THE ITO 3(2)(1), MUMBAI v. M/S. INDIA LIFE CREDIT & HOLDINGS LTD, MUMBAI

ITA 3081/MUM/2008 | 2004-2005
Pronouncement Date: 09-11-2011 | Result: Dismissed

Appeal Details

RSA Number 308119914 RSA 2008
Assessee PAN AAACI7655J
Bench Mumbai
Appeal Number ITA 3081/MUM/2008
Duration Of Justice 3 year(s) 6 month(s) 3 day(s)
Appellant THE ITO 3(2)(1), MUMBAI
Respondent M/S. INDIA LIFE CREDIT & HOLDINGS LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted I
Tribunal Order Date 09-11-2011
Date Of Final Hearing 02-11-2011
Next Hearing Date 02-11-2011
Assessment Year 2004-2005
Appeal Filed On 06-05-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND SHRI P.M. JAGTAP (ACCOUNTANT MEMBER) ITA NO. 3081/MUM/2008 ASSESSMENT YEAR-2004-05 THE ITO 3(2)(1) AAYAKAR BHAVAN MUMBAI-400 020 VS. M/S. INDIA LIFE CREDIT & HOLDINGS LTD. 202 DALMIA TOWERS NARIMAN POINT MUMBAI-400 021 PAN- AAACI 7655J (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI C.G.K. NAIR RESPONDENT BY: SHRI VIPUL B. JOSHI DATE OF HEARING :2.11.2011 DATE OF PRONOUNCEMENT: 09.11.2011 O R D E R PER B.R. MITTAL JM : THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMEN T YEAR 2004-05 AGAINST ORDER OF LD. CIT(A) DT. 21.2.2008 DISPUTING TO ALLOW LOSS OF RS. 1 79 31 571/- DISALLOWED BY AO RELATING TO TRANSACT ION IN THE UNITS OF SUNDARAM MUTUAL FUNDS. 2. THE RELEVANT FACTS ARE THAT ASSESSEE IS IN BUSIN ESS OF INVESTMENT AND MANAGEMENT CONSULTANCY SERVICES AND HAD MADE INVES TMENT IN THE UNITS OF SUNDARAM MUTUAL FUND. THE ASSESSEE RECEIVED DIVIDE ND OF RS. 1 50 97 200/- AND INCURRED LOSS OF RS. 1 79 31 571/- IN THE TRANS ACTIONS RELATING TO SAID UNITS OF SUNDARAM MUTUAL FUND. THE ASSESSING OFFICER CON SIDERED THE SAID ITA NO. 3081/M/2008 2 TRANSACTION TO BE ONE OF DIVIDEND STRIPPING. THE AO DID NOT ACCEPT THE CONTENTION OF ASSESSEE THAT PROVISIONS OF SEC. 94(7 ) OF THE ACT DOES NOT APPLY INASMUCH AS SALE OF MUTUAL FUND UNITS WERE NOT WITH IN A PERIOD OF THREE MONTHS FROM THE SPECIFIED DATE I.E. RECORD DATE. H OWEVER AO DID NOT ACCEPT THE SAID CONTENTION OF ASSESSEE AND STATED THAT ASS ESSEE ARTIFICIALLY CREATED LOSS AS THE ENTIRE TRANSACTIONS WERE ARRANGED BY AS SESSEE. THUS AO DISALLOWED LOSS CLAIMED BY ASSESSEE ON SALE OF SUND ARAM MUTUAL FUND. 3. IN THE FIRST APPEAL LD. CIT(A) STATED THAT PROVI SIONS OF SEC. 94(7) IS NOT ATTRACTED INASMUCH AS SALE OF MUTUAL FUND IS NO T WITHIN A PERIOD OF 3 MONTHS SPECIFIED THEREIN THEREFORE ADDITION MADE B Y AO CANNOT BE SUSTAINED. HENCE DEPARTMENT IS IN APPEAL BEFORE TRIBUNAL. 4. DURING THE COURSE OF HEARING LD. DEPARTMENTAL R EPRESENTATIVE SUPPORTED THE ACTION OF AO AND SUBMITTED THAT TRANS ACTION TO PURCHASE UNITS OF SUNDARAM MUTUAL FUND WERE ARRANGED AND IT WAS A COLOURED TRANSACTION. HE SUBMITTED THAT ACTION OF AO SHOULD BE CONFIRMED. 5. ON THE OTHER HAND LD. AR SUPPORTED THE ORDER OF LD. CIT(A) AND SUBMITTED THAT PROVISIONS OF SEC. 94(7) OF THE ACT ARE NOT ATTRACTED AS ASSESSEE DID NOT SELL THE SAID MUTUAL FUND WITHIN A PERIOD OF 3 MONTHS AFTER THE RECORD DATE. THE LD. AR RELYING ON DECISION OF BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS SMT. ALKA BHOS LE 325 ITR 550 (BOM) SUBMITTED THAT ONLY IF ALL THE THREE CONDITIONS AS ARE LAID DOWN U/S. 94(7) OF THE ACT ARE FULFILLED THE LOSS IF ANY ARISING FROM THE PURC HASE OR SALE OF SECURITIES OR UNITS HAD TO BE IGNORED FOR THE PURP OSE OF COMPUTING THE INCOME ITA NO. 3081/M/2008 3 CHARGEABLE TO TAX TO THE EXTENT SUCH LOSS DID NOT EXCEED THE AMOUNT OF DIVIDEND OR INCOME RECEIVED OR RECEIVABLE. HE SUBM ITTED THAT AO HAS HIMSELF ACCEPTED THE SALE OF UNITS HAD TAKEN PLACE AFTER EX PIRY OF PERIOD OF 3 MONTHS FROM THE RECORD DATE. HE SUBMITTED THAT HONBLE BO MBAY HIGH COURT HAS ALSO HELD IN THE ABOVE CASE THAT ALL THE THREE CONDITION S PRESCRIBED IN CLAUSE (A) (B) AND (C) OF SUB-SECTION 7 WERE CUMULATIVE IN NAT URE. IT IS RELEVANT TO STATE THAT CONDITIONS LAID DOWN UNDER SUB-SECTION (7) OF SECTION 94 SPELT OUT THREE REQUIREMENTS ; (I) THE PURCHASE OR ACQUISITION OF A NY OF THE SECURITIES OR UNITS SHOULD TAKE PLACE WITHIN A PERIOD OF THREE MONTHS PRIOR TO THE RECORD DATE ; (II) THE SALE OR TRANSFER SHOULD TAKE PLACE WITHIN A PERIOD OF THREE MONTHS AFTER THE RECORD DATE ; AND (III) THE DIVIDEND OR INCOME RECEIVED OR RECEIVABLE SHOULD BE EXEMPT. 6. SINCE LD. DR HAS NOT DISPUTED THE FACT THAT ASS ESSEE HAD ACTUALLY PURCHASED THE SAID UNIT OF SUNDARAM MUTUAL FUND AND HAD ALSO SOLD THE SAME AFTER THE EXPIRY OF 3 MONTHS FROM THE SPECIFIED REC ORD DATE WE HOLD THAT THE CONTENTION OF LD. DR THAT IT IS A COLOURABLE EXERCI SE HAS NO MERITS AS THE PURCHASE AND SALE OF UNIT OF SUNDARAM MUTUAL FUND A RE NOT IN DISPUTE. WE FIND THAT ISSUE INVOLVED IS SQUARELY COVERED BY THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS SMT. ALKA BHOSLE (SUPRA) AS ONE OF THE CONDITION LAID DOWN U/S. 94(7) OF THE ACT I.E. SALE OF UNIT ALSO SHOULD TAKE PLACE WITHIN A PERIOD OF 3 MONTHS AFTER THE RECORD DATE IS NOT FULFILLED. HENCE WE HOLD THAT THERE IS NO INFIRMI TY IN THE ORDER OF LD. CIT(A) IN DELETING THE DISALLOWANCE OF RS. 1 79 31 571/- MADE BY AO. ACCORDINGLY WE UPHOLD HIS ORDER BY REJECTING THE GROUND OF APPEAL TAKEN BY DEPARTMENT. ITA NO. 3081/M/2008 4 7. IN THE RESULT APPEAL FILED BY DEPARTMENT IS DISM ISSED. ORDER PRONOUNCED ON THIS 9 TH DAY OF NOVEMBER 2011 SD/- SD/- ( P.M. JAGTAP) (B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 9 TH NOVEMBER 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR I BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T MUMBAI