TaxTMI 
TaxTMI 
2010 (8) TMI 435
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....t of section 11 of the Act to the assessee on the ground that the assessee had infringed the provision of section 13(1)(d) of the Act. This opinion of the Assessing Officer was influenced by the act of the assessee in making investment in secured debentures of Indian Rayons, secured convertible bonds of Voltas Ltd. and unsecured bonds of Telco. The view of the Assessing Officer was that the income derived from debentures was only examined and was not included as income of the trust but this exemption would not extend to the income derived from investment in bonds. The case put up by the assessee was that the debentures include bonds but this plea was not accepted by the Assessing Officer. The matter was taken up in appeal by the assessee. T....
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....artment approached this court under section 256(2) of the Act and in that application, this court directed the Tribunal to refer the following question of law for the opinion of this court, along with statement of case : "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in allowing the benefit of section 11 of the Income-tax Act to the assessee when it had made investment in the bonds etc.?" 3. The word "debentures" is nowhere defined under the Income-tax Act. However, the Indian Companies Act specifically defines this term and as per the definition provided in section 2(12) of the said statute, "bond" is covered under the expression "debenture". Therefore,....
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....is apparently used in a sense slightly in excess of its strict legal meaning. Lindley J. observed in an early case British India Steam Navigation Co. v. IRC [1881] 7 QBD 165 at pages 172-173 : `What the correct meaning of "debenture" is I do not know. I do not find anywhere any precise definition of it. We know that there are various kinds of instruments commonly called debentures. You may have mortgage debentures, which are charges of some kind on property. You may have debentures which are bonds ; . . . You may have a debenture which is nothing more than an acknowledgment of indebtedness. And you may have a thing like this, which is something more ; it is a statement by two directors that the company will pay a certain sum of....
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.... is often-though not invariably-expressed to be one of a series of like debentures. But the term, as used in modern commercial parlance, is of extremely elastic character, for (1) it is sometimes used, both by lawyers and businessmen, to describe an instrument which is not called, on the face of it, a debenture, e.g., a bond ; (2) it is used of an instrument which is not one of a series. A single debenture may be issued to one man ; (3) it is not the less a debenture because (a) it is not under seal ; or (b) it does not contain a charge ; or (c) it does not provide for payment at any fixed date but only in the event of winding up, or on some contingency ; or (d) there is no persona....
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....the opinion that in the absence of any definition of "debenture" in the Income-tax Act, reliance could be placed upon the definition given in section 2(12) of the Companies Act and also the common parlance in which this term is understood. Even the Madras High Court in the case of CIT v. Lakshmi Vilas Bank Ltd. The reference appears to be to [1997] 228 ITR 697 (Mad) had an occasion to deal with this very aspect and it also categorically held that as the Income-tax Act does not define "debenture", to understand the meaning of this term, the court would have to depend upon various other enactments. 5. We are in agreement with the aforesaid view taken by the Kerala as well as Madras High Courts and thus hold that it would be ap....