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May 2013

Exemption: Interest on tax free bonds: Section 10(15) : A. Y. 1988-89: Interest for period between application for allotment and actual allotment: Entitled to exemption: CIT vs. Bharat Heavy Electricals Ltd.; 352 ITR 88 (Del):

By K. B. Bhujle, Advocate
Reading Time 1 mins
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For the A. Y. 1988-89, the assessee had claimed exemption of interest on tax free bonds u/s. 10(15). The Assessing Officer disallowed the claim for exemption in respect of the interest for the period from the date of application for allotment and the date of actual allotment. The Tribunal held that the assessee was entitled to exemption.

On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:

“i) In view of the amplitude of section 10(15)(iv), the fact that interest was paid for a brief period of about six days would not make it any less an amount of interest payable “in respect of bonds”.

ii) The assessee was entitled to exemption on the interest earned on tax free bonds between the date of their application by the assessee and the date of their allotment.”

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