TaxTMI 
TaxTMI 
1992 (9) TMI 119
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.... in trust for the assessee and, therefore, the character of the Bonds as Bonds has ceased and the value of the gold has to be included in the assessments. The other minor objection raised by the department is based on the decision of the Supreme Court in McDowell & Co. Ltd. v. CTO [1985] 154 ITR 148. 3. The objection of the department cannot be upheld in view of the provisions of the Public Debt Act, 1944 and the Negotiable Instrument Act, 1881. We shall advert to those provisions a little later after noticing the preliminary objection of the Ld. D.R. before us. He submitted that the issue is decided against the assessee by two decisions of the Tribunal-- (1) Executors & Trustees of the Estate of Late Shri R.G. Saraiya v. Second WTO [1988....
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....r bond payable to bearer etc. The security can also be issued in any other form prescribed by the Government. The bond in the instant case takes the shape of a promissory note payable 'to order'. The last two words denote that the bond itself is negotiable. Under section 60 of the Negotiable Instrument Act read with section 13 thereof, a promissory note payable to order, which is a negotiable instrument, can be negotiated until payment or satisfaction thereof by the maker of the same at or after maturity, but not after such payment or satisfaction. A Negotiable instrument is negotiable ad infinitum until it has been paid or discharged on behalf of the acceptor. The negotiability of the instrument may be restricted by restrictive covenant or....
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....n. That section states that the liability of the Government in respect of any interest payment due on Government security shall terminate on the expiry of six years from the date on which the amount due by way of interest became payable. This provision is only in regard to the interest payment. Since nothing is said about the principal due under the Government security, the natural consequence is that the principal will continue to be a liability without any period of limitation and shall never cease. This provision is applicable to all Government securities which include a promissory note payable to order under section 2(2) of the Public Debt Act under which the National Defence Gold Bond, 1980, falls. 4. We are, therefore, of the consid....
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....at such directions are not binding on the Government of India and do not create any trust but the Government may agree to abide by such directions only as an " act of grace " and without any liability. This sub-section clearly shows that even if an assessee had requested the Government of India to hold the gold for a period after the date of maturity, the Government does not automatically hold the gold in trust for the beneficiary but it does only as an act of grace and without any liability whatsoever. The provisions of section 6 of the Public Debt Act, clearly negative the contention of the Ld. D.R. that a trust is created whereunder the gold is held by the Reserve Bank of India in trust for the assessee after the date of maturity. 6. M....
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....ons of the Negotiable Instrument Act and the Public Debt Act. 7. It was further pointed out by Mr. Bajoria that even after the date of maturity there was no earmarking of the gold represented by the Gold Bond and that the assessee can collect the gold from any of the Public Debt Offices which was against the contention that a trust has been created in favour of the assessee. We have seen the relevant press notifications issued by the Government from time to time extending the facility for repayment of the gold. Originally the Government extended the facility of redemption through the nationalised banks and later on the facility was restricted to Public Debt Offices. 8. Mr. Bajoria further pointed out that para 42. 1 of circular No. 461,....
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....undisclosed income and it would be improper to extend the benefit of the exemption beyond the period of maturity. However, it should be remembered that we have to construe the exemption provision in the light of the other statutory provisions which have a bearing on the true nature of the gold bond, such as, Public Debt Act and the Negotiable Instrument Act. We have got also to bear in mind the fact that the Government though fully aware that the bonds matured on 27-10-1980 did not take any steps to delete the exemption provision in the WT Act but allowed it to remain in the Act. We cannot therefore subscribe to the view expressed by the Ld. D.R. that the exemption provision in the WT Act, after the date of maturity of the gold bonds, has b....