ASHOK KUMAR JALAN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under S. 256(1) of the IT Act, 1961. The following question has been referred to us for determination :

(2.) THE assessee purchased National Defence Gold Bonds, 1980, on 3rd April, 1980, at the price of Rs. 1,125 per bond. He purchased bonds worth 1,000 grams of gold. The actual payment of the purchase price was made by him by cheque on 29th Sept., 1980. Under the National Defence Gold Bonds, 1980, Scheme, the bonds were to be exchanged by the holder for gold on 27th Oct., 1980.

(3.) THERE does not appear to be any material which would establish that the only motive of the assessee in purchasing these bonds was to make a profit by selling them at a later date. The assessee had not purchased bonds in very large quantities thereby indicating a desire to trade in them; nor is there any material to show that he had no intention of retaining the bonds and exchanging them for gold on the due date, 27th Oct., 1980, as he could have done. The assessee had the means to pay for these bonds and in fact he did pay for them. The mere fact that he sold them on 1st Oct., 1980, is not sufficient for the purpose of coming to a conclusion that this was an adventure in the nature of trade. There is also no material to show that the assessee was carrying on any business similar to that of buying and selling bonds such as dealing in stock or shares; or that the resale of bonds was allied to the assessee's usual trade or business or was incidental to it. In these circumstances, in our view, the Department has not discharged the burden of establishing that this was an adventure in the nature of trade.