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TMI Blog2015 (3) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... the immunity provided to the bond holder of India Development Bond in US dollars, under Sections 6 and 7 of the Remittance of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991 which includes that no enquiry to be made from bond holder, regarding the source, is also available to gifts, which are found to be bogus gifts, routing the unaccounted money of the bond holder, through such bonds, by purchasing the bonds for consideration in India; B. Whether the view taken in the judgment dated 26.7.2011 in Income Tax Appeal No. 3 of 2004; Commissioner of Income Tax vs. Smt. Usha Omer (2011) 338 ITR 448, that no investigation can be allowed to be held pertaining to the India Development Bonds which were received from NRI's/Overseas Corporate Bodies as gifts is a correct view, in law?" The facts of one of the three cases, ie Writ Tax No 432 of 2005 would be briefly indicated as an illustration, it being an agreed position between counsel appearing for the assessee and counsel appearing for the revenue that the facts are similar in all the three cases. The Full Bench is required to determine the questions of law referred. Thereupon the proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des for immunities in the following terms: "6. Immunities.-(1) Notwithstanding anything contained in the Wealth-tax Act, 1957 (27 of 1957), the Gift-tax Act, 1958 (18 of 1958), the Income-tax Act, 1961 (43 of 1961), the Foreign Exchange Regulation Act, 1973 (46 of 1973) and the Foreign Contribution (Regulation) Act, 1976 (49 of 1976),- (a) no non-resident Indian or overseas corporate body who or which owns the Foreign Exchange Bonds or any person resident in India to whom a gift of such Bonds has been made by such non-resident Indian or overseas corporate body, shall be required to disclose, for any purpose whatsoever, the nature and source of the investment in such Bonds; (b) no inquiry or investigation shall be commenced against any of the persons referred to in clause (a) under any of the said Acts on the ground that such person owns such Bonds; (c) the fact that any of the persons referred to in clause (a) owns such Bonds shall not be taken into account and shall be inadmissible as evidence in any proceedings relating to any offence or the imposition of any penalty under any of the said Acts. (2) Nothing in sub-section (1) shall apply to foreign exchange which is required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FEBs are gifted to a person resident in India, the principal amount of the FEBs and the interest thereon would be payable in non-repatriable Indian Rupees. Under Clause 12 (1), FEBs were transferable by endorsement and delivery. FEBs were freely transferable among NRIs, OCBs and banks acting in a fiduciary capacity on their behalf. Under Clause 12 (2), FEBs were also transferable from NRIs or OCBs or banks acting in a fiduciary capacity on their behalf to persons resident in India or to charitable trusts in India through gifts or sale against non-repatriable Indian Rupees. Under Clause 12 (3) of the Scheme, FEBs were also transferable among persons resident in India. Clause 13 of the Scheme provided as follows: "13. Immunity and exemption.- NRIs and OCBs or the bank acting in fiduciary capacity on behalf of NRIs or OCBs or both or any persons resident in India to whom a gift of FEBs has been made by such NRIs or OCBs or bank acting in fiduciary capacity on behalf of NRIs or OCBs or both shall be provided immunities and exemptions, as provided in Sections 6 and 7 of the Act." Now it is in this background that the questions which have been formulated for consideration by the Full ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rship of the bonds is inadmissible in evidence and is not to be taken into account in a proceeding relating to an offence or the imposition of a penalty under the legislation specified. While construing the ambit of the immunity in Section 6, it is necessary to carefully analyse both the persons to whom the immunity has been granted, the transactions in respect of which the immunity operates and the extent of the immunity. The persons to whom the immunity applies are as stated above. The immunity also applies to a situation where a gift is made by a non-resident entity to a resident Indian. The nature of the immunity is as stated in clauses (a), (b) and (c) respectively. The immunity in Section 6 does not confer a protection against an enquiry in respect of matters which do not fall under Section 6(1). Where the ambit of the investigation or enquiry is outside the purview of the provisions of Section 6 (1), no immunity would be available under that provision. For instance, where a resident Indian does not claim that there was a gift received by him from an NRI or an OCB who or which owns the FEBs, the immunity would not be attracted. Where the gift in question has not emanated fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were claimed as having been received by him and by other members of his family. In the course of the assessment, the Assessing Officer stated that the assessee had informed him that the bonds were received from certain Kirana traders of Kanpur who had gone to Dubai and Singapore and that one Sita Ram Makhija of Kanpur, who was residing in Dubai, had gifted the bonds to the assessee and to the members of his family. Since the documents pertaining to the bonds were seized during the course of the search, the attention of the assessee was drawn to the fact that the name of Sita Ram Makhija was not mentioned in any of the documents and that none of the bonds had been gifted by the said Sita Ram Makhija to the assessee as per the seized documents as the names of transferors, as mentioned in the transfer documents, were other than that of Sita Ram Makhija. According to the Assessing Officer, the assessee stated that Sita Ram Makhija had arranged the gifts of the bonds to the assessee and his family members in consideration of the assistance which was rendered by the assessee to him at a certain point of time. We may clarify that we are not expressing any view on merits having due regar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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