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2018 (10) TMI 1582 - AT - Income TaxTaxability of Gift u/s 56 - Indian Millennium Deposit (IMD) bonds taxation in the hands of the assessee - sum of money as used in Section 56(2) - Valid gift - Held that - We find that the issue of gift of Indian Millennium Deposit certificate is not taxable in the hands of the assessee who received the same upon gift and also under the terms and conditions as stipulated in the Indian Millennium Deposit Certificate. It was provided that the said certificates can be gifted by NIR/banks only once to any person resident in India but the IMD bonds will be passed on to the donee including the gift for premature encashment. However, non resident only will be entitled to transfer the said IMD certificates. Also as perused various decisions relied upon by the assessee and find that the IMD bonds falls under the category of securities and therefore it does not fall within the meaning of any some of money. - decided against revenue
Issues:
1. Taxability of Indian Millennium Deposit (IMD) bonds in the hands of the assessee under Section 56(2) of the Act. 2. Justification of CIT(A) in holding that IMD bonds would not be taxed as "sum of money." 3. Reliance on previous ITAT order contested by the Department. 4. Appeal to set aside CIT(A) order and restore Assessing officer's decision. Issue 1: Taxability of IMD bonds under Section 56(2) of the Act The appeal concerned the tax treatment of Indian Millennium Deposit (IMD) bonds received by the assessee as gifts. The Assessing Officer (AO) added the maturity value of the IMD bonds to the assessee's income under Section 69 of the Act due to non-furnishing of details during assessment. The matter reached ITAT, which remanded it to the CIT(A). The CIT(A) sought a remand report verifying the genuineness of transactions and identity of the donor. After considering all facts and reports, the CIT(A) deleted the addition of principal amount and interest. The Revenue appealed this decision. Issue 2: Justification of CIT(A) in not taxing IMD bonds as "sum of money" The Revenue contended that the CIT(A) erred in not taxing the IMD bonds as "sum of money" under Section 56(2) of the Act, arguing that IMD deposits could be easily converted into cash on redemption. The assessee cited various decisions supporting the validity of IMD bonds as gifts. The ITAT analyzed these decisions and concluded that the IMD bonds fell under the category of securities and did not qualify as a "sum of money." The ITAT upheld the CIT(A)'s decision based on the legal interpretation and facts presented. Issue 3: Reliance on contested ITAT order The Revenue challenged the CIT(A)'s reliance on a previous ITAT order in the case of ACIT Vs. Haresh N. Mehta, which was contested by the Department before the High Court. The ITAT examined the legal sanctity of the CIT(A)'s direction to tax the IMD bonds under Section 56(2)(v) of the Act and set it aside based on the timing of the receipt of the bonds and legal interpretations. The ITAT found no reason to deviate from the CIT(A)'s decision, considering the legal reasoning and factual analysis provided. Issue 4: Appeal to set aside CIT(A) order The Revenue prayed for setting aside the CIT(A) order and restoring the Assessing officer's decision. However, the ITAT dismissed the appeal, affirming the CIT(A)'s reasoned decision based on the legal interpretations, case laws, and factual aspects discussed. The ITAT found the CIT(A)'s conclusion to be correct and upheld the deletion of the addition of the principal amount and interest. The appeal filed by the Revenue was consequently dismissed on 12th October 2018. This detailed analysis of the legal judgment addresses the issues raised in the appeal regarding the taxability of IMD bonds and the justification for the CIT(A)'s decision, while also examining the reliance on previous orders and the final decision of the ITAT.
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