1988 (3) TMI 162 - AT - Wealth-tax

Summary

Issues:
- Interpretation of section 5(1)(xvia) of the Wealth-tax Act regarding exemption of gold bonds from taxation
- Validity of holding National Defence Gold Bonds beyond the original repayment date
- Applicability of Gold (Control) Act, 1968 on the possession and sale of gold bonds
- Justification of Commissioner of Wealth-tax (Appeals) decision to grant exemption under section 5(1)(xvia) of the Act

Analysis:
The judgment by the Appellate Tribunal ITAT Nagpur involved two appeals by the department concerning the interpretation of section 5(1)(xvia) of the Wealth-tax Act regarding the taxation of gold bonds. The main issue revolved around whether the gold bonds held by the assessees were taxable under the Act. The Wealth-tax Officer (WTO) had included the value of gold bonds in the wealth of the assessee for the assessment year 1981-82, as the delivery of gold had not been taken before the valuation date. However, the Commissioner of Wealth-tax (Appeals) (CWT(A)) disagreed and directed that the wealth be reduced by the value of the gold bonds, citing exemption under section 5(1)(xvia) of the Act.

The Revenue relied on a decision by the Patna Bench of the Tribunal, arguing that the assessees cannot escape taxation by holding onto the gold bonds without encashing them. On the other hand, the assessees' counsel argued that the gold bonds continued to enjoy exemption under section 5(1)(xvia) as per the original scheme provisions and subsequent extensions for repayment. The counsel highlighted the provisions of the Gold (Control) Act, 1968, which regulated the ownership and sale of primary gold, emphasizing that the assessees were legally permitted to hold the gold bonds until the extended repayment date.

The Tribunal agreed with the CWT(A) and upheld the exemption granted under section 5(1)(xvia) of the Act. It was concluded that as long as the gold bonds were held as such and the exemption was not withdrawn, the assessees were entitled to the exemption. The Tribunal dismissed the departmental appeals, affirming the decision of the CWT(A) to grant exemption to the assessees regarding the value of the gold bonds for taxation purposes.