Capital gains treatment denied on maturity of Indira Vikas Patra; no transfer of a capital asset was found.

Maturity proceeds of Indira Vikas Patra were treated as a return of the depositor's money after a fixed period, not as consideration for transfer of a capital asset. As no transfer within section 45(1) read with section 2(47) of the Income-tax Act, 1961 occurred, no capital gain or capital loss arose. The claim for indexed cost of acquisition under Explanation (iii) to section 48 therefore also failed.

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Issues: Whether maturity of Indira Vikas Patra constituted a transfer of a capital asset so as to give rise to capital gain or capital loss, and whether indexed cost of acquisition could be claimed in relation to the amount received on maturity.

Analysis: The maturity proceeds were held to be merely a return of money placed with the Post Office for a fixed period and not consideration received on transfer of any capital asset. For capital gains to arise, there must be a transfer within the meaning of section 45(1) read with section 2(47) of the Income-tax Act, 1961. The instrument was treated as akin to a deposit repayable on maturity, and its encashment did not amount to sale, exchange, relinquishment, or extinguishment of rights independent of transfer. In the absence of transfer, no capital gain or capital loss could arise, and the claim for indexed cost under Explanation (iii) to section 48 also failed.

Conclusion: Maturity of Indira Vikas Patra did not amount to a transfer of a capital asset, and no capital gain or capital loss arose; the disallowance was upheld against the assessee.

Ratio Decidendi: Receipt of maturity proceeds from an instrument that merely returns the depositor's money after a fixed period, without any transfer of a capital asset, does not attract section 45 of the Income-tax Act, 1961 and cannot support a claim for capital loss or indexed cost.

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