TaxTMI 
TaxTMI 
2014 (1) TMI 554
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....revenue profits." 2. The Yaduraj Kanodia Trust, Kanpur is assessable as an AOP. The trust came into existence on 26.9.1978 with Master Yaduraj Kanodia (minor son of Shri G.P. Kanodia) as its sole beneficiary. During the previous year, relevant to the assessment year 1980-81, the trust received by way of gift the National Defence Gold Bonds weighing 10000 gms from Shri D.P. Kanodia & Smt. Ratan Devi Kanodia (wife of Shri B.M. Kanodia). These National Defence Gold Bond 1980 were issued as per notification dated 19.10.1965 (as amended upto 19.11.1965) issued by the Ministry of Finance, Department of Economic Affairs. The relevant para of the notification provided:- "Wealth Tax, capital Gains Tax and Estate Duty. The bonds will be exempt from wealth tax and any capital gains from their sales or transfer will not be subject to income-tax. Capital loss if any will not be eligible for being set off, Gifts, in a year, of Bonds by the initial subscriber will be exempt from Gift Tax to the extent of the value of Bonds for an aggregate weight of five kilogrammes of gold. The Bonds will also be exempt from Estate Duty on the fi....
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....olders as aforesaid, a licensed dealer/certified goldsmith can purchase/covert the gold into ornaments within the prescribed time limit." 9. No capital gains will arise when the bonds are exchanged for gold on redemption. However, any subsequent sale, exchange or transfer of such gold within the meaning of section 2 (47) of the Income Tax Act would attract capital gains tax in respect of capital gains arising from such sale, exchange or transfer. For the purpose of computation of capital gains, the cost of acquisition of gold would be the market value of the Bonds on then date of redemption." 7. After the gold bonds received in gift by the trust were sold prior to the date of its redemption, the assessee made investment in fresh purchase of gold bonds. These purchases were made of 2500 grams on 6.10.1980 for Rs.3,35,000/- and 1900 grams on 27.10.1980 of Rs.2,60,000. These gold bonds were sold in the quantities of 600 grams on 17.3.1981, 800 grams on 20.3.1981 and 600 grams on 2.4.1981.On the transaction of 600 grams of gold the Assessing Officer worked out a profit of Rs.19,668/- and assessed the same fo....
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....ssee were recorded in the books of account which were found in the course of search. The Tribunal held:- "There was no question of converting the gold into gold jewellery as the assessee was not a dealer in gold jewellery at any time. The transactions of ultimate sale and the initial transaction of receipt of gifts cannot, in our opinion, be held to be transactions of adventure in the nature of trade. Receipt of gifts arose the sweet will of the donor who thought fit to make a gift. Sale of gold ultimately was due to the said notification of the Government which forced the assessee to sell as it could not retain the gold which it received on maturity of gold bonds. There was, of course, one transaction of purchase and sale of gold bonds a few months before the date of maturity but, in our opinion, it would not materially alter the nature of the transaction. The case laws relied upon by the learned representative of the assessee fully support the case of the assessee as mentioned above." "There is absolutely no evidence to show that the assessee has suppres....
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....1,200 27.10.1980 3,300 gms 4,78,500 8,05,800 Date of sale weight amount 21.1.1981 100 gms 23.1.1981 1,000 gms Rs.5,05,550 Profit Rs.54,844 2. ITR No.88 of 1991 Raghuraj Kanodia V. CIT (minor through father & natural guardian Shri S.P. Kanodia AY 1981-92 [Previous year ending on 31.3.1981] (Arising out of ITA No. 1738/A/1987) Date of purchase weight amount 3.9.1980 948 gms Rs.1,20,396 4.9.1980 1,500 gms 1,91,250 24.10.1980 3,400 gms 5,02,100 8,13,746 Date of sale weight amount 21.1.1981 2,100 gms Rs.5,05,550 Profit Rs.68,272 3. ITR No.184 of 1987 - CIT v. Yaduraj Kanodia Trust AY 1982-83 [Previous year ending on 30.6.1981] (Arising out of ITA No.2056/A/1985) Trust created on 26.9.1978 with nucleus of Rs.501/- by Smt. Ratan Devi Kanodia w/o Shri B.M. Kanodia. Sole beneficiary Yaduraj Kanodia (Minor) s/o Shri G.P. Kanodia. Date of purchase weight amount 16.10.1978 Gift 5,000 gms. Rs.3,20,000 29.3.1979 Gift....
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....) As per assessment order at page 3 of paper book, the assessee purchased gold bonds worth Rs.10,73,100/- as under: Date of purchase weight amount 4.9.1980 200 gms. Rs.25,500 11.9.1980 1,400 gms. 1,80,600 17.9.1980 1,000 gms. 1,32,000 27.9.1980 5,000 gms. 7,35,000 10,73,100 Note: Total income determined in the case of Trust at Rs. 6,35,936/- assessed in his hands. 6. ITR No.21 of 1996 CIT v. Rituraj Kanodia Trust (AOP) Sole beneficiary (Master) Rituraj Kanodia AY 1982-83 (Accounting period ending on 30.6.1981/) (Arising out of ITA No. 720/A/1987) Trust created on 26.9 1978 with a nucleous of Rs. 251/-. Smt. Uma Shashi Kanodia w/o Shri Devi Prasad Kanodia gifted 5,000 grams gold bonds worth Rs. 5,20, 000/- on 16.10. 1978. Date of purchase/sale /gift weight amount 16.10.1978 gift from Smt. Uma Shashi Kanodia w/o Shri D. P. Kanodia 5,000gms. Rs.5,20,000/- 16.07.1980 sale 2,000 gms. 2,40,000 4.9.1980 sale 500 gms. 63,700 12.8.1980 sale 1,000 gms. 1,30,000 12.9.1980 sale 1,000 gms. 1,30,000 Profit shown Rs.2,75,750/- 7. ITR....
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.... (bond redeemed on 18.11.80) Date of sale weight amount 29.5.80 Rs.1,42,210/- 9.4.81 redeemed gold sold for Rs.1,99,200/- Profit Rs.71,640/- 13. ITR No.55 of 1989- CIT v. Yaduraj Investment (P.) Ltd. AY 1982-83 [Previous year ending on 30.6.1981] (Arising out of ITA No.94/A/1986) Business: Investors and financiers Date of purchase/sale weight amount 9.10.1980 purchase 3,500 gms. Rs.4,90,000 19.1.1981 sale 2,800 gms. 4,55,000 21.1.1981 sale 700 gms. 1,13,000 5,69,000 Profit Rs.79,500 minus Rs.40,143 interest paid to Bank =Rs.39,447/- 14. ITR No.10 of 2000- CIT v. Master Raghuraj Kanodia (Minor) AY 1983-84 [Previous year ending on 30.6.1982] (Arising out of ITA No.680/A/1985) Profit of Rs.62,160/- on sale of gold received after redemption of gold bond 15. ITR No.112 of 1999- CIT v. Smt. Indira Kanodia AY 1981-82 (Arising out of ITA No.485/A/1991) Penalty of Rs.84,000/- for concealment of income including income of Rs.40,847/- on sale of gold bonds. 16. ITR No.59 of 1999- CIT v. Shri Ritu Raj Kan....
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.... receipt of gifts cannot be held to be transactions of adventure in nature of trade. The receipt of gifts arose out of sweet will of the doner, who thought it fit to make a gift. The sale of gold was in terms of the notification of the Government which made the assessee to sell the gold bonds as it could not retain the gold which it received on maturity of gold bonds. The purchase and sale of the gold bonds a few month before the date of maturity would not materially alter the nature of transaction. There was no evidence to show that the assessee had suppressed any transaction or did not record these transactions in his books. No instance of any dubious method was pointed out nor any colourable method was adopted. The trusts in question were already held to be genuine by the revenue. The transactions of sale were also not questioned. The sale of gold ultimately had to be done by any person who received not on maturity of gold bonds as the gold received on the maturity could not be held such as for more than six months. The assessee had no choice. They had discharged the burden of proof and that the revenue was not able to prove that any transactions were in the nature of trade. ....
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....i Ashish Bansal submits that at the time of sale of gold in 1980 the Gold Control Act, 1968 was on the statute book which was repealed in the year 1990 by the Gold (Control) Repeal Act, 1990. The Gold Control Act in order to carry on business of gold and gold ornament required a licence to be obtained under Section 27 of the Act. A restriction was imposed under Section 8 of the Act on the acquisition, possession and disposal of gold without a licence. The gold bonds were purchased and were given as a gift without requiring any conditions of having a licence and thus the same of some of these gold bonds, even if it was made some time prior to its maturity and from which the gold bonds were purchased again and the sale of gold as a condition of disposal on the purchase of gold bonds could not be treated as sale in the ordinary course of transaction nor there was any evidence of any series of transaction. None of these transactions were in the line of business pursued by any of the assessee. The taking of delivering of gold and its sale was under the terms and conditions of the purchase of National Defense Gold Bonds. There was no material to show, nor there was anything on record to ....