Per Shri R.V. Easwer, JM - This order will dispose of 10 appeals. In all the 10 appeals the only point involved is whether the assessee’s are entitled to the exemption under section 5(1)(xvia) of the Wealth-tax Act in respect of National Defence Gold Bonds. 1980, for the assessment years 1987-88 and 1988-89.

2. The objection of the department to granting the exemption is that the bonds have matured on 27-10-1980 and thereafter the Reserve Bank of India holds the gold in trust for the assessee and, therefore, the character of the Bonds as Bonds has ceased and the value of the gold has to be included in the assessments. The other minor objection raised by the department is based on the decision of the Supreme Court in McDowell & Co. Ltd. v. CTO [1985] 154 ITR 148¹.

3. The objection of the department cannot be upheld in view of the provisions of the Public Debt Act, 1944 and the Negotiable Instrument Act, 1881. We shall advert to those provisions a little later after noticing the preliminary objection of the Ld. D.R. before us. He submitted that the issue is decided against the assessee by two decisions of the Tribunal - (1) Executors & Trustees of the Estate of Late Shri R. G. Saraiya v. Second WTO [1988] 24 ITD 211 (Bom.) and (2) Smt. Subhadraben Shankerlal Patel v. WTO [1990] 32 ITD 711 (Ahd.). It was also brought to our notice that the decision of the Tribunal in IAC v. Mrs. Sakina [1988] 27 ITD 370 (Nag.) was in favour of the assessee. We have carefully gone through the decisions which were stated to be against the assessee. In these two decisions, the provisions of the Public Debt Act and the Negotiable Instrument Act were not considered. The bonds with which we are now concerned have been issued under the provisions of the Public Debt Act and they are in the form of Promissory Notes payable to order and, therefore, we cannot ignore the provisions of the Public Debt Act and the Negotiable Instrument Act in order to ascertain the true nature and the legal character of the Bonds. We are, therefore, of the opinion that the Tribunal’s orders relied on by the Ld. D.R. are not impediments to the case of the assessee’s being examined in the light of the aforesaid statutory provisions. The National Defence Gold Bonds, 1980 were issued on 27-10-1965 and the Bond is in the form of a Promissory Note payable to order. There was a provision for interest payment every year. The Bonds were issued by the Public Debt Office. Under section 2 (2) of the Public Debt Act the Government security means a security created and issued by the Government for the purpose of raising a public loan and having one of the following forms, Namely, either stock or promissory note payable to order or a bearer bond payable to bearer etc. The security can also be issued in any other form prescribed by the Government. The bond in the instant case takes the shape of a promissory note payable ‘to order’. The last two words denote that the bond itself is negotiable. Under section 60 of the Negotiable Instrument Act read with section 13 thereof a promissory note payable to order, which is a negotiable instrument can be negotiated until payment or satisfaction thereof by the maker of the same at or after maturity, but not after such payment or satisfaction. A Negotiable instrument is negotiable ad infinitum until it has been paid or discharged on behalf of the acceptor. The negotiability of the instrument may be restricted by restrictive covenant or endorsement but there is no such restriction in the National Defence Gold Bonds, 1980 issued by the Government. The negotiability of the negotiable instrument ceases only when it is paid or satisfied by or on behalf of the person liable therein at or after maturity and not otherwise. Therefore, the first objection of the department that the character of the Bond as Bond ceased on the date of maturity, namely, 27-10-1980, cannot be upheld. The provisions of section 23 of the Public Debt Act lend support to this view.