Bond washing transaction [ Section 94(1) ] - Income Tax - Ready Reckoner - Income Tax

Bond washing transaction [ Section 94(1) ] Where the owner of any securities (referred to as the owner ) sells or transfers those securities, and buys back or reacquires the securities, then, if the result of the transaction is that any interest becoming payable in respect of the securities is receivable otherwise than by the owner, the interest payable as aforesaid shall, whether it would or would not have been chargeable to income-tax apart from the provisions of this sub-section, be deemed, for all the purposes of this Act, to be the income of the owner and not to be the income of any other person. Note:- B uying back or reacquiring the securities shall be deemed to include references to buying or acquiring similar securities, so, however, that where similar securities are bought or acquired, the owner shall be under no greater liability to income-tax than he would have been under if the original securities had been bought back or reacquired. Exception of section 94(1):- The provisions of section 94(1) shall not apply if the owner, or the person who has had a beneficial interest in the securities, as the case may be, proves to the satisfaction of the Assessing Officer- ( a ) that there has been no avoidance of income-tax, or ( b ) that the avoidance of income-tax was exceptional and not systematic and that there was not in his case in any of the three preceding years any avoidance of income-tax by a transaction of the nature referred to in section 94(1). [ Section 94(3) ]