9911796707
TMI Blog1993 (8) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... These National Defence Gold Bonds were to mature on 27-10-1980 and on maturity the holders of the Bonds were to get Gold in lieu of the Bonds. The purchases were made through a number of brokers and whereas C. Manjesh used the funds of Jayalaxmi Trust to the extent of about Rs. 4 lakhs for making the purchases, the other three assessees, on the other hand, used both the funds of the said trust (by way of loans) and also borrowed from banks and thus made the purchases of the Gold Bonds. It is an admitted fact that thereby they undertook the liability to pay interest to the bank at the market rate and also to the trust. Three of the assessees, excepting C. Manjesh sold away the major portion of the Gold Bonds a few days/weeks before the maturity date of the Gold Bonds and made handsome profit. The balance out of the Gold Bonds purchased by them was converted by them into Gold which was also sold by them ultimately, within a short time from the date of maturity. C. Manjesh, on the other hand, sold away his entire holding of Gold Bonds before the maturity of the same. It was admitted by the representative of all the assessees, during the course of the hearing of these appeals before u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to have appreciated that the Gold Bonds had been purchased from out of the funds of the trust and, therefore, they should have been treated at par with the other income of the trust and taxable income, if any, thereof should have been brought to tax only in the hands of the trustees as the choice had been exercised by the ITO and there was no option left in him to bring to tax the said income in the hands of the beneficiaries. 5.1 This particular ground is clearly related to the earlier one. As cited by us in the preceding paragraph, the department actually chose to assess the share of income of the beneficiaries from the trust directly in their hands. So far as the issue relating to the purchase of the Gold Bonds from out of the funds of the trust is concerned, it is required to be stated that the beneficiaries simply borrowed funds from the trust on payment of interest and hence whatever profit accrues to them out of the borrowed funds, are clearly assessable in their hands only and not in the hands of the trustees. Three out of the four assessees again utilised bank loans also, in addition to the trust funds, for indulging in purchase of the Gold Bonds. 6. The next ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the gold bonds, from the trust as well as from banks at market rates of interest, that the purchases and sales were made in regular business-like manner through brokers and also the proximity in time between the dates of purchases and sales strongly suggest speculative tendency on the part of the assessees. On these considerations, be argued that the transactions should be considered as business transactions or at least transactions related to adventures in the nature of trade. About the point raised by the counsel of the assessees that the income out of the borrowed funds from the trust should have been assessed in the hands of the trust, he argued that this particular contention does not hold much sway inasmuch as the assessees themselves had showed profits out of the transactions in their own returns of income as exempted income and that this particular issue was taken up for the first time only before CIT (A). The departmental representative also placed strong reliance on the decision of the Income-tax Appellate Tribunal, Bangalore Bench in the case of Deepak A. Mehta in IT Appeal No. 894, 983 and 456 (Bang.) of 1985. 7. The issue before us in the present appeals is to decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt span of time. Although an investment may also ultimately be disposed of quickly, at the time when it is acquired, there should be some expectation or desire to hold it more or less on a long-term basis. The other characteristic of acquiring an asset as an investment is that the acquirer must expect some return out of it, either by way of dividend or yield or ultimate appreciation in the value thereof on a long-term basis. The acquirer may also want to use that the asset for his personal purpose or he may have the intention of developing it into a full-fledged asset like in case of a piece of land. The third characteristic of acquiring a capital asset is that generally such acquisition is made out of the surplus fund of the acquirer. Borrowal of funds from others, incurring the liability of paying interest at market rate involves a great risk and an investor generally avoids such type of borrowal in making an investment. The other considerations in this regard should be whether the asset acquired is common to the general line of business of the acquirer or not. 9. In the instant case, although the assessees are, to some extent or other, connected with the business they themselve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifferent from those in those two cases. According to the Supreme Court decision, determination of the question about the adventure in the nature of trade would depend entirely on the facts. In the instant cases, the facts cannot lead to any such conclusion but that the transactions indulged in by the assessees were speculative transactions and of the nature of adventure in the business or trade. Hence, we affirm the decisions of the lower authorities of taxing the profits arising out of the transactions a business profit. 10. There is no substance in the argument put forward by the representative of the assessees that at least the profit arising out of the sale of the redeemed gold should be treated as capital gains. Inasmuch as the Gold Bonds themselves have not been considered by us to be capital assets, the gold received by the assessee on redemption of such Gold Bonds cannot also be considered as capital assets. Hence, this particular contention of the counsel of the assessees is being rejected. 11. In another ground, it has been contended that the levy of interest under sections 139(8) and 215 is illegal. No reason has been shown in support of this contention nor did the rep ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
