to support the exemption claim, ultimately ruling in favor of the assessees and directing the deletion of the premium addition made by the Revenue authorities.