|The assessee deposited certain quantity of gold on 27-11-1999 in Gold Deposit Scheme, 1999 ("the scheme"). Thereafter, he redeemed the certificate of gold on 22-11-2006 to obtain the physical gold, which was finally sold on 7-11-2007. Assessee treated the income arising out of the said sale as short-term capital gains. However, AO opined that the date of acquisition of gold was 27-11-1999 and he, accordingly, computed the long-term capital gains. Further, the CIT (A) upheld the order of the AO.
On appeal, the Tribunal held in favour of assessee as under:
1) On redemption of the certificate, the nature of the capital asset, which was in the shape of gold bond certificate, was changed into the gold. Thus, the gold which was received by the assessee on redemption was a new capital asset that had come in possession of the assessee on redemption of gold bond certificate;
2) The date of maturity of certificates of gold (22-11-2006) should be considered as the date of acquisition of the gold for the purpose of computation of capital gains;
3) The value of gold on the date of redemption of certificates (i.e., when a new capital asset came into existence) was to be taken as the cost of acquisition of gold. Earlier, the gold in possession of the assessee had lost its identity when the same was converted into bonds. The bonds could not be treated as gold nor could the gold be treated as bonds;
4) The authorities were not justified in taking the date of acquisition as 22-11-1999 instead of 22-11-2006. Therefore, the orders of the authorities were set aside and it was directed that the cost and the date of acquisition of the gold for the purpose of computing the capital gains be taken as the date on which the gold had been received by assessee on redemption of the gold bonds, i.e., 22-11-2006 – SHIV KUMAR AGARWAL v. DCIT  2876 (Agra – Trib.)
In the present case, the dispute over period of holding arises due to Circular No. 415 (even though said circular was issued for the purpose of National Defense Funds, yet it was relied upon to explain the similar issue). As per this Circular, the cost of acquisition of gold received on redemption of such bonds should be its fair market value as existing on the date of redemption.
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