RAFIQUE A MALIK, MUMBAI V. DCIT 2(2), MUMBAI

ITA 3413/MUM/2010

• Counselvise Citation: 341319914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 17-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 30-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G K NAIR
• Assessee Lawyers: D V LAKHANI
• Keywords: Salary income
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, D, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND B.RAMAKOTAIAH (A .M ) ITA NO.3413/MUM/2010 (ASSESSMENT YEAR: 2006-07) SHRI RAFIQUE A. MALIK, C/O METRO SHOES LTD., 19, METRO HOUSE, 3 RD FLOOR, COLABA CAUSEWAY, MUMBAI-400001 PAN: AABPM5599H DY. COMMISSIONER OF INCOME TAX CIRCLE 2(2), MUMBAI. APPELLANT V/S RESPONDENT DATE OF HEARING : 17.8.2011 DATE OF PRONOUNCEMENT : APPELLANT BY : SHRI D.V. LAKHANI RESPONDENT BY : SHRI G.K.NAI R O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 2.3.2010 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2006-07. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS AN INDIVIDUAL DERIVES INCOME FROM SALARY, CAPITAL GAINS AND OTHER SOURCES. HE FILED RETURN DECLARING AN INCOME OF RS.2,13,54,210/-. THE AO AFTER PROCESSING OF THE R ETURN UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) SELECTED THE CASE FOR SCRUTINY AND ACCORDI NGLY ISSUED NOTICES UNDER SECTIONS 143(2) AND 142(1) ALONG WITH THE QUESTIONNAIRE. ON VERIFICATION OF DETAILS OF SHORT TERM CAPITAL ITA NO.3413/MUM/2010 (ASSESSMENT YEAR: 2006-07) 2 GAINS, THE AO NOTED THAT THE ASSESSEE INCURRED LOS S OF RS.3,64,272/- ON SALE OF SHARES OF M/S RELIANCE B ANKING FUND. THE AO FURTHER NOTED THAT THE ASSESSEE HAS R ECEIVED DIVIDEND OF RS.3,51,288/- FROM THE SAID COMPANY WH ICH WAS CLAIMED AS EXEMPT. THE AO AFTER APPLYING THE PROV ISIONS OF SECTION 94(7) OF THE ACT DISALLOWED THE LOSS TO T HE EXTENT OF RS.3,51,288/- AND ACCORDINGLY COMPLETED THE ASSESSM ENT AT AN INCOME OF RS.2,17,05,500/-, VIDE ASSESSMENT ORD ER DATED 19.12.2008 PASSED UNDER SECTION 143(3) OF THE ACT . 3. ON APPEAL, THE LD.CIT(A) WHILE OBSERVING THAT TH E UNITS PURCHASED WERE DISPOSED OF WITHIN A PERIOD OF NINE MONTHS AND THE DIVIDEND WAS EXEMPTED, HELD THAT THE AO WAS FULLY JUSTIFIED IN RESTRICTING THE LOSS CLAIMED TO SUCH AN AMOUNT ONLY AND ACCORDINGLY UPHELD THE DISALLOWANCE MADE BY THE AO. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUND SUSTENANCE OF DISALLOWANCE OF LOSS RS.3,51,288/- U NDER SECTION 94(7) OF THE ACT. 5. AT THE TIME OF HEARING, THE LEARNED COUNSEL FO R THE ASSESSEE FILED A CHART SHOWING DATE OF PURCHASE OF UNITS OF M/S RELIANCE BANKING FUND, AMOUNT, DATE OF FIRST D IVIDEND WITH AMOUNT AND DATE OF SECOND DIVIDEND WITH AMOUNT , DATE ITA NO.3413/MUM/2010 (ASSESSMENT YEAR: 2006-07) 3 OF REDEMPTION WITH AMOUNT AND THE AMOUNT OF LOSS SU FFERED RS.3,64,271.66. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE THOUGH THE FIRST DIVIDEND OF RS.1,56,128 /- DATED 29.12.2005 FALLS WITHIN A PERIOD OF THREE MONTHS FR OM THE DATE OF PURCHASE AND THE SAME IS LIABLE TO BE TAX ED UNDER SECTION 94(7) OF THE ACT BUT THE SECOND DIVIDEND OF RS.1,95,160/- DATED 30.3.2006 FALLS BEYOND THE PER IOD OF THREE MONTHS FROM THE DATE OF PURCHASE, THEREFORE, THE PROVISIONS OF SECTION 94(7), DO NOT APPLY ON THE AM OUNT OF SECOND DIVIDEND OF RS.1,95,160/- AND THEREFORE THE SAME IS NOT LIABLE TO TAX AND FOR THIS PROPOSITION, THE REL IANCE WAS ALSO PLACED ON THE DECISION OF HONBLE BOMBAY HIG H COURT IN COMMISSIONER OF INCOME-TAX V/S SMT. ALKA BHOSLE (2010) 325 ITR 550(BOM.), WHEREIN IT HAS BEEN HELD THAT TH E CONDITIONS PRESCRIBED IN CLAUSES (A), (B) AND (C) O F SECTION 94(7) ARE CUMULATIVE IN NATURE. THUS SECTION 94(7) WOULD NOT BE APPLICABLE. HE, THEREFORE, SUBMITS THAT THE DIVI DEND OF RS.1,95,160/- SHOULD BE EXCLUDED FROM THE PROVISION S OF SECTION 94(7) AND THE DISALLOWANCE MADE TO THIS EX TENT BE DELETED. 6. ON THE OTHER HAND, THE LD.DR SUPPORTS THE ORDER OF THE AO AND THE LD.CIT(A) ITA NO.3413/MUM/2010 (ASSESSMENT YEAR: 2006-07) 4 7. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD WE FIND MERIT IN THE PLEA OF THE LEARNED COUNSEL FOR THE A SSESSEE. THE FACTUAL MATRIX OF THE CASE IS AS UNDER : DETAILS OF SHORT TERM CAPITAL LOSS ON SALE OF REL IANCE BANKING FUND: DATE OF PURCHASES : 27.12.20 05 AMOUNT : RS.10,00 ,000/- DATE OF FIRST DIVIDEND : 29.12.2005 DIVIDEND AMOUNT : RS. 1,56,128/- DATE OF SECOND DIVIDEND : 30.3.2006 DIVIDEND AMOUNT : RS.1,95,160/- DATE OF REDEMPTION : 31.3.2006 REDEMPTION AMOUNT : RS.6,35,728.34 DIFFERENCE AMOUNT (LOSS) : RS.3,64,271.66 8. IN THE CASE OF SMT. ALKA BHOSLE (SUPRA) THE FACT S ARE AS UNDER (HEAD NOTE, PAGE 550): THE ASSESSEE PURCHASED CERTAIN UNITS WITHIN A PERI OD OF LESS THAN THREE MONTHS FROM THE RECORD DATE, BUT ADMITTEDLY, THE UNITS WERE SOLD BEYOND A PERIOD OF THREE MONTHS FROM THE RECORD DATE. THE CONTENTION OF THE REVENUE WAS THAT THOUGH THE UNITS WERE SOLD BEYOND A PERIOD OF THREE MONTHS OF THE RECORD DATE, THE PROV ISIONS OF SECTION 94(7) OF THE INCOME-TAX ACT, 1961 WOULD APPLY SINCE THEY WERE ACQUIRED WITHIN A PERIOD OF THREE M ONTHS OF THE RECORD DATE. ITA NO.3413/MUM/2010 (ASSESSMENT YEAR: 2006-07) 5 IT HAS BEEN HELD (HEAD NOTE, PAGES 550 AND 551): HELD, DISMISSING THE APPEAL, THAT SUB-SECTION (7) OF SECTION 94 SPELT OUT THREE REQUIREMENTS; (I) THE PU RCHASE OR ACQUISITION OF ANY OF THE SECURITIES OR UNITS SH OULD 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 DA TE ; AND (III) THE DIVIDEND OR INCOME RECEIVED OR RECEIV ABLE SHOULD BE EXEMPT. IN THE EVENT THAT THESE THREE CONDITIONS WERE FULFILLED, THE LOSS, IF ANY, ARISIN G FROM THE PURCHASE OR SALE OF SECURITIES OR UNITS, HAD TO BE IGNORED FOR THE PURPOSE OF COMPUTING THE INCOME CHARGEABLE TO TAX, TO THE EXTENT SUCH LOSS DID NOT EXCEED THE AMO UNT OF DIVIDEND OR INCOME RECEIVED OR RECEIVABLE. THE SALE OF THE UNITS HAD TAKEN PLACE AFTER THE EXPIRY OF A PER IOD OF THREE MONTHS FROM THE RECORD DATE. HENCE, THE SECON D CONDITION SPELT OUT FOR THE APPLICABILITY OF SUB-SE CTION 7 WOULD NOT COME INTO FORCE. THE CONDITIONS PRESCRIBE D IN CLAUSES (A), (B) AND (C) OF SUB-SECTION 7 WERE CUMU LATIVE IN NATURE THUS, SECTION 94(7) WOULD NOT BE APPLICAB LE. 9. APPLYING THE RATIO OF THE ABOVE DECISION TO THE FACTS OF THE PRESENT CASE, WE FIND THAT THE AMOUNT OF THE FI RST DIVIDEND OF RS.1,56,128/- DATED 29.12.2005 FALLS WITHIN TH E PERIOD THREE MONTHS FROM THE RECORD DATE I.E. 27.12.2005, THEREFORE, THE SAME IS LIABLE TO BE TAXED, WHEREAS THE AMOUNT OF SECOND DIVIDEND OF RS.1,95,160/- DATED 30.3.2006 F ALLS BEYOND THE PERIOD OF THREE MONTHS FROM THE RECORD DATE I.E.27.12.2005 THEREFORE, IT FALLS OUTSIDE THE SCOP E OF SECTION 94(7) OF THE ACT. THIS BEING SO AND KEEPING IN VIE W THE RATIO OF THE ABOVE DECISION THAT THE CONDITIONS PRESCRIB ED IN CLAUSES (A), (B) AND ( C ) OF SECTION 94(7) ARE CUM ULATIVE IN NATURE, WE ARE OF THE VIEW THAT ON THE AMOUNT OF DI VIDEND OF ITA NO.3413/MUM/2010 (ASSESSMENT YEAR: 2006-07) 6 RS.195,160/- DATED 30.3.2006, THE PROVISIONS OF SEC TION 94(7) ARE NOT APPLICABLE AND ACCORDINGLY, WE WHILE UPHOLDING THE DISALLOWANCE OF LOSS OF RS.1,56,128/-, DELETE THE AMOUNT OF DISALLOWANCE OF LOSS OF RS.1,95,160/-. THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.1,95,160/-. THE GROU NDS TAKEN BY THE ASSESSEE ARE, THEREFORE, PARTLY ALLOWED. 10. IN THE RESULT, THE ASSESSEES APPEAL STANDS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19TH AUG,2011. SD SD (B.RAMAKOTAIAH ) (D.K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 19TH AUGUST, 2011 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI ITA NO.3413/MUM/2010 (ASSESSMENT YEAR: 2006-07) 7 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, D, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND B.RAMAKOTAIAH (A .M ) ITA NO.3413/MUM/2010 (ASSESSMENT YEAR: 2006-07) SHRI RAFIQUE A. MALIK, C/O METRO SHOES LTD., 19, METRO HOUSE, 3 RD FLOOR, COLABA CAUSEWAY, MUMBAI-400001 PAN: AABPM5599H DY. COMMISSIONER OF INCOME TAX CIRCLE 2(2), MUMBAI. APPELLANT V/S RESPONDENT CORRINGENDUM IN THE ORDER PASSED BY THE ITAT, MUMBAI BENCHES D MUMBAI IN THE ABOVE APPEAL IN ITA NO.3413/MUM/201 0 FOR ASSESSMENT YEAR 2006-07 DATED 19.8.2011, AT PAGE N O.1 FOR APPELLANT BY SHRI D.V.LAKHANI AND RESPONDENT BY S HRI G.K.NAIR READ APPELLANT BY SHRI D.V.LAKHANI AND RESPONDENT BY SHRI C.G.K.NAIR SD SD (B. RAMAKOTAIAH ) (D.K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 30 TH AUG, 2011 SRL COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ITA NO.3413/MUM/2010 (ASSESSMENT YEAR: 2006-07) 8 ASSTT. REGISTRAR, ITAT, MUMBAI