ACIT, Bangalore V. Smt Gurusharan Kaur, Bangalore

ITA 449/BANG/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9424 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 12-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V S SREELEKHA
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Avoidance of tax
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI N.L.KALRA, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE, K, JUDICIAL MEMBER ITA NO.449(BANG)/2009 (ASSESSMENT YEAR: 2004-05) ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 2(1), BANGALORE. .... APPELLANT VS. SHRI GURUSHARAN KAUR, 119, 9 TH MAIN, ARASAPPA COMPLEX, IDEAL HOME TOWNSHIP, RAJARAJESWARINAGAR, BANGALORE. .... RESPONDENT APPELLANT BY : SMT. V.S.SREELEKHA. RESPONDENT BY : SHRI PADAMCHAND KHINCHA. O R D E R PER GEORGE GEORGE K, JM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-I, BANGALORE, DATED 13-3-2009. THE ASSESSMENT YEAR CONCERNED IS 2004-05. 2. THE ASSESSEE IS AN INDIVIDUAL. FOR THE CONCERN ED YEAR, ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME-T AX ACT, 1961 ['THE ACT' FOR SHORT] ON 11-12-2006. THE AO D ISALLOWED SHORT TERM CAPITAL LOSS TO THE EXTENT OF RS.19,36,8 10/- U/S 94(7) OF THE ACT, BRIEFLY, THE FACTS WITH REFERENCE TO D ISALLOWANCE BY INVOKING SECTION 94(7) OF THE ACT ARE AS FOLLOWS: T HE ASSESSEE HAD PURCHASED SUNDARAM BOND SAVER UNITS OF MUTUAL F UND FOR RS.50 LAKHS ON 24-12-2003. THESE UNITS WERE SOLD O N 26-3-2004 FOR RS.28,37,557/- RESULTING IN SHORT TERM CAPITAL LOSS OF RS.21,62,443/-. OUT OF THIS LOSS, A SUM OF RS.19,36 ,810/- WAS ITA 449/B/2009 PAGE 2 OF 5 DISALLOWED BY APPLYING SEC.94(7) OF THE ACT ON THE GROUND THAT ON THESE UNITS, THE ASSESSEE HAD RECEIVED A DIVIDEN D OF RS.19,36,810/-. THIS DIVIDEND WAS DECLARED ON 26-12 -2003. THE AO IS OF THE OPINION THAT THESE UNITS WERE SOLD WIT HIN THREE MONTHS AFTER RECORD DATE AND HENCE, SHORT TERM CAPI TAL LOSS TO THE EXTENT OF DIVIDEND IS DISALLOWABLE. THE AO IS O F THE VIEW THAT THE WORD MONTH IN SECTION 94(7) IS TO BE INTERPRE TED AS CALENDAR MONTH AND HENCE HE IS OF THE OPINION THAT THE ASSES SEE IS HIT BY SECTION 94(7) OF THE ACT INASMUCH AS IN HIS OPINION , SALE TRANSACTION IS DONE WITHIN THREE MONTHS AFTER RECOR D DATE. 3. AGGRIEVED BY THE ORDER OF ASSESSMENT, ASSESSEE F ILED APPEAL BEFORE THE LD. CIT(A) AND CONTENDED THAT UNI TS WERE SOLD BY THE ASSESSEE AFTER THE PERIOD OF THREE MONTHS OF THE RECORDED DATE AND HENCE PROVISIONS OF SEC.94(7) OF THE INCOM E-TAX ACT, 1961 ['THE ACT' FOR SHORT] ARE NOT APPLICABLE TO TH E FACTS OF THE ASSESSEES CASE. IT WAS FURTHER SUBMITTED; INTERPR ETATION PUT BY THE AO ON THE WORD MONTH IS NOT CORRECT AND IS NO T SUPPORTED BY LAW. THE LD. CIT(A), ALLOWED THE APPEAL OF THE ASS ESSEE AND THE RELEVANT FINDINGS OF THE LD. CIT(A) ARE REPRODUCED BELOW: I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS, THE FACTS OF THE CASE AND THE APPELLATE DECISION PL ACED BEFORE ME. IT WOULD APPEAR TO ME THAT IN THE ABSEN CE OF ANY SPECIFICATION TO THE CONTRARY, THE INTERPRETATI ON OF THE TERM MONTH USED IN THE STATUTE HAS TO BE BASED ON ITS COMMONLY UNDERSTOOD MEANING IN EVERY DAY PARLANCE. THE AOS VIEW THAT THE PERIOD IS TO BE RECKONED IN TERMS OF CALENDAR MONTH IS, I BELIEVE, MISPLACED & I FIND NO REASON TO SUPPORT SUCH A VIEW. THE TERM MONTH, THEREFORE, HAS TO BE RECKONED EITHER IN TERMS OF A PERIOD ITA 449/B/2009 PAGE 3 OF 5 OF 90 DAYS OR IN TERMS OF THE CORRESPONDING DATES O F THE SUCCEEDING MONTHS. THE CASE OF SAROSH NOWROJEE BURJOJEE CITED SUPRA IS SQUARELY APPLICABLE IN THE CASE OF THE APPELLANT. IN THE SAID CASE, THE HONBLE ITAT HAS BASED ITS DECISION ON A CALCULATION OF THREE MONTHS AS NINETY DAYS. FOLLOWING THIS DECISION, IF THE PERIOD OF HOLDING BY THE APPELLANT WERE TO BE RECKONED, THE CALCULATION WOULD BE AS UNDER: RECORD DATE (26-12-03) TO 31-12-03: 6 DAYS JANUARY 2004 : 31 DAYS FEBRUARY 2004 (LEAP YEAR) : 29 DAYS MARCH 2004 : 25 DA YS TOTAL :91DAYS (EXCLUDING THE DATE OF SALE) QUITE CLEARLY, THEREFORE, THE APPELLANT HAS HELD TH E SECURITY BEYOND THE MANDATORY PERIOD OF THREE MONTH S. IN THE CIRCUMSTANCES, THE PROVISIONS OF S.94(7) CAN NOT BE SAID TO APPLY. EVEN IF ONE WERE TO TAKE THE OTHER INTERPRETATION FOR CALCULATING THE DURATION, NAMELY , IN TERMS OF THE CORRESPONDING DATES OF THE SUCCEEDING MONTHS, THE SALE CAN STILL NOT BE CONSIDERED AS HAV ING TAKEN PLACE WITHIN THREE MONTHS AS THE RECORD DATE IS 26- 12-03 AND THREE MONTHS WOULD CONCLUDE ON 25-3-04 WHEREAS THE SALE HAS TAKEN PLACE ON 26-03-04, I.E. BEYOND THE PERIOD OF THREE MONTHS. I AM THEREFORE O F THE VIEW THAT IN EITHER SCENARIO, THE APPELLANT IS NOT HIT BY THE PROVISIONS OF S.94(7). AGGRIEVED BY THE ORDER OF THE LD. CIT(A), REVENUE I S IN APPEAL BEFORE US. 4. AT THE VERY OUTSET, IT HAS BEEN SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE ORDER OF THE ITAT IN ITA NO.56/BANG/2008 DATED 28-3-2008 IN THE CASE OF MR.SAROSH ITA 449/B/2009 PAGE 4 OF 5 NOWROJEE BURJOJEE VS. ACIT READ WITH ORDER PASSED U/S 254 OF THE ACT DATED 19-6-2008. 5. BEFORE WE PROCEED TO DISPOSE OFF THE MATTER, WE ARE REPRODUCING THE SECTION AS IT STOOD AT THE RELEVANT ASSESSMENT YEAR (SINCE THE SECTION, FOR THE ASSESSMENT YEAR 20 05-06, IS MISQUOTED BY THE LD. CIT(A) IN HIS ORDER: AVOIDANCE OF TAX BY CERTAIN TRANSACTIONS IN SECURI TIES. 94. (7) WHERE (A) ANY PERSON BUYS OR ACQUIRES ANY SECURITIES OR UNIT WITHIN A PERIOD OF THREE MONTHS PRIOR TO THE RECORD DATE; (B) SUCH PERSON SELLS OR TRANSFERS SUCH SECURITIES OR UNIT WITHIN A PERIOD OF THREE MONTHS AFTER SUCH DATE. (C) THE DIVIDEND OR INCOME ON SUCH SECURITIES OR U NIT RECEIVED OR RECEIVABLE BY SUCH PERSON IS EXEMPT, THEN, THE LOSS, IF ANY, ARISING TO HIM ON ACCOUNT O F SUCH PURCHASE AND SALE OF SECURITIES OR UNIT, TO THE EXT ENT SUCH LOSS DOES NOT EXCEED THE AMOUNT OF DIVIDEND OR INCO ME RECEIVED OR RECEIVABLE ON SUCH SECURITIES OR UNIT, SHALL BE IGNORED FOR THE PURPOSES OF COMPUTING HIS INCOME CHARGEABLE TO TAX. 5.1 IN THE CASE OF ITO VS. SHAMBHU MERCANTILE LTD., (304 ITR (AT) 36, THE DELHI BENCH OF THE TRIBUNAL, HAD H ELD, CLAUSES (A), (B) AND (C) OF SECTION 94(7) NEED TO BE SATISF IED CUMULATIVELY FOR INVOKING THE SECTION. THE TRIBUNAL ORDER WAS AF FIRMED BY RECENT JUDGMENT OF THE HONBLE HIGH COURT AND SAME IS REPORTED IN 224 CTR 499 (DEL). IN THE INSTANT CASE, CLAUSE S (A) AND (C) ARE SATISFIED AND THE DISPUTE IS REVOLVING WITH REF ERENCE TO CLAUSE ITA 449/B/2009 PAGE 5 OF 5 (B) OF SECTION 94(7). THIS ASPECT OF THE MATTER HA S BEEN DEALT WITH BY THE TRIBUNAL IN THE CASE OF SAROSH NOWROJEE BURJOJEE (SUPRA) AND THE RELEVANT PORTION IS EXTRACTED BELOW : 5. IN VIEW OF THE REQUIREMENT OF SECTION 94(7) OF THE ACT, THAT THE SECTION WOULD GET ATTRACTED ON LY IF THE SALE OR TRANSFER OF SECURITIES TAKE PLACE WITHI N THE DATE OF PURCHASE ONLY, THE SAID SECTION WOULD HAVE NO APPLICABILITY TO THE FACTS OF THE PRESENT CASE AS H AS BEEN FOUND IN PARA.4 ABOVE. TO REITERATE, THE FACT AS FOUND IN PARA 4 IS THE SALE WAS MADE ON 26-3-04 AND THE 90 DAYS LIMIT EXPIRE ON 15-3-04. THEREFORE, TH E SAID SECTION IS NOT APPLICABLE. 6. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL CITED SUPRA, WE DISMISS THE GROUNDS RAISED IN THIS APPEAL . ORDER PRONOUNCED IN THE OPEN COURT ON 13TH AUGUST, 2009. SD/- SD/- (N.L.KALRA) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE: D A T E D : 13TH AUGUST,2009. EKS* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A)-I, BANGALORE. 5 DR, ITAT, BANGALORE. 6 GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRA R, ITAT, BANGALORE.