National Defence Gold Bonds, 1980-Transfer of gold after redemption-Date of acquisition of gold for the purpose of capital gains-Instruction regarding - Income Tax - 415/1985

National Defence Gold Bonds, 1980-Transfer of gold after redemption-Date of acquisition of gold for the purpose of capital gains-Instruction regarding Circular No. 415 Dated 14/3/1985 The Government of India had issued in the year 1965, National Defence Gold Bonds, 1980. These Bonds were redeemable after 15 years, i.e., on or after 27th October, 1980. It was clarified in the Press Communique bearing No. MMS/MMM/ANT/361/3 dated 22-9-1980, issued by the Department of Economic Affairs, Ministry of Finance, that: "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 be the market value of the Bonds on the date of redemption." A question has arisen as to whether such capital gains should be treated as long-term or short-term capital gains. The question has been examined by the Board. The exchange of gold bonds at the time of redemption is an altogether fresh transaction when an assessee acquires a different asset. It has also been decided above that for the purposes of the computation of capital gains, cost of acquisition of gold would be the market value of the bonds on the date of redemption. The material date in this case would, therefore, be the date of redemption of gold bonds which would be treated as the date of acquisition of the gold. As per section 2(42A), "Short-term capital asset" means a capital asset held by an assessee for not more than 36 months immediately preceding the date of transfer. The question as to whether the gains arising in such cases would be short or long-term would, therefore, depend upon the time that has passed between the date of redemption of gold bonds and the subsequent sale of gold. 3. The above instructions may please be brought to the notice of all officers. Yours faithfully, (Sd.) O.P. Srivastava, Director (ITA. II).