1989 (4) TMI 106 - AT - Income Tax

Assessee Prevails in Capital Loss Dispute Over Gold Bonds Acquisition Date

The judgment favored the assessee in a case concerning the calculation of short term capital loss related to the acquisition and sale of gold bonds. The ... Assessment Year, Capital Gains, Computation Of Capital, Gold Bonds Issues:Calculation of short term capital loss based on date of acquisition of gold bonds, interpretation of market value for capital gains, relevance of date of redemption in determining cost of acquisition.Analysis:The judgment revolves around the calculation of short term capital loss by the assessee concerning the acquisition and subsequent sale of gold bonds. The dispute arose due to the variance in the date considered for the acquisition of gold between the assessee and the Income Tax Officer (ITO). The assessee claimed a short term capital loss of Rs. 20,860, while the ITO assessed a capital gain of Rs. 1,66,100 based on differing dates of acquisition. The ITO considered the market price on the maturity date of the gold bonds, whereas the assessee based the cost of acquisition on the date of actual receipt of the gold. The Commissioner directed the ITO to ascertain the market rate on the date of submission of the gold bonds for redemption.The assessee contended that the market price on the date of redemption should be considered for calculating capital gains, referencing a press communique advising bond holders to submit bonds in advance for examination. Additionally, the assessee relied on a circular stating the date of redemption as the date of acquisition for gold bonds. Conversely, the DR cited a Tribunal decision emphasizing the ownership of gold by the assessee, suggesting the date of maturity as the relevant date. The counsel for the assessee referred to various dictionaries to define 'redemption' to support their argument.The Tribunal emphasized the importance of the transfer details in determining capital gain or loss, highlighting the necessity for the transferor to have full title and possession of the property. The Tribunal distinguished a previous decision related to wealth-tax exemption, emphasizing the importance of the date when the assessee acquired ownership and possession of the gold. It was concluded that the date of possession and ownership of the gold, when the assessee became fully capable of selling it, should be considered for determining the market value. The mode of acquisition, whether through redemption or market purchase, was deemed irrelevant, with the date of becoming the owner and possessor being crucial.The judgment ultimately favored the assessee, allowing the claimed short term capital loss based on the date of acquisition when ownership and possession of the gold were transferred. The decision highlighted the significance of the date when the assessee gained full control over the asset in determining the market value for capital gains or losses.