TMI Blog2014 (2) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... August 1994 in which it was stated that, “the interest on Kisaan Vikas Patras has to be assessed to income tax on accrual basis, the amount of interest accrued on these patras during initial two and half years has to be determined in consultation with the department of Economic Affairs - The amount of interest accrued on investment in Kisaan Vikas Patra by an assessee is to be calculated on the basis of the table received from the Department of Economic Affairs wherein rates of interest and maturity amount for Rs. 1000 denomination of Kisaan Vikas Patra are given – Thus, the authorities correctly recorded that the assessee was entitled to encash KVPs after two years and six months and the period was over – Decided against Assessee. - Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal. Tribunal rejected his appeal by judgment dated 12th October 2012, making following observations : 5. We have heard the rival submissions and perused the material on record. Before us, the assessee has placed on record the copy of the letter dated 1st December 1991 issued by the Office of the Joint Commissioner of Income Tax incorporating the Circular No. 687 dated 19081994 which reads is as under : As per Circular No. 687 dated 10081994, interest on Kisan Vikas Patras has to be assessed to income tax on accrual basis, the amount of interest accrued on these patras during initial two and half years has to be determined in consultation with the Department of Economic Affairs. The amount of interest accrued on investment in K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f indexed cost of acquisition as contemplated under Explanation (iii) to Section 48. In the case of Dr. R.P Patel v. CIT [2009] 26 DTR 266 (Ker), it has been held that IVP is admittedly a deposit scheme framed by the Government of India for making deposits in the Post Offices, purchase of IVP amounts to depositing a specific amount in post office for a specific rate of interest. On maturity, the holder can encash the same from the very same post office. It further held that IVPs cannot be treated as bonds because it has no sale value or market value as such. It is nothing but a deposit made in post office which entitles the depositor to receive prefixed specific rate of interest and on maturity only the principal amount with accrued inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued interest on KVP to be taxable. We, thus, uphold the order of A.O and dismiss the appeal of the assessee. 7. In the result, appeal of the assessee is dismissed. Urging that there was an error apparent on the face of the record in the judgment of the Tribunal, assessee filed Miscellaneous Application which was also dismissed by the Tribunal on 26th April 2013. Hence, this Appeal. Appellant contended that the KVP was nothing but a promissory note and the entire amount with interest was promised to be paid over at the end of maturity period. There was nothing to suggest that the interest would accrued during such period. He contended that the KVP should be considered as an asset under section 214 of the Act, therefore, gain should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubrule (3), if the encashment is after expiry of one year but before the expiry of two years and six months from the date of certificate, the holder would receive face value of the certificate together with simple interest at the rate applicable from time to time to the account holders under the Post Office Savings Account Rules, 1981. Subrule (4) of Rule 13 provides for different rate of returns for any premature encashment after expiry of two years and six months; depending upon the date of purchase of KVP. We are governed by subrule (4) of Rule 13, since admittedly, KVPs were purchased after 1st March 2003 and the table below rule 12 provides for greater return, depending upon the time of premature encashment contained in subrule (1). Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but less than 8 years and 7 months 1850.93 It could thus be seen that on the grounds specified in Rule 13, premature encashment before 2 years and six months of the date of the certificate is envisaged under the rules. However, after completion of such maturity lockin period of two years and six months, an investor could at his option, encash the certificate and would receive the return at the rates specified in different subPage rules; depending upon the date of purchase of the certificate. Under the circumstances, in our opinion, the Tribunal was correct in confirming the opinion that the KVP did not amount to a promissory note and which, at the end of the period, the authority promise to pay a fixed sum of money only. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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