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TMI Blog2012 (12) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer's action, while making the addition of Rs.45,15,49,625/-, relying on circular No.2 of 2002 of CBDET dated 15/02/02 and ignoring the press note dated 20/03/02 issued in this regard by CBDT. Ld. CIT(A) has further erred in upholding the Assessing Officer's action, making the addition of Rs.45,15,49,625/-, making the circular applicable with retrospective effect, which is illegal and against the interest of the appellant. Ld. CIT(A) has further erred in upholding the Assessing Officer's action, while making the addition of Rs.45,15,49,625/-, assuming the discount rates for the years 2005 to 2010 and gross error in making calculations purely based on assumption, conjecture and surmise. 4. In law and in facts and circumstances of the Appellant's case, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the action of the learned Assessing Officer in considering the long term capital gain of Rs.4,51,34,165/- on sale of interest coupon strips of Tata Finance Ltd. as short term capital gain. 5. In law and in facts and circumstances of the Appellant's case, the Ld. Commissioner of Income3 Tax (Appeals) has erred in upholding the action of ld. Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1+0.0883) 2 1.18.440 Purchase consideration in this case is Rs.1,25,00,29,233. Thus the accrued interest is Rs.31,89,50,841. (ii) The discounted value as on 31.03.02 in case of DDBs of Infrastructure Leasing & Financial Services Ltd. is as under: Discounted values= 74,92,50,000= 74,92,50,000 = 63,25,98,784 (1+0.0883) 2 1.18440 Purchase consideration in this case is Rs.50,00,00,000. Thus the accrued interest is Rs.13,25,98,784. In the light of the above observation, the addition of these amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt bonds. 29. The issue stands covered by the order of the Ahmedabad Bench of the Tribunal in the case of Kisan Discretionary Family Trust Vs. ACIT in ITA No.1850/Ahd/2007 (AY 2003-2004) dated 2-11-2007. In this order it has been held that as per Circular no.2 of 2002 it is applicable only to deep discount bonds purchased after 15-2-2002. Therefore, if it is held that the OFCPNs. are similar in nature to deep discount bonds, they having been purchased after 15-2-2002, the circular is applicable and the interest must be held to have been rightly offered and assessed. The contention before us however is that the assessee follows the cash system of accounting and therefore the interest is assessable only in the year in which the OFCPNs. are encashed. We find that the interest has been assessed in the assessment order under the head "income from other sources". Under Section 145(1) of the Act, income chargeable under this head shall subject to the provisions sub-section (2) be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. As already noticed the assessee is following the cash system of accounting. Therefore the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trips there could not be any Long Term Capital Gain because as per Assessing Officer, there would be either accrued interest or Short Term Capital Gain. Thereafter, the Assessing Officer had discussed certain Circulars and other provisions of the Act and, thereafter arrived at the following conclusion:- "5.8. The assessee sold the interest coupon strips Part-B, Series-I as on 18.05.01 and it was listed as on 20.06.2000. This is clearly a short term capital asset and the gain arising from the transaction of the same is the STCG, this is Rs.98,09,876. The assessee sold the interest coupon strips Part-B, Series-II as on 19.5.01 and it was listed as on 20.06.2000, this is clearly a short term capital asset and the gain arising from the transaction of the same is the STCG, this is Rs.1,04,360. Therefore the STCG on the same is computed at Rs.99,14,236. (Addition of STCG Rs.99,14,236) 5.9. In the matter of all the other interest coupon strips of Tata Finance Ltd., the assessee sold the Series-I as on 22.03.02 and Series-II as on 20.03.02. It is concluded that the interest accrued on the same as on 31.03.01 and the same is added here. From 31.03.01 to the date of sale, the difference i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence between the letter of allotment and the debenture certificate. It is pointed out further that the departmental authorities have not appreciated the circular no.2 of 2002 issued by the CBDT in proper perspective and that they were wrong in relying on the same to hold that the capital gains in the present case are not long term capital gains. It is submitted that the circular applies prospectively in the sense that the treatment referred to therein would be applicable to bonds or debentures allotted after 15-2-2002 and it has been so held by the Ahmedabad Bench of the Tribunal in the case of Arvind Cotspin Vs. DCIT in ITANo.519/Ahd/2001 (Asstt.Year 1996-97) dated 20-6-2006. The learned counsel for the assessee drew our attention to the letter of allotment compiled in the paper book at page 102 and pointed out that what is allotted are deep discount bonds (Series-A) and that the letter of allotment evidences the title to the bonds and is not qualitatively different in any manner from the debenture bond certificates itself. He accordingly contended that the assumption of the departmental authorities that the letter of allotment is a separate instrument, apart from the debenture c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act as meaning a capital asset which is not a short term capital asset. The result is that in the case of the capital asset specified in the proviso to section 2(42A), it becomes a long term capital asset if it is held for more than 12 months and it is not necessary that such an asset should be held at least for a period of 36 months in order to qualify as a long term capital asset. One of the assets specified in the proviso is a security listed in a recognised stock exchange in India. Such a security was added in the proviso by the Finance Act, 1994 with effect from 1-4-1995. It is common ground that in the present case the department's case is that the capital asset acquired by the assessee from Nirma Ltd. falls under this category of assets viz. security listed in a recognised stock exchange in India. We may also refer to section 2(h) (i)of the Securities Contracts (Regulation) Act, 1956 which defines securities to "include shares, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate". There are other sub-clauses in this clause but since the learned CIT-DR rested his case only on sub-claus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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