Clarification regarding exemption under section 10(15)(iic) of the Income-tax Act, etc., of 9% Relief Bonds, 1987 (Now 8.5 per cent Relief Bonds, 2001)
1. Government of India (Ministry of Finance, Department of Economic Affairs), on 17-11-1987, notified the issue of 9% Relief Bonds, 1987. This notification, regarding tax concession on these Bonds, provided as under :
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(i)
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Income-tax
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Interest on the Bonds will be exempt from income-tax under the Income-tax Act, 1961.
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(ii)
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Wealth-tax
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The Bonds will be exempt from wealth-tax under Wealth-tax Act, if the Bonds are owned from the date on which the bonds are subscribed to by the assessee or for a period of at least six months ending with the relevant valuation date, whichever is shorter.
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(iii)
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Gift-tax
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Gifts of the Bonds made by an initial subscriber will be exempt from gift-tax subject to a maximum of Rs. 5 lakhs in value in the aggregate in one or more years.
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2. Section 10(15 )(iic) of the Income-tax Act provides exemption from income tax in the case of an individual or a Hindu undivided family, on the interest on such Relief Bonds as the Central Government may, by notification in the Official Gazette specify in this behalf. Similarly, section 5(1)(xvif) of the Wealth-tax Act as existing before 1-4-1993 provided exemption from wealth-tax in the case of an individual or a Hindu undivided family on such Relief Bonds as the Central Government may, by notification in the Official Gazette, specify in this behalf. Section 5(1)(iiid) of Gift-tax Act also provided exemption from gift-tax, subject to prescribed conditions and ceiling, in case of an individual or a Hindu undivided family, on the gift of property, in the form of such Relief Bonds as the Central Government may, by notification in the Official Gazette, specify in this behalf.
3. It is hereby clarified that, by virtue of notification dated 17-11-1987 referred to in para 1, 9% Relief Bonds, 1987 shall be deemed to have been notified for the purpose of exemption under sections of Income-tax/Wealth-tax/Gift-tax Act mentioned in para 2 subject to conditions laid down in para 1.
Circular : No. 673, dated 21-12-1993.
JUDICIAL ANALYSIS
In S.A. Growth Fund (P.) Ltd. v. Asstt. CIT [1998] 97 Taxman 112 (Delhi-Trib.) (Mag.), it was held that premium received on Bond is not taxable. [See also Circular No. 18, dated 1-1-1982].
