MS. MINAL NIRVAN SANGHAVI, MUMBAI V. ASST.C.I.T., CIRCLE 16(2), MUMBAI

ITA 5676/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1528 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2005-2006
• Appeal Filed On: 22-10-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K MONONTY
• Keywords: Principle of natural justice
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, F, MUMBAI BEFORE SHRI R.S.SYAL, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 5676/MUM/2009 (ASSESSMENT YEARS: 2005-06) MINAL NIRVAN SANGHAVI 62, CASA GRANDA, 22, K S TAYABJI MARG, MUMBAI-400006 PAN: AANPS8906J . APPELLANT VS ACIT CIRCLE 16(2) MATRUMANDIR MUMBAI .. RESPONDENT APPELLANT BY : SHRI SATISH R MODY. RESPONDENT BY : SHRI S K MONONTY O R D E R PER VIJAY PAL RAO,JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 17.08.2009 OF CIT(A)-XVI, MUMBAI FOR THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: I) THE LD. AO HAS ERRED IN DISALLOWING SHORT TERM CAPITAL LOSS SUFFERED BY THE APPELLANT IN RESPECT O F SALE OF MUTUAL FUND UNITS BY APPLYING THE PROVISION S OF SECTION 94(7) OF THE IT ACT, 1961; II) THE CIT(A) HAS FURTHER ERRED IN CONFIRMING THE ADDITIONS MADE BY THE AO III) THE LD. CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE HAS NOT RECEIVED ANY DIVIDEND WHATSOEVER DURING THE ACCOUNTING YEAR ENDED 31.03.2005 AGAINST WHICH SUCH LOSES CAN BE ITA NO. 5676/MUM/2009 (ASSESSMENT YEARS: 2005-06) 2 ADJUSTED. YOUR PETITIONER STATES THAT SHORT TERM CAPITAL LOSS INCURRED BY THE ASSESSEE ON THE SALE O F THE MUTUAL FUND UNITS HAD TO BE ALLOWED SHORT TERM CAPITAL LOSS BECAUSE THERE WAS NO DIVIDEND RECEIVED BY THE ASSESSEE DURING HE ACCOUNTING YEAR ENDED 31.3.2005 AGAINST WHICH SUCH LOSES COULD HAVE BEEN ADJUSTED IV) THE ORDER APPEALED AGAINST IS BAD IN LAW AND IS AGAINST THE PRINCIPLE OF NATURAL JUSTICE; V) THE ORDER APPEALED AGAINST IS BASED ON SURMISES AND CONJECTURES 3. FROM THE GROUNDS OF APPEAL TWO QUESTIONS ARISES, THE FIRST QUESTION WHETHER THE AMENDED PROVISIONS OF SE CTION 94(7) WHEREBY CLAUSE (B) WAS INSERTED VIDE FINANCE (NO.2) , ACT, 2004 WITH EFFECT FROM 01.04.2005 IS APPLICABLE FOR THE ASSESSMENT YEAR 2005-06 OR NOT AND THE SECOND QUES TION WHETHER THE DIVIDEND WHICH WAS NOT RECEIVED DURING THE FINANCIAL YEAR ENDED 31.03.2005 IS AVAILABLE FOR AD JUSTMENT OF SHORT TERM CAPITAL LOSS ON THE SALE AND PURCHASE OF MUTUAL FUNDS UNITS. 4. THE ASSESSEE HAS DECLARED A TOTAL INCOME OF RS.11,31,391/-. THE ASSESSEE CLAIMED SHORT TERM CA PITAL LOSS ON MUTUAL FUNDS AMOUNTING TO RS.7.09 LAKHS. THE AO DISALLOWED THE SHORT TERM CAPITAL LOSS ON SALES AND PURCHASES OF MUTUAL FUNDS UNITS ON WHICH THE ASSESSEE RECEIVE D THE DIVIDEND. THE AO WAS OF THE VIEW THAT AS PER THE AMENDED ITA NO. 5676/MUM/2009 (ASSESSMENT YEARS: 2005-06) 3 PROVISIONS OF SECTION 94(7) WHICH CAME INTO EFFECT FROM 01.04.2005, IN THE CASE OF UNITS WHOSE DIVIDEND WER E EXEMPTED UNDER THE INCOME TAX ACT ARE ACQUIRED WITH IN A PERIOD OF THREE MONTHS PRIOR TO THE RECORD DATE AND THEN SOLD WITHIN A PERIOD OF NINE MONTHS AFTER THE RECORD DAT E THEN THE DIVIDEND WHICH IS EXEMPTED SHALL BE SET OFF AGAINST THE LOSS ON SALE /PURCHASE OF SUCH UNITS. 5. ON APPEAL, THE CIT(A) CONFIRMED THE ORDER OF THE AO. 6. BEFORE US, THE LEARNED AR OF THE ASSESSEE HAS SU BMITTED THAT THE AMENDED PROVISIONS OF SECTION 94(7) OF TH E INCOME TAX ACT, 1961 ARE NOT APPLICABLE FOR THE ASSESSMENT YEAR 2005-06. HE HAS FURTHER CONTENDED THAT THE SAID AM ENDMENT RECEIVED THE ASSENT OF PRESIDENT OF INDIA ONLY ON 1 0.09.2004. THEREFORE, IT IS NOT APPLICABLE TO THE FINANCIAL Y EAR 2004-05 RELEVANT TO THE ASSESSMENT YEAR 2005-06. 7 AS REGARDS THE SECOND QUESTION, THE LEARNED AR O F THE ASSESSEE HAS SUBMITTED THAT WHEN THE ASSESSEE HAS N OT RECEIVED ANY DIVIDEND DURING THE FINANCIAL YEAR ENDED ON 31.3.2005, THEN SUCH LOSSES CANNOT BE ADJUSTED AGAI NST THE DIVIDEND RECEIVED BEYOND THE FINANCIAL YEAR RELEV ANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. ITA NO. 5676/MUM/2009 (ASSESSMENT YEARS: 2005-06) 4 8. ON THE OTHER HAND, THE LEARNED DR HAS SUBMITTED THAT REGARDING THE APPLICABILITY OF THE AMENDED PROVISIO NS ARE CONCERNED, THE ISSUE IS COVERED AGAINST THE ASSESSE E BY THE DECISION OF THE AMRITSAR BENCH OF THE TRIBUNAL IN THE CASE OF SURI SONS VS. ADDL. CIT (2009) 124 TTJ 800 (AMRITSAR BENCH). HE HAS RELIED UPON THE ORDERS OF THE LOWER AUTHORIT IES. 9. AS REGARDS THE SECOND QUESTION OF NON RECEIPT OF DIVIDEND DURING THE FINANCIAL YEAR, THE LEARNED DR HAS SUBMITTED THAT THE LOSS ON SALE OF MUTUAL FUND UN ITS OR SECURITY ARISES ONLY WHEN IT IS SOLD. THEREFORE THE RECEIPT OF DIVIDEND IS NOT RESTRICTED TO THE FINANCIAL YEAR R ELEVANT TO THE ASSESSMENT YEAR. AS PER THE PROVISIONS OF SECTION 94(7) ALL SUCH DIVIDEND RECEIVED OR RECEIVABLE IRRESPECTIVE O F FINANCIAL YEAR BETWEEN THE PERIOD OF PURCHASE AND SALE OF TH E UNITS. 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AS WEL L AS RELEVANT RECORDS. AS FAR AS THE APPLICABILITY OF T HE AMENDED PROVISIONS OF SECTION 94(7)(B) IS CONCERNED, WE NOT ED THAT THIS ISSUE HAS BEEN CONSIDERED AND DECIDED BY THE AMRITS AR BENCH OF THIS TRIBUNAL IN THE CASE OF SURI SONS V/S ADDL. CIT (SUPRA). THE RELEVANT PORTION OF THE TRIBUNAL ORDER IS AS U NDER : 6.15 WE HAVE GONE THROUGH THE CONTEXT USED IN THIS SECTION, THE OBJECT OF THE LEGISLATURE, CIRCUMSTANCES UNDER WHICH THE STATUTE WAS ITA NO. 5676/MUM/2009 (ASSESSMENT YEARS: 2005-06) 5 AMENDED. THE CONCLUSION PROVES THAT THIS AMENDED PROVISION IS APPLICABLE TO THE ASSESSMENT YEAR 2005-06. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS DISMISSED. 6.16 FURTHER, THE ARGUMENT OF THE ASSESSEE IS THAT FINANCE (NO.2) ACT, 2004 WHICH RECEIVED ASSENT OF THE PRESIDENT ON 10 TH SEPT 2004 AND IT IS NOT APPLICABLE TO THE FINANCIAL YEAR 2004-05 SINCE THE AMENDMENT CAME AFTER THE CLOSE OF THE SIX MONTHS OF THE FINANCIAL YEAR. THIS ARGUMENT OF THE ASSESSEES COUNSEL HAVING NO MERIT SINE THE LEGISLATURE CLEARLY MENTIONED IN THE ACT THE DATE FROM WHICH THE ACT IS EFFECTIVE I.E. 1 ST APRIL, 2004, AS SUCH THE PRESIDENTS ASSENT WILL RECKON BACK TO THE DATE FROM 1 ST APRIL, 2004 AND AS SUCH AMENDMENT IS APPLICABLE FOR THE FINANCIAL YEAR 2004-05 RELEVANT TO THE ASSESSMENT YEAR 2005-06 ACCORDINGLY,. THIS ISSUE IS DECIDED AGAINST THE AS SESSEE AND IN FAVOUR OF THE REVENUE. 11. AS FAR AS THE QUESTION OF RECEIPT OF DIVIDEND BEYOND THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDE R CONSIDERATION IS CONCERNED. THE PROVISIONS OF SECTI ON 94(7) ON CLEARLY MANIFEST THAT WHEN SUCH UNITS/SECURITIE S ARE ACQUIRED WITHIN THREE MONTHS FROM THE RECORD DATE A ND SOLD WITHIN 9 MONTHS AFTER THE RECORD DATE AND THAT ANY DIVIDEND RECEIVED OR RECEIVABLE BY THE ASSESSEE HAS TO BE AD JUSTED AGAINST ANY LOSS ARISEN FROM THE SALE OF THESE UNIT S. THUS ANY DIVIDEND RECEIVED OR RECEIVABLE BETWEEN THE D ATES OF PURCHASE AND SALE OF UNIT WITHIN THE SPAN OF PERIOD PRESCRIBED ITA NO. 5676/MUM/2009 (ASSESSMENT YEARS: 2005-06) 6 BY SECTION 94(7) SHALL BE ADJUSTED AGAINST THE LOS S ARISEN FROM THE SALE OF SUCH UNITS. THE FINANCIAL YEAR OF THE RECEIPT OF DIVIDEND IS TOTALLY IRRELEVANT FOR THIS PURPOSES. THEREFORE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDERS O F THE LOWER AUTHORITIES. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMI SSED. PRONOUNCED IN THE OPEN COURT ON 18.06.2010 SD SD (R.S.SYAL) (VIJ AY PAL RAO) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATED 18 TH JUNE 2010 SRL:10610 COPY TO: 1. MINAL NIRVAN SANGHAVI 62, CASA GRANDA, 22, K S TAYABJI MARG, MUMBAI-400006 2.ACIT CIRCLE 16(2) MATRUMANDIR MUMBAI 3. CIT(A)-XVI, MUMBAI. 4. CIT-CITY XVI 5. DR F BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI