ITO 21(3)(3), MUMBAI V. MAHENDRA P MEHTA, MUMBAI

ITA 6924/MUM/2008

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6305 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 03-11-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 04-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Keywords: Gift; Additional evidence
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI R.V. EASWAR, PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 6924/MUM/2008 (ASSESSMENT YEAR: 2004-05) INCOME TAX OFFICER - 21(3)(3) SHRI MAHENDRA P. MEH TA C-11, PRATYAKSH KAR BHAVAN C/O. SPARTEN ENGG. CO. B.K.C., BANDRA (E) VS. 111, NEW TEJPAL INDAL. ESTATE MUMBAI 400051 SAKINAKA, MUMBAI 400072 PAN - AACPM 8790 K APPELLANT RESPONDENT APPELLANT BY: SHRI SURENDRA KUMAR RESPONDENT BY: SHRI HERO RAI O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) XXI, MUMBAI DATED 30.09.2008. 2. REVENUE HAS RAISED THE FOLLOWING GROUND ON TWO ISSU ES: - 1. (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.13, 39,252/- MADE BY THE AO ON ACCOUNT OF INCOME FROM UNDISCLOSED SOU RCES. (II) THE LD. CIT(A) ERRED IN ALLOWING THE SHORT T ERM CAPITAL LOSS OF RS.3,85,587/- WHICH WAS DISALLOWED BY THE AO. 3. BRIEFLY STATED, THE ASSESSEE IS AN INDIVIDUAL, FILE D RETURN OF INCOME DECLARING TOTAL INCOME OF ` 5,93,930/- FROM INCOME FROM REMUNERATION, HOUSE PROPERTY, CAPITAL GAIN AND OTHER SOURCES. INC OME FROM PARTNERSHIP HAS BEEN CLAIMED AS EXEMPT. THERE ARE TWO ISSUES RA ISED IN THE APPEAL. THE FIRST ONE BEING THE ISSUE OF GIFT RECEIVED. IN THE COURSE OF SCRUTINY ASSESSMENT THE A.O. NOTICED THAT THE ASSESSEE HAS C REDITED AN AMOUNT OF ` 13,39,252/- IN THE CAPITAL ACCOUNT, WHICH WAS STATE D TO BE GIFT RECEIVED FROM SHRI VIJAY VORA, BROTHER-IN-LAW( WIFES BROTHE R) OF THE ASSESSEE ON REDEMPTION OF RESURGENT INDIA BONDS OF THE VALUE OF US$ 20000. THE A.O. ENQUIRED ABOUT THE IDENTITY, CREDITWORTHINESS AND G ENUINENESS OF THE GIFT. ASSESSEE SUBMITTED THAT HIS BROTHER-IN-LAW MR. VIAJ Y VORA RESIDING IN NEW ITA NO. 6924/MUM/2008 SHRI MAHENDRA P. MEHTA 2 YORK, USA HOLDING INDIAN PASSPORT HAS INVESTED IN R ESURGENT INDIA BONDS ISSUED BY THE STATE BANK OF INDIA ON 31 ST OCTOBER 1998 AND BEFORE MATURITY IN OCTOBER 2003, THEY WERE GIFTED TO THE ASSESSEE B Y ENDORSING ON THE SAID BONDS AND THAT THESE WERE REDEEMED WITH STATE BANK OF INDIA, NRI BRANCH, MUMBAI AND COPY OF THE PASSPORT OF SHRI VIJAY VORA WAS SUBMITTED TO ESTABLISH IDENTITY AND COPIES OF BONDS AND CERTIFIC ATE OF REDEMPTION FOR GENUINENESS OF THE TRANSACTION. THE A.O. INSISTED O N VERIFYING THE CREDITWORTHINESS OF THE SAID SHRI VIJAY VORA. IT WA S SUBMITTED THAT SHRI VIJAY VORA HAS MIGRATED TO USA IN 1982 AND SINCE THEN RES IDENT OF USA AND HAD HIS OWN INCOMES BUT DUE TO CERTAIN REASONS ASSESSEE FELT UNABLE TO OBTAIN THE CREDITWORTHINESS OF HIS BROTHER-IN-LAW. HE DID NOT FILE ANY DETAILS OF THE INCOME OF HIS BROTHER-IN-LAW. SINCE THE CREDITWORTH INESS WAS NOT SUBMITTED FOR VERIFICATION, THE A.O. MADE THE ADDITION OF THE AMOUNT AS UNDISCLOSED INCOME OF THE ASSESSEE EVENTHOUGH THE ASSESSEE CLAI MED THAT THE BONDS WERE FREE FROM INCOME TAX, WEALTH TAX AND GIFT TAX EVEN FOR THE TRANSFEREES. 4. THE MATTER WAS CARRIED TO THE CIT(A), WHO NOT ONLY EXAMINED THE GENUINENESS OF THE TRANSACTION BUT ALSO EXAMINED TH E ASSURANCE GIVEN BY THE GOVERNMENT OF INDIA WHILE ISSUING THE BONDS ABO UT EXEMPTION FROM TAX IN INDIA AND DELETED THE ADDITION STATING THAT DENI AL OF THE CLAIM ON THE PRETEXT OF LACK OF CREDITWORTHINESS OF THE DONOR CA NNOT BE A REASON FOR MAKING ADDITION IGNORING THE OTHER EVIDENCES FILED. REVENUE IS AGGRIEVED. 5. WITH REFERENCE TO SECOND ISSUE, ASSESSEE SUBSCRIBED TO THE PRUDENTIAL ICICI POWER UNITS AS WELL AS UNITS OF SUNDARAM SELE CT MIDCAP AND CLAIMED SHORT TERM CAPITAL LOSS OF ` 3,85,587/-. THE A.O., INVOKING THE PROVISIONS OF SECTION 94(7) WITH REFERENCE TO SECOND RECORD DATE OF THE FUND DISALLOWED THE LOSS CLAIMED. THE CIT(A) EXAMINED AND FOUND THA T THESE TRANSACTIONS ARE NOT COVERED BY PROVISIONS OF SECTION 94(7) AND ACCO RDINGLY HE DELETED THE DISALLOWANCE MADE BY THE A.O. THE SECOND ISSUE WAS RAISED ON THIS ISSUE. 6. THE LEARNED D.R. EXPLAINED THE FACTS OF THE CASE ON BOTH THE ISSUES AND TOOK US THROUGH THE ORDERS OF THE A.O. TO SUBMI T THAT THE CIT(A) WAS WRONG IN ALLOWING THE CLAIMS OF THE ASSESSEE. IT WA S HIS SUBMISSION THAT THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE WITH REFERE NCE TO THE CREDITWORTHINESS OF THE DONOR WITH REFERENCE TO THE GIFT RECEIVED AND FURTHER ITA NO. 6924/MUM/2008 SHRI MAHENDRA P. MEHTA 3 HE ANALYSED THE PROVISIONS OF SECTION 94(7) TO SUBM IT THAT PROVISIONS OF THE SAID SECTION ARE APPLICABLE TO THE FACTS OF ASSESSE ES CASE AND CIT(A) HAS WRONGLY GIVEN RELIEF TO THE ASSESSEE. 7. THE LEARNED COUNSEL IN REPLY SUBMITTED THAT ASSESSE ES BROTHER-IN-LAW HAS MIGRATED TO USA AS EARLY AS 1982 AND HAS THE CA PACITY TO INVEST IN STATE BANK OF INDIA BOND ISSUED IN OCTOBER 1998 OF US$ 20 000 AND ALSO HAS THE CAPACITY TO HOLD ON TILL MATURITY IN 2003 AND JUST BEFORE MATURITY THESE WERE GIFTED TO THE ASSESSEE AND THE ASSESSEE REDEEMED TH EM IN THE STATE BANK OF INDIA AND FURNISHED ALL THE EVIDENCES WITH REFERENC E TO THE GENUINENESS OF THE GIFT TRANSACTION AND ITS REDEMPTION WHICH WAS C REDITED TO CAPITAL ACCOUNT. HE ALSO RELIED ON THE DECISION OF THE HON' BLE HIGH COURT OF ALLAHABAD IN THE CASE OF KANCHAN SINGH VS. CIT 174 TAXMAN 383 TO SUBMIT THAT THE ASSESSEE HAS ESTABLISHED THE NATURE AND SO URCE OF MONEY, THEREFORE, THE A.O. WAS NOT JUSTIFIED IN MAKING THE ADDITION J UST BECAUSE THE HE COULD NOT FURNISH THE DONORS CAPACITY IN GIFTING THE AMO UNT. 8. AS AN ABUNDANT CAUTION, THE ASSESSEE ALSO FURNISHED THE INDIVIDUAL INCOME TAX RETURNS FILED BEFORE THE INTERNAL REVENU E SERVICE, USA BY SHRI VIJAY VORA FOR THE YEARS 2003 AND 204 BEFORE US WIT H A PRAYER FOR ADMISSION OF ADDITIONAL EVIDENCE, AND RELIED ON THE PRINCIPLE S ESTABLISHED BY THE HON'BLE MADRAS HIGH COURT IN THE CASE OF ANAIKAR TR ADERS AND ESTATES (P.) LTD. (NO. 2) VS. CIT 186 ITR 313 AND M. AYISHATH MU NAWARA VS. UNION OF INDIA 213 ITR 572 (MAD) AND THE THIRD MEMBER DECISI ON IN THE CASE OF MASCON GLOBAL LTD. VS. ACIT 37 SOT 202 (CHENNAI) (T M) FOR ADMISSION OF ADDITIONAL EVIDENCE. HE ALSO FURTHER RELIED ON THE JUDGEMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SURESH KUMA R KAKAR 324 ITR 231 (DEL) TO SUBMIT THAT WHERE THE GIFTS ARE FROM CLOSE RELATIVES THROUGH LOVE AND AFFECTION, IT DOES NOT REQUIRE ANY PARTICULAR OCCAS ION TO GIFT THE AMOUNT AND SINCE THE AMOUNTS ARE RECEIVED THROUGH BANKING CHAN NELS IDENTITY AND GENUINENESS HAVE BEEN PROVED BEYOND DOUBT AND THE S OURCE OF GIFT WAS FROM THE BROTHER-IN-LAW, IT WAS SUBMITTED THAT THERE IS NO QUESTION OF MAKING ANY ADDITION UNDER SECTION 68 OF THE I.T. ACT. 9. WE HAVE CONSIDERED THE ISSUE OF GIFT. THERE IS NO D ISPUTE AS TO THE FACT THAT SHRI VIJAY VORA, A PERSON OF INDIAN ORIGIN HAS INVESTED IN RESURGENT ITA NO. 6924/MUM/2008 SHRI MAHENDRA P. MEHTA 4 INDIA BONDS IN OCTOBER 1998 OUT OF HIS SOURCES ABRO AD. THESE BONDS WERE HELD IN HIS NAME TILL 2003 AND BEFORE ITS MATURITY THESE WERE GIFTED TO THE ASSESSEE, WHO HAPPENS TO BE HIS BROTHER-IN-LAW. THE SE WERE REDEEMED THROUGH STATE BANK OF INDIA, NRI BRANCH, MUMBAI AND CERTIFICATE WAS ALSO PLACED ON RECORD. IT IS ALSO TRUE THAT AT THE TIME OF ISSUE THE GOVERNMENT OF INDIA HAS ASSURED THE INVESTORS THAT INCOME ON THE RESURGENT INDIA BOND WILL BE EXEMPT IN THE HANDS OF THE SUBSCRIBERS FROM INDIAN INCOME TAX ACT. IT WAS ALSO FURTHER ASSURED THAT THE BONDS WILL ALS O FREE FROM WEALTH AND GIFT TAX IN INDIA. TAX CONCESSIONS WILL BE AVAILABLE TO THE DONEE/TRANSFEREE ALSO. THE TAX CONCESSIONS WILL BE AVAILABLE TILL THE MATU RITY OF THE BONDS TO THE NRI HOLDERS, DONEES, TRANSFEREES, IF THEY RETURN TO IND IA BEFORE MATURITY OF RIB AND ALSO TO RESIDENT DONEES. IN THE CASE OF PREMATU RE ENCASHMENT OF THE RIBS IN NON-REPATRIABLE INDIAN RUPEES BY HOLDERS/DO NEES/ SURVIVORS, THE PROCEEDS IN THE HANDS OF THE HOLDERS/DONEES /SURVIV ORS WILL BE FREE FROM ANY TAX IN INDIA. ON THE BASIS OF THIS ASSURANCE GIVEN AT THE TIME OF ISSUANCE OF RIBS ABOUT THE TAX TREATMENT, THE CIT(A) HAS CORREC TLY COME TO THE CONCLUSION THAT THE AMOUNT CAN NOT BE TREATED AS UN EXPLAINED INCOME WHEN THE SOURCE WAS MATURITY PROCEEDS OF THE RIBS AND AC CORDINGLY, HE DELETED THE ADDITION. EVENTHOUGH THE LEARNED D.R. VEHEMENTL Y ARGUED THAT EXAMINATION OF CREDITWORTHINESS IS AN IMPORTANT ASP ECT IN ACCEPTING THE CLAIM OF GIFT, WE ARE OF THE OPINION THAT THE A.O. HAS WRONGLY CONSIDERED THE AMOUNT FOR ADDITION UNDER SECTION 68. IT IS NOT THE CASE OF THE A.O. THAT THE ASSESSEE HAS ROUTED THE AMOUNT THROUGH HIS BROTHER- IN-LAW. THE INVESTMENT WAS MADE BY THE SAID SHRI VIJAY VORA WAY BACK IN OC TOBER 1998 IN USA. JUST BECAUSE THE BONDS WERE GIFTED TO THE ASSESSEE BEFORE MATURITY, IT CANNOT BE STATED THAT THE TRANSACTION IS NOT A GENU INE ONE WARRANTING AN ADDITION UNDER SECTION 68. PROVISIONS OF SECTION 68 REQUIRE EXAMINATION OF NATURE OF SOURCE OF THE CREDIT AND THE ASSESSEE HAS DISCHARGED HIS BURDEN OF EXPLAINING THE NATURE OF SOURCE OF TRANSACTION. IT IS TRUE THAT WHILE EXAMINING THE GIFT GENUINENESS, IDENTITY OF THE DO NOR AND CREDITWORTHINESS OF THE DONOR ARE REQUIRED TO BE CONSIDERED. IN THIS CASE THE THREE PARAMETERS ARE SATISFIED EVENTHOUGH THE ASSESSEE COULD NOT FUR NISH THE INCOME TAX RETURN OF THE SAID DONOR IN USA/ DETAILS OF INCOME, THE FACT THAT THAT THE PERSON COULD INVEST IN RESURGENT INDIA BONDS AND HO LD IT FOR A PERIOD OF 5 ITA NO. 6924/MUM/2008 SHRI MAHENDRA P. MEHTA 5 YEARS TILL ITS MATURITY ITSELF INDICATE THAT THE PE RSON HAS CAPACITY TO INVEST/DONATE THE AMOUNTS. IN VIEW OF THIS, WE ARE OF THE VIEW THAT THE ACTION OF THE CIT(A) IN DELETING THE ADDITION SO MA DE DOES NOT REQUIRE ANY INTERFERENCE. 10. WE ARE ALSO OF THE OPINION THAT THERE IS NO NEED FO R ADMITTING THE ADDITIONAL EVIDENCE AND SENDING IT BACK TO THE A.O. WHICH WILL BE A FUTILE FORMALITY AS THE SAID PERSON HAS CAPACITY TO DONATE , THE DONOR IS IMMEDIATE FAMILY RELATIVE OF THE ASSESSEE WHICH WAS NOT IN DI SPUTE AND FURTHER THE INVESTMENT IN BONDS ITSELF GIVES EXEMPTION NOT ONLY TO THE ORIGINAL INVESTOR BUT ALSO TO THE DONEES / TRANSFEREES. IN VIEW OF TH ESE REASONS, WE ARE OF THE OPINION THAT THERE IS NO NEED TO ADMIT ANY FURTHER ADDITIONAL EVIDENCE AND ACCORDINGLY THE PRAYER MADE WAS REJECTED. ORDER OF THE CIT(A) IS UPHELD. REVENUES GROUND ON THIS IS REJECTED. 11. COMING TO THE ISSUE OF LOSS ON SALE OF UNITS, ASSES SEE HAS INVESTED THE FOLLOWING AMOUNTS IN THE MUTUAL FUNDS (AS STATED IN PAGES 8 & 9 OF THE ASSESSMENT ORDER): - FOLIO NO. NAME OF THE SCHEME NO. OF UNITS DATE OF PURCHASE RECORD DATE DATE OF REDEMPTION COST PRICE REDEMPTION PROCEEDS S.T.C.L. DIVIDEND REC. 597963/ 29 PRUDENTIAL ICICI POWER DIVIDEND 28,752.12 13/10/03 23/10/03 24/12/03 05/02/04 500,000 385,279 114,721 86,256 86,256 607995/ 03 - DO- 30,120.48 22/10/03 23/10/03 24/12/03 04.02.04 500,000 404,819 95,181 90,361 90,361 TOTAL 353,234 146633 /93 SUNDARAM SELECT MIDCAP- DIVIDEND 28.165.05 19/11/03 21/11/03 27/02/04 08/03/04 500,000 324,315 175,685 112,660 98,578 TOTAL 211.238 12. A PERUSAL OF THE ABOVE STATEMENT INDICATES THAT THE SAID MUTUAL FUNDS HAVE DECLARED TWO RECORD DATES AND SINCE THE INVEST MENTS MADE IN THE SAID MUTUAL FUNDS / SALE MADE WERE WITHIN THREE MONTHS P ERIOD FROM THE SECOND RECORD DATE AO WAS OF THE OPINION THAT THE PROVISIO NS OF SECTION 94(7) ARE APPLICABLE. IT WAS CONTENDED BEFORE THE CIT(A) THAT AS FAR AS INVESTMENT IN SUNDARAM SELECT MIDCAP-DIVIDEND WAS CONCERNED THE P ROVISIONS WERE NOT APPLICABLE EITHER WAY. THE PURCHASE OF MUTUAL FUND ON 19.11. 2003 WAS MORE THAN THREE MONTHS, IF CONSIDERED WITH THE SECO ND DATE 27.02.04, HENCE GETS OUT OF THE PROVISIONS OF SECTION 94(7). IF ON E CONSIDER THE FIRST RECORD ITA NO. 6924/MUM/2008 SHRI MAHENDRA P. MEHTA 6 DATE 21.11.03 THEN THE SALE WAS AFTER THREE MONTHS PERIOD AS IT WAS 08.03.04. ACCORDINGLY PROVISIONS OF SECTION 94(7) A RE NOT APPLICABLE TAKING EITHER OF THE RECORD DATES AS BASIS. WITH REFERENCE TO OTHER TWO INVESTMENTS, IT WAS ASSESSEES CONTENTION THAT THE RECORD DATE W ITH REFERENCE TO THE PURCHASE ALONE CAN BE CONSIDERED AS THE ASSESSEE WO ULD NOT BE IN THE KNOWLEDGE OF SECOND RECORD DATE FOR DECLARATION OF DIVIDEND WHICH HAPPENED SUBSEQUENT TO THE DATE OF PURCHASE AND SO PROVISIONS OF SECTION 94(7) ARE NOT APPLICABLE. THE LEARNED CIT(A), AFTER EXAMINING THE PROVISIONS AND RELYING ON THE PRINCIPLES ESTABLISHED BY THE HO N'BLE ITAT IN THE CASE OF SHAMBHU MERCANTILE LTD. 9 DTR (DEL) (TRIB) 617 HELD THAT THE THREE INSTANCES OF PURCHASE OF UNITS WERE OUTSIDE THE PUR VIEW OF PROVISIONS OF SECTION 94(7) AND ACCORDINGLY HE DELETED THE SAME. 13. WE HAVE CONSIDERED THE ISSUE AND THE ARGUMENTS OF R IVAL PARTIES.. THE PROVISIONS OF SECTION 94(7) HAVE BEEN INTERPRETED B Y THE ITAT DELHI I BENCH IN THE CASE OF ITO VS. SHAMBHU MERCANTILE LTD. 9 DT R (DEL) (TRIB) 617 WHEREIN AFTER ANALYSING THE USE OF WORDS AS SUCH P ERSON, SUCH UNIT AND SUCH DATE WITH SUCH SECURITIES OR UNITS IN CLAUSE S (B) & (C) OF SECTION 94(7) IT WAS HELD THAT ALL THE THREE CLAUSES ARE TO BE RE AD TOGETHER AND ALL THE THREE CONDITIONS MENTIONED IN CLAUSES (A), (B) AND (C) TH EREON MUST BE CUMULATIVELY SATISFIED. IN THIS CASE THERE ARE TWO RECORD DATES AFTER THE PURCHASE OF MUTUAL FUNDS BY THE ASSESSEE. IN OUR OP INION THE RECORD DATE WITH REFERENCE TO PURCHASE ONLY CAN BE CONSIDERED A S SUCH DATE FOR CONSIDERING THE PERIOD OF SALE ALSO. AS RIGHTLY POI NTED, ASSESSEE COULD NOT BE IN A POSITION TO KNOW OR UNDERSTAND OR PLAN HIS AFF AIRS WHEN THE DECLARATION OF DIVIDEND BY THE MUTUAL FUND WAS AGAIN MADE, AFTE R SOME PERIOD WHICH BECOMES SECOND RECORD DATE IN THIS CASE. IT IS NOT POSSIBLE TO IMAGINE THE SITUATION WHERE IF A MUTUAL FUND WENT ON DECLARING DIVIDEND PERIODICALLY AFTER PURCHASE OF UNITS BY ANY ASSESSEE, THE REFERE NCE TO SUCH DATE WILL GO ON SHIFTING FROM THE FIRST RECORD DATE IMMEDIATELY FOLLOWING THE PURCHASE OF UNITS TO THE LATER ONE AS AND WHEN THE MUTUAL FUND ANNOUNCES FRESH RECORD DATE FOR THE PURPOSE OF DECLARING DIVIDENDS. CONSID ER A CASE WHERE THE ASSESSEE PURCHASES WITHIN THREE MONTHS OF THE FIRST RECORD DATE AND THE MUTUAL FUND WENT ON DECLARING DIVIDENDS PERIODICALL Y AND ASSESSEE SELLS THE ITA NO. 6924/MUM/2008 SHRI MAHENDRA P. MEHTA 7 UNITS AFTER HOLDING FOR EXAMPLE, FOR MORE THAN ONE YEAR BUT IMMEDIATELY FOLLOWING THE LAST RECORD DATE SOLD THE UNITS, IT C ANNOT BE STATED THAT PROVISIONS OF SECTION 94(7) ARE ATTRACTED BECAUSE H E HAS PURCHASED WITHIN THREE MONTHS FROM THE FIRST RECORD DATE AND SOLD WI TH THREE MONTHS OF THE LAST RECORD DATE. IT IS NOT THE INTENTION OF LEGISL ATURE IN INTRODUCING SECTION 94(7) WHICH WAS BASICALLY TO PREVENT DIVIDEND STRIP ING. AS SEEN FROM THE ACTION OF THE A.O., THE A.O. HAS CONSIDERED THE SEC OND RECORD DATE WHEN THE DIVIDEND WAS DECLARED AGAIN FOR CONSIDERING THE APP LICABILITY OF PROVISIONS OF SECTION 97(7). THE EXTENT OF LOSS DISALLOWED WAS AL SO NOT CORRECT. AS PER THE PROVISION ONLY LOSS TO THE EXTENT OF DIVIDEND RECEI VED SHOULD ONLY BE DISALLOWED WHERE AS THE AO DISALLOWED THE ENTIRE LO SS CLAIMED. IN OUR OPINION THE RECORD DATE, WITH WHICH THE ASSESSEE HA S PURCHASED THE UNITS IN MUTUAL FUND CAN ONLY TAKEN INTO CONSIDERATION FO R EXAMINING WHETHER PROVISIONS OF SECTION 94(7) ARE SATISFIED. IF THE F IRST RECORD DATE ALONE WAS CONSIDERED, ASSESSEE HAS SOLD ALL THE UNITS AFTER K EEPING IT FOR MORE THAN THREE MONTHS AND ACCORDINGLY PROVISIONS OF SECTION 94(7) ARE NOT ATTRACTED. IN OUR VIEW THE CIT(A) HAS CORRECTLY EXCLUDED THE S ECOND RECORD DATE AS THE PROVISIONS MUST BE COMPLIED ONLY WITH REFERENCE TO THE FIRST RECORD DATE IMMEDIATELY FOLLOWING THE PURCHASE OF UNITS. ANY OT HER INTERPRETATION WOULD RESULT IN ATTRACTING CLAUSE (B) OR SECTION 94(7) EV EN IN A CASE WHERE THE UNITS ARE HELD FOR FEW YEARS BUT WAS SOLD WITH THREE MONT HS OF THE LAST RECORD DATE ON WHICH DIVIDEND WAS DECLARED. IN VIEW OF THI S, WE ARE OF THE OPINION THAT THE CIT(A) HAS CORRECTLY INTERPRETED THE APPLI CABILITY OF SECTION 94(7) ON THE FACTS OF THE CASE AND ACCORDINGLY THE LOSS WAS CORRECTLY ALLOWED. WE, THEREFORE UPHOLD THE ORDER OF THE CIT(A) AND REJECT REVENUES GROUND ON THIS ISSUE. 14. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH NOVEMBER 2010. SD/- SD/- (R.V. EASWAR) (B. RAMAKOTAIAH) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 24 TH NOVEMBER 2010 ITA NO. 6924/MUM/2008 SHRI MAHENDRA P. MEHTA 8 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXI, MUMBAI 4. THE CIT XXI, MUMBAI CITY 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.