TaxTMI 
TaxTMI 
2020 (7) TMI 729
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....ys in filing. The case is now taken up for adjudication on merits. 3. The Revenue pleads the following substantive grounds in its instant appeal:- "1. The Ld. CIT(A) erred in law in allowing Long Term Capital Loss of Rs. 109,80,30,873/- on transfer of Government Securities after applying Cost Inflation Index cost on the sale of Government Securities. The Ld. CIT(A) erred in holding that Government Securities are not bond or debentures. 2. The Ld. CIT(A) erred in law to allow set off of brought forward long term capital loss of Rs. 2,79,36,337/- against the short term capital gain computed u/s 50 of the Act. 3. The Ld. CIT(A) has erred in law in deleting the addition of Rs. 67,56,925/- u/s 14A disallowance as proportionate interest of Rs. 67,56,925/- was computed under Rule 8D(2)(ii) read with Rule 8D of the I.T. Rule. 4. The Ld. CIT(A) has erred in law in deleting the addition of Rs. 8,93,88,975/- u/s. 14A as administrative expenses of Rs. 8,93,88,975/- was computed under Rule 8D(2)(iii) read with I.T. Rule. 5. The Ld. CIT(A) has erred in law in deleting the addition of Rs. 10,19,816/- u/s 40(a)(ia) of the IT Act on account of failure....
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....Public Debt Act, 1944 defines "Government security" as follows: " Government security" means (a) a security, created and issued, by the Government) for the purpose of raising a public loan, and having one of the following forms, namely: (i) stock transferable by registration in the books of the Bank; or (ii) a promissory note payable to order; or (iii) a bearer bond payable to bearer; or (iv) a form prescribed in this behalf; (b) any other security created and issued by the Government in such form and for such of the purposes of this Act as may be prescribed" The Government securities which were sold during the year were stocks being of the nature described in clause (i) to section 2(a) of the Public Debt Act, I 944. The third proviso to section 48 of the Act restricts the indexation in the case of long term capital assets, being bonds or debentures other than Capital Indexed Bonds issued by the Government. The term debenture has been defined in section 2(30) of the Companies Act, 2013 which reads as "debenture" includes debenture stock, bonds or any other instrument of a company evidencing a ....
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....s are in the nature of Bonds and Debentures on which indexation benefit u/s 48 of the Act is not applicable. During the course of appellate proceedings, the above definitions were explained before the learned CIT(A). 34. We note that it was also submitted during appellate proceedings that the Learned PCIT in his order u/s 263 dated 19.03.2015 had not discussed any of the contentions of the assessee claiming that Government Securities are not Bonds and Debentures. In the said order, he has not given any finding either accepting or denying the contentions of the assessee. On the other hand, in the said order passed u/s 263, he had concentrated only on the technical aspect that the assessment order for AV 201011 was erroneous and prejudicial to the interest of the Revenue since the Learned AO had not examined this question of indexation on transfer of Government Securities at the assessment stage and hence Sec.263 of the Act was applicable in the present case. He btherefore set aside the assessment order for the limited purpose of examining whether on the divestment of the Government Securities the assessee was entitled to the benefit of indexation. The assessee thereafter fi....
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....held that aforesaid financial instrument was Bond and therefore no benefit of indexation would be available to the assessee because the case was hit by 3rd proviso of Sec.48 of the Act. But the said order of the Tribunal did not throw any light on the dispute in the present case i.e. whether the Government Securities are Bonds & Debentures. The facts of the said case and conclusion is given below: "Facts of this case: Capital gains indexation benefit on debt instruments Assessee reported loss on conversion of units of UTI MIP 99 which were converted by UTI into tax free bonds prior to the actual date of redemption, after claiming benefit of indexation Tenns "bonds" and "debentures" are not defined in IT Act in case of premature withdrawal, interest already paid is deducted from capital in that sense, UTI, MIP99 is also a bond as per definition of bond Third proviso to s.48 excludes bonds and debentures other than capital indexed bonds issued by the Government from the list of capital assets eligible for the benefit of indexation CIT(A) has erred in allowing indexation on such bonds" "UTI bonds himself to pay to the bolder ofMIP99, a fixed sum @ 11.3 per c....
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....urities are entitled to indexation. The detailed facts and findings are given below: "facts of the case: Capital gains Short term and long term capital assets and short term and long term capital gains Deletion of addition AO disallowed indexation benefit claimed by assessee as per 3rd proviso of Sec.48 held that on sale of government securities. indexation benefit was not allowed CIT(A) deleted addition placing reliance on Explanation2 to Section 2(42A) r/w Securities Contracts Regulation Act, 1956 and allowed appeal of assessee Revenue in appeal was related to indexation benefit on capital gains u/s 48Held, from definition of capital asset, government securities were not excluded from definition of capital asset As per Section 2(42A) expression 'security' should had meaning assigned to Clause 11 of Securities Contracts Regulation Act, 1956 which includes government securities Bonds could not be equated with securities Assessee had made investments in government securities and sold securities after bold period of more than 12 months to treat securities as long term capital assets Capital gains arose on transfer of long term company assets were entitled fo....
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....." 5. The Revenue is fair enough in not pin-pointing any distinction on facts or law in the twin assessment years. We thus adopt judicial consistency to affirm the CIT(A)'s findings under challenge. The Revenue fails in its instant first grievance. 6. Next comes the Revenue's second substantive grievance that the CIT(A) has erred in law and on facts in allowing set off of brought forward long term capital loss of Rs.2,79,36,337/- against short term capital gains computed u/s 50 of the Act. There is no dispute about the basic fact that the assessee's long term capital loss in issue arose on sale / transfer of the relevant block of assets i.e. its that building only. It had also claimed depreciation thereupon in the preceding assessment years. Its computation of the consequential capital gains came to be covered u/s 50 of the Act resulting in short term capital loss as a special provision arising on sale of depreciable assets. The Revenue's only plea during the course of hearing is that such capital gains or loss; which are computed u/s 50 of the Act are not eligible for set off against long term capital gains brought forward. We find no merit in the Revenue's instant stand. ....