TMI Blog2020 (7) TMI 729X X X X Extracts X X X X X X X X Extracts X X X X ..... tal loss against the short term capital gain computed u/s 50 - HELD THAT:- 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 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. Hon'ble Bombay high court s decision in Commissioner of Income Tax vs. Ace Builders [ 2005 (3) TMI 36 - BOMBAY HIGH COURT] as upheld in V.S.Dempo Company Ltd. [ 2016 (10) TMI 62 - SUPREME COURT] holds that the impugned deeming fiction treating long term capital gains / losses as short once are applicable in specified circumstances only u/s 50 of the Act. And also that they are very much eligible for all other deduction provisions under the Act - Such capital gains are very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RAJASTHAN HIGH COURT] hold that the clinching expression cess does not form part of sec. 40(a)(ii) of the Act so as be disallowed. We adopt the very reasoning mutatis mutandis hold the CIT(A) s appellate action deleting the impugned addition - Revenue s appeal is dismissed. - ITA No.1486/Kol/2019 - - - Dated:- 22-7-2020 - Shri J.Sudhakar Reddy, Accountant Member and Shri S.S.Godara, Judicial Member By Appellant Shri Ram Bilash Meena, CIT-DR By Respondent Shri S.K.Tulsian, Advocate ORDER S.S.Godara, This Revenue s appeal for assessment year 2014-15 arises against the Commissioner of Income Tax (Appeals)-10, Kolkata s order dated 28.02.2018 passed in case No.245/CIT(A)-10/Cir-3(1)/14-15/2018-19/Kol, involving proceedings 143(3) of the Income Tax Act, 1961; in short the Act . Heard both the parties. Case file(s) perused. 2. We notice at the outset that this Revenue s appeal suffers from 30 days delay in filing this appeal. The Assessing Officer has filed his condonation petition dated 17.06.2017 attributing the above delay to compilation of necessary papers and other procedural reequirements. The assessee is very fair in not disputing corr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Third proviso to section 48 read as under: Provided also that nothing contained in the second proviso shall apply to the long term capital gain arising from the transfer of a long term capital asset, being a bond or debenture other than (a) capital indexed bonds issued by the Government; or (b) Sovereign Gold Bond issued by the Reserve Bank of India under the Sovereign Gold Bond Scheme, 2015 Here, it is of utmost relevance to discuss the meaning of 'Government Security'. We note that the term Government security has been defined under Explanation (b) to section 194LD(2) of the Income Tax Act, 1961 as follows: Government security shall have the meaning assigned to it in clause (b) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) As per Section 2(b) of the Securities Contracts (Regulation) Act, 1956 Government security means a security created and issued, whether before or after the commencement of this Act, by the Central Government or a State Government for the purpose of raising a public loan and having one of the forms specified i,! clause (2) of section 2 of the Public Debt Act, 1944 (18 of 1944). Further, secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt issued by the Central Government or the State Governments. It acknowledges the Government's debt obligation. Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with original maturity of one year or more). In India, the Central Government issues both, treasury bills and bond or dated securities while the Slate Governments issue only bonds or dated securities, which are called the Slate Development Loans (SDLs). GSecs carry practically no risk of default and, hence, are called risk free giltedged instruments. The RBI/Government had itself adopted a different nomenclature and definition for 'Bonds' and 'Government Securities' as evident from the above definitions. Had Bonds and Government Securities the same, there would have been no need to define both these terms differently. The learned AO and the learned CIT(A) had not disputed the fact that the assessee has transacted in Government Securities but have only alleged that these Government Securities are in the nature of Bonds and Debentures on which indexation benefit u/s 48 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ictionary . In all his discussions, the Id CIT(A) has not explained how Government Securities are Bonds and Debentures. He has finally drawn the following conclusion at Pg 12 of his order, which is reproduced below: These cash flows traded separately as independent securities in the secondary market. From perusal of the RBI clarification also, the assessee is found to have purchased and sold the said GSecs through the secondary Market, i.e, LKP Securities Ltd and Bankers i.e, United Bank of India as per copy of confirmations placed on record by the assessee. Hence, in my considered opinion, the Govt. Securities in question, viz. GS2010 ,GS2OJ2 are also bonds, as per this definition of bond as enunciated by various authorities including the guidelines of RBI. The Id CIT(A), has finally relied on a decision of the Hon'ble Tribunal Ahmedabad Bench in the case of Areez P. Khambatta in ITA No.795/Ahd/2009 for AY 200506 dated 09.12.2011, wherein the Tribunal examined the question whether UTI MIP59 carrying fixed amount of interest was a Bond and Debenture. It was held that aforesaid financial instrument was Bond and therefore no benefit of indexation would be available to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. In this case, UTI MIP 99 was transferred by the assessee UTI MIP99 is a bond floated by Unit Trust of India which is not a Government entity. UTI Mutual Fund is promoted by the four of the largest Public Sector Financial Institutions as sponsors, viz., State Bank of India, Life Insurance Corporation of India, Bank of Baroda and Punjab National Bank with each of them holding an 18.24% stake in the paid up capital of UTI AMC. However, in the present case, the assessee has transferred Government Securities floated by the Central Government. In this case cited by the CIT(A). There is no reference of Government Securities, as such the facts of this are clearly distinguishable from the present case. Most importantly, to buttress the contention that indexation benefits are available on sale of Government Securities' we rely on the judgment of the Coordinate bench of Chennai Tribunal in the case of Sundaram Finance Limited vs ACIT (2017) 165 ITD 0563 (Chennai) wherein on identical facts it was held that Government Securities are entitled to indexation. The detailed facts and findings are given below: facts of the case: Capital gains Short term and long term cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the order of the Ld. CIT(A) and the same is upheld. Based on the factual position discussed above, we note that as per Section 2(42A) expression 'security shall have meaning assigned to Clause 11 of Securities Contracts Regulation Act, 1956 which includes government securities. The facts of this case are squarely applicable to the present case of the assessee. Therefore, respectfully following the judgment of the Coordinate Bench in the case of Sundararn Finance Limited (supra) we note that it is abundantly clear that Government Securities are entitled to Indexation Benefits. Therefore, we note that Government Securities are different from Bond and Debenture for the purpose of the 3rd proviso to Sec. 48 of the Act (4th proviso after amendment) and therefore the benefit of indexation should be granted to the assessee on the redemption of these Government Securities. 36. In the result, appeal of the assessee in ITA No.937, 938/KoI/2018 ITA No.1439/Kol/2018 are allowed. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 636/- as well as tax free interest income of ₹769,27,746/-, the CIT(A) has recorded his clinching finding of fact that its investment yielding exempt income had been derived from own funds only. The same has gone unrebutted from the Revenue side. This tribunal s co-ordinate bench decisions right from assessment year(s) 2008-09 to 2010-11, 2013-14 and 2015-16 have consistently held that the impugned proportionate interest disallowance does not apply in case of interest free funds having been invested in exempt income yielding investments. We also reiterate that this assessee has rather earned exempt interest income as well (supra). We therefore go by judicial consistency to affirm the CIT(A) s appellate order under challenge. The Revenue s case is not is no different qua the third head of administrative expenditure as well since the CIT(A) has only directed the Assessing Officer to compute the same after considering the exempt income yielding investment only as per this tribunal s order in RIE Agro Ltd. vs. DCIT (2013) 144 ITD 141 (Kol) as upheld in jurisdictional high court in Commissioner of Income Tax vs. REI Agro Ltd. ITAT No. 161 of 2013 dated 23.12.2013. We thus rejec ..... 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