loss incurred on Compensation Bonds is not Capital loss

IRCON International Ltd. Vs. DCIT, I.T.A. No. 37/2000, Date of Order: 15.05.2015,  High Court of Delhi 

Whether the loss incurred on Compensation Bonds-2001 issued by GOI, governed by the provisions of the Public Debts Act, 1944 and the Public Debt Rules, 1945, was a loss and/or it was a capital loss is legally tenable.

Held No

In the present instance, the amounts as indicated earlier were payable for services provided by way of projects executed by the assessee in Iraq. The Iraqi Government‟s inability to pay due to sanctions imposed by it and the subsequent Central Government‟s negotiating an arrangement for its payment through bonds that were to mature in future – with interest did not in any way alter their character or convert them into capital assets as the assessee argues.