- (1.) Leave granted.
(2.) Interpretation of sub-section (3) of Section 226 of the Income Tax Act, 1961 (Act) is involved in these appeals which arises out of a judgment and order dated 27.8.2004 passed by the High Court of Judicature of Andhra Pradesh at Hyderabad in Writ Petition No.2305 of 2002 whereby and whereunder the writ petition filed by B.M. Malani (hereafter referred to as the respondent) was allowed in part.
(3.) Respondent is an assessee of income tax. He was admittedly a defaulter in payment of income-tax. He had invested an amount of 65 lacs in the Monthly Income Plan (III) offered by the Unit Trust of India under Capital Gains Scheme, the predecessor in interest of the petitioner in the year 1998 with an object to seek exemption under Section 84-E of the Act. The "Highlights" projected for such an offer were as under : "A five year close ended income plan The plan offers three options 1) Monthly Income Option, 2) Annual Income Option & 3) Cumulative Option The face value of a unit is Rs.10/- and units will be sold at par. The Trust shall pay an assured income @ 12.50% p.a. payable monthly under monthly income option and @ 13.25% p.a. payable annually under annual income option, for all the five years of the plan. Under the Monthly Income Option, income distribution warrants for the period upto March 1999 will be sent along with the membership advice/unit certificate. Thereafter income warrants payable monthly will be sent in advance for every April- March period. Repurchase allowed from 1st September, 2001 at NAV based repurchase price under all the three options. Scheme shall be listed on the whole sale debt segment of the NSE within six months from the closure of subscription. It is guaranteed that the capital invested in the scheme will be protected on maturity i.e. units will not be redeemed below par. The Development Reserve Fund (DRF) of the Trust will guarantee this capital protection. There is no such guarantee for premature repurchases and the repurchase price in such cases will be as per prevailing NAV. There is scope for capital appreciation as a part of investment will be in equities. Tax benefits under Section 80L and Sections 48 and 112 of Income Tax Act, 1961 on income distributed and capital gains from capital appreciation. Capital gains tax exemption under Section 54EA of the Income Tax Act, 1961 subject to lock-in for three years from the date of acceptance.";