Government securities retain bond character after maturity, preserving wealth-tax exemption and defeating any alleged trust claim.

National Defence Gold Bonds, 1980 retained their character as Government securities after maturity because discharge under the Public Debt Act, 1944 occurs only on payment, not on maturity alone. A promissory note payable to order remains negotiable until redeemed, and section 6 of the Public Debt Act negatives any trust in Government securities. On that basis, post-maturity holding of the gold by the Government or Reserve Bank did not create a trust that would defeat exemption, and the wealth-tax exemption under section 5(1)(xvia) remained available.

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Issues: Whether National Defence Gold Bonds, 1980 continued to retain the character of bonds after maturity so as to qualify for exemption under section 5(1)(xvia) of the Wealth-tax Act, and whether the post-maturity holding of the gold by the Government/Reserve Bank created a trust that would deny the exemption.

Analysis: The bonds were issued as Government securities in the form of promissory notes payable to order, and their legal character had to be determined in the light of the Public Debt Act, 1944 and the Negotiable Instruments Act, 1881. A promissory note payable to order remains negotiable until payment or satisfaction, and section 23 of the Public Debt Act, 1944 shows that discharge occurs only on payment and not merely on maturity. Section 24 of the Public Debt Act, 1944 also indicates that while interest liability may terminate after six years, no such termination is provided for the principal. Section 6 of the Public Debt Act, 1944 expressly negatives any trust in respect of Government securities and states that the Government is not bound by notice of trust.

Conclusion: The bonds did not lose their character as bonds on maturity, no trust was created in favour of the assessee, and the exemption under section 5(1)(xvia) of the Wealth-tax Act remained available.

Final Conclusion: The assessees were held entitled to wealth-tax exemption in respect of the National Defence Gold Bonds, 1980, and the connected appeals succeeded.

Ratio Decidendi: A Government security issued as a negotiable promissory note continues to retain its legal character until redeemed, and maturity alone does not extinguish the Government's liability or create a trust so as to defeat a statutory exemption.

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