1987 (12) TMI 82 - AT - Wealth-tax

Summary

Issues:
1. Exemption under Wealth Tax Act for the assessment year 1984-85.
2. Interpretation of the date of issue of Capital Investment Bonds for tax exemption.

Analysis:
1. The appeal pertains to the revisionary orders passed by the CIT Andhra Pradesh-I Hyderabad, withdrawing the exemption of Rs. 5 lakhs granted to the assessee-trust under section 5(1)(xvid) of the Wealth Tax Act for the assessment year 1984-85. The CIT issued a notice to the assessee-trust after completing the original assessment, finding the exemption wrongly granted. The CIT's orders directed the WTO to raise an additional tax demand due to the withdrawal of exemption. The assessee filed a reply, but the CIT found it unacceptable, leading to the withdrawal of the exemption.

2. The crux of the issue revolves around the interpretation of the date of issue of the Capital Investment Bonds for tax exemption purposes. The Government of India issued 7 percent Capital Investment Bonds, and the notification specified the conditions for exemption under the Wealth Tax Act. The sub-rules under the notification outlined that the Bonds' issue date is the date of subscription receipt in cash or realization of the cheque or draft. The exemption under Wealth Tax Act was contingent upon the ownership of Bonds from the subscription date or for a minimum of six months ending with the relevant valuation date. The assessee purchased Bonds worth Rs. 5 lakhs and deposited the demand draft on 29th March 1984, claiming entitlement to exemption based on the subscription date. However, the CIT argued that since the Bonds were issued on 5th April 1984, exemption was only allowable from the issue date. The Tribunal disagreed with the CIT's interpretation, emphasizing that the subscription date was the criterion for tax exemption as per the notification. The Tribunal held that the date of issue of the Bond was the date of subscription in cash or by demand draft, making the assessee eligible for exemption from the subscription date. The Tribunal rejected the CIT's contention, stating that the date of issue was relevant only for interest computation, not for determining tax exemption eligibility.

In conclusion, the ITAT Hyderabad-A set aside the revisionary orders of the CIT, allowing the appeal of the assessee-trust. The original assessment order by the WTO for the assessment year 1984-85 was restored, affirming the assessee's entitlement to the exemption under section 5(1)(xvid) of the Wealth Tax Act based on the subscription date of the Capital Investment Bonds.