Rohini Nilekeni, Bangalore V. Addl.C.I.T., Bangalore

ITA 871/BANG/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0679 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 02-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: H NAGINCHAND KHINCHA
• Keywords: Avoidance of tax
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.871/BANG/2012 ASSESSMENT YEAR : 2006-07 SMT. ROHINI NILEKANI, NO.856, 13 TH MAIN, 3 RD BLOCK, KORAMANGALA, BANGALORE 560 034. PAN : ABUPN 4381L VS. THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 7, BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI H. NAGINCHAND KHINCHA, C.A. RESPONDENT BY : SHRI FARAHAT HUSSAIN QURESHI, CIT-II(DR) DATE OF HEARING : 25.03.2013 DATE OF PRONOUNCEMENT : 28.03.2013 O R D E R PER N.V.VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORD ER DATED 22.03.2012 OF THE CIT(APPEALS), LTU, BANGALORE DATE D 22.03.2012 RELATING TO ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE IS AN INDIVIDUAL. FOR AY 06-07, T HE ASSESSEE FILED RETURN OF INCOME ON 30-07-2006 DECLARING TOTAL INCO ME OF RS. 133,30,97,440/-. IN AN ORDER PASSED U/S. 143(3) OF THE ACT DATED 29-12- ITA NO.871/BANG/2012 PAGE 2 OF 11 2008 THE AO DISALLOWED THE CLAIM OF THE ASSESSEE FO R DEDUCTION OF SHORT TERM CAPITAL LOSS OF RS.26,39,632/- ON SALE OF UNIT S OF BIRLA DIVIDEND FUND BY INVOKING THE PROVISIONS OF SEC.94(7) OF THE INCOME TAX ACT, 1961 (THE ACT). 3. THE FACTS WITH REGARD TO THE SHORT TERM CAPITA L LOSS ARE AS FOLLOWS: THE ASSESSEE PURCHASED 38,25,554 UNITS OF BIRLA DIV IDEND FUND ON 15.09.2005. ON 14-02-2006, THE ASSESSEE REDEEMED 3 8,25,554 UNITS OF BIRLA DIVIDEND FUNDS. IT IS ON THE SALE(REDEMPTION) OF THESE THAT THE ASSESSEE HAD INCURRED A SHORT TERM CAPITAL LOSS OF RS.26,39,632/-. THE UNITS WERE PURCHASED AT RS.13-07 PER UNIT AND REDEE MED AT RS.12-38 PER UNIT RESULTING IN THE LOSS OF RS. 26,39,632/- (3825 54 X 0.69 PAISE). BETWEEN THE DATE OF PURCHASE (I.E., 15-09-2005) AND THE DAT E OF REDEMPTION (I.E., 14- 02-2006) DIVIDEND WAS DECLARED TWICE ON THESE UNITS BY BIRLA DIVIDEND FUND ON FOLLOWING DATES. A) ON 28-10-2005 RS. 0-80 PER UNIT B) ON 13-01-2006 RS. 1-60 PER UNIT 4. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER D ATED 29-12-2008 HELD THE ABOVE TRANSACTION INVOLVING PURCHASE AND R EDEMPTION OF UNITS TO BE A DIVIDEND STRIPPING TRANSACTION COVERED BY SECT ION 94(7) OF THE ACT. 5. AN UNDERSTANDING OF WHAT IS DIVIDEND STRIPPING, IS NECESSARY TO APPRECIATE THE CONTROVERSY INVOLVED IN THIS APPEAL. IT IS A DEVISE ADOPTED TO LEGITIMATELY AVOID PAYMENT OF TAXES ON TAXABLE INCO ME. SUPPOSE AN ASSESSEE HAS A SHORT-TERM CAPITAL GAIN OF RS. 2 LAK H DURING THE PREVIOUS YEAR AND IF THE ASSESSEE DOES NOT RESORT TO DIVIDEN D STRIPPING, HE WOULD ITA NO.871/BANG/2012 PAGE 3 OF 11 PAY APPROXIMATELY RS. 60,000 AS TAX. ALTERNATIVELY, THE ASSESSEE COULD INVEST THIS SUM IN A FUND THAT HAS AN NAV OF RS 20, AND WHICH DECLARES A DIVIDEND OF 50 PER CENT. THIS MEANS THAT FOR EACH U NIT, INVESTORS RECEIVE RS 5 AS DIVIDEND AND THE NAV GOES DOWN TO RS 15. FOR R S 2-LAKH INVESTED, THE ASSESSEE WOULD GET RS 50,000 AS DIVIDEND. HOWE VER, THE NAV OF THE UNIT WOULD NOW STAND REDUCED TO RS 1.5 LAKH A LO SS OF RS. 50,000. THE ASSESSEE WOULD SELL THE UNITS AND INCUR A LOSS OF R S.50,000. THE AMOUNT OF CAPITAL LOSS ON SALE OF UNITS WILL NOW REDUCE YOUR ORIGINAL SHORT-TERM CAPITAL GAIN OF RS 2 LAKH TO RS 1.5 LAKH. THE TAX LIABILITY ON THIS AMOUNT WILL BE RS 45,000. IN ADDITION, THE ASSESSEE EARNS TAX FREE DI VIDEND INCOME ON UNITS OF RS 50,000. THUS, THE ASSESSEES TOTAL TAX LIAB ILITY IS DOWN FROM RS 60,000 TO RS 45,000. BESIDES THIS THE ASSESSEE WOU LD ALSO GET A TAX FREE DIVIDEND INCOME OF RS.50,000. 6. WITH A VIEW TO DISALLOW SUCH LOSSES, THE FINAN CE ACT, 2001 INTRODUCED SUB-SECTION (7) TO SEC.94 W.E.F. 1.4.200 2. THE PROVISIONS SO INTRODUCED READS THUS: SEC.94: AVOIDANCE OF TAX BY CERTAIN TRANSACTIONS IN SECURITIES. (7) WHERE (A) ANY PERSON BUYS OR ACQUIRES ANY SECURITIES OR U NIT WITHIN A PERIOD OF THREE MONTHS PRIOR TO THE RECORD DATE; (B) SUCH PERSON SELLS OR TRANSFERS (I) SUCH SECURITIES WITHIN A PERIOD OF THREE MONTHS AFTER SUCH DATE, OR (II) SUCH UNIT WITHIN A PERIOD OF NINE MONTHS AFTER SUCH DATE; (C) THE DIVIDEND OR INCOME ON SUCH SECURITIES OR UN IT RECEIVED OR RECEIVABLE BY SUCH PERSON IS EXEMPT, ITA NO.871/BANG/2012 PAGE 4 OF 11 THEN, THE LOSS, IF ANY, ARISING TO HIM ON ACCOUNT O F SUCH PURCHASE AND SALE OF SECURITIES OR UNIT, TO THE EXTENT SUCH LOSS DOES NOT EXCEED THE AMOUNT OF DIVIDEND OR INCOME RECEIVED OR RECEIVABLE ON SUCH SECURITIES OR UNIT, SHALL BE IGNORED FOR THE PURPOS ES OF COMPUTING HIS INCOME CHARGEABLE TO TAX. .. EXPLANATION : FOR THE PURPOSES OF THIS SECTION, 'INTEREST' INCLUDES A DIVIDEND; (AA) 'RECORD DATE' MEANS SUCH DATE AS MAY BE FIXED BY (I) A COMPANY FOR THE PURPOSES OF ENTITLEMENT OF TH E HOLDER OF THE SECURITIES TO RECEIVE DIVIDEND; OR (II) A MUTUAL FUND OR THE ADMINISTRATOR OF THE SPEC IFIED UNDERTAKING OR THE SPECIFIED COMPANY AS REFERRED TO IN THE EXPL ANATION TO CLAUSE (35) OF SECTION 10, FOR THE PURPOSES OF ENTITLEMENT OF THE HOLDER OF THE UNITS TO RECEIVE INCOME, OR ADDITIONAL UNIT WITHOUT ANY CONSIDERATION, AS THE CASE MAY BE; (B) 'SECURITIES' INCLUDES STOCKS AND SHARES; (C) SECURITIES SHALL BE DEEMED TO BE SIMILAR IF THE Y ENTITLE THEIR HOLDERS TO THE SAME RIGHTS AGAINST THE SAME PERSONS AS TO CAPITAL AND INTEREST AND THE SAME REMEDIES FOR THE ENFORCEM ENT OF THOSE RIGHTS, NOTWITHSTANDING ANY DIFFERENCE IN THE TOTAL NOMINAL AMOUNTS OF THE RESPECTIVE SECURITIES OR IN THE FORM IN WHICH T HEY ARE HELD OR IN THE MANNER IN WHICH THEY CAN BE TRANSFERRED; (D) 'UNIT SHALL HAVE THE MEANING ASSIGNED TO IT I N CLAUSE (B) OF THE EXPLANATION TO SECTION 115AB. 7. THE AFORESAID PROVISIONS PROVIDES FOR A MINIMUM HOLDING PERIOD OF SECURITIES OR UNITS AFTER ITS PURCHASE AND BEFORE I TS SALE. THE HOLDING PERIOD IS DETERMINED WITH REFERENCE TO THE RECORD DATE. R ECORD DATE HAS BEEN DEFINED FOR THE PURPOSE OF THE AFORESAID PROVISIONS TO BE 'RECORD DATE' MEANS SUCH DATE AS MAY BE FIXED BY A COMPANY/MUTUAL FUND FOR THE PURPOSES OF ENTITLEMENT OF THE HOLDER OF THE SECURI TIES/UNITS TO RECEIVE DIVIDEND. THE MINIMUM HOLDING PERIOD FROM THE DATE OF PURCHASE TILL THE RECORD DATE IS 3 MONTHS. THE MINIMUM HOLDING PERIO D AFTER THE RECORD DATE ITA NO.871/BANG/2012 PAGE 5 OF 11 BEFORE THE UNITS CAN BE SOLD IS 9 MONTHS. IT IS NO T IN DISPUTE THAT AS LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF SHAMBHU MERCANTILE LTD. (183 TAXMAN 251) TO ATTRACT THE PROVISIONS OF SECTION 94(7) OF THE ACT, ALL THE THREE CONDITIONS PROVIDED (IN CLAUSE (A) (B ) & (C) OF SEC.94(7) OF THE ACT) THEREIN HAVE TO BE CUMULATIVELY SATISFIED. TH ERE IS NO DISPUTE THAT CONDITIONS LAID DOWN IN CLAUSE (B) & (C) OF SEC.94( 7) OF THE ACT ARE SATISFIED. THE DISPUTE IS ONLY WITH REGARD TO SATISFACTION OF CONDITIONS MENTIONED IN SEC.94(7)(A) OF THE ACT. 8. ACCORDING TO THE AO, THE DATE OF PURCHASE OF THE UNITS BY THE ASSESSEE WAS ON 15-09-2005. THE DATE OF SALE/ REDE MPTION OF THESE UNITS WAS ON 14.2.2006. THE MUTUAL FUND HAD DECLARED TWO DIVIDENDS BETWEEN THE DATE OF PURCHASE OF THE UNITS BY THE ASSESSEE A ND THEIR SALE/REDEMPTION I.E., ON 28-10-2005 AND ON 13-01-2 006. IF THE RECORD DATE IS RECKONED WITH REFERENCE TO THE DECLARATION OF DI VIDEND ON 28.10.2005, WHICH IS THE CASE OF THE AO, THE PURCHASE OF THE UN ITS WOULD BE WITHIN A PERIOD OF 3 MONTHS PRIOR TO THE RECORD DATE AND THE REFORE CLAUSE (A) OF SEC.94(7) OF THE ACT WOULD ALSO BE ATTRACTED. IF O N THE OTHER HAND THE RECORD DATE IS RECKONED WITH REFERENCE TO THE DECLA RATION OF DIVIDEND ON 13.01.2006, WHICH IS THE CLAIM OF THE ASSESSEE, THE N THE PURCHASE OF THE UNITS WOULD BE BEYOND 3 MONTHS PRIOR TO THE RECORD DATE AND THEREFORE THE CONDITION SPECIFIED IN CLAUSE (A) OF SEC.94(7) OF A CT WOULD NOT BE APPLICABLE AND CONSEQUENTLY THE LOSS CLAIMED BY THE ASSESSEE HAS TO BE ALLOWED. THE PROVISIONS OF SEC.94(7) OF THE ACT AR E SILENT ON WHICH RECORD DATE IS TO BE RECKONED FOR APPLYING THOSE PROVISION S WHEN THERE ARE TWO RECORD DATES BETWEEN THE DATE OF PURCHASE OF UNITS AND SALE OF THOSE UNITS. ITA NO.871/BANG/2012 PAGE 6 OF 11 9. THE AO ADOPTED 28-10-2005 AS THE RECORD DATE FO R THE PURPOSE OF ASCERTAINING THE APPLICABILITY OF SEC. 94(7) OF THE L.T. ACT, 1961 AND ACCORDINGLY HELD ALL THE CONDITIONS SPECIFIED IN SE C.94(7) OF THE ACT WERE SATISFIED AND THUS DISALLOWED THE CLAIM OF THE ASSE SSEE FOR DEDUCTION OF LOSS ON SALE OF UNITS. 10. BEFORE CIT(A) THE ASSESSEE SUBMITTED THE LEGIS LATIVE HISTORY AND INTENT OF SEC. 94(7) WAS TO CURB THE MISCHIEF/MISUS E OF DIVIDEND EXEMPTION BY A TAX AVOIDANCE PRACTICE, POPULARLY KNOWN AS DIV IDEND STRIPPING. THE ASSESSEE POINTED OUT THAT THE MEMORANDUM EXPLAINING THE PROVISIONS OF FINANCE BILL 2001 AND CBDT CIRCULAR NO. 14 DATED 09 -11-2001, CONFIRM THE FACT THAT THE AMENDMENT WAS TO CURE A MISCHIEF/ABUS E/DEFECT OF THE ACT. IT WAS ARGUED THAT THOSE PROVISIONS HAVE THEREFORE TO BE INTERPRETED TO THE EXTENT NECESSARY TO SUPPRESS THE MISCHIEF AND ADVAN CE THE REMEDY. IT WAS ARGUED THAT WHEN THERE ARE MORE THAN ONE RECORD DAT E, THE RECORD DATE NEAREST TO THE SALE/REDEMPTION IS TO BE CONSIDERED AS RECORD DATE FOR APPLICABILITY OF SEC. 94(7). 11. THE CIT(A) FIRSTLY NOTICED THAT PROVISIONS OF S EC.94(7) OF THE ACT WERE SILENT WHEN THERE WERE TWO RECORD DATES BETWEE N THE DATE OF PURCHASE AND SALE OF UNITS. THE CIT(A) HELD THAT T HE RECORD DATE CLOSEST TO THE DATE OF PURCHASE SHOULD BE TAKEN AS THE RECORD DATE IN THE CASE OF THE ASSESSEE. THE CIT(A) THEREAFTER GAVE THE FOLLOWING REASONS FOR HIS CONCLUSIONS AS ABOVE:- 6.1.2 MORE IMPORTANTLY, HOWEVER, ONE NEEDS TO EXA MINE THE ISSUE FROM THE POINT OF VIEW OF THE GUIDING PRINCIP LES ENUNCIATED IN THE MISCHIEF RULE. IN OTHER WORDS, THE INTERPRET ATION SHOULD BE ITA NO.871/BANG/2012 PAGE 7 OF 11 SUCH AS TO SUPPRESS THE MISCHIEF AND ADVANCE THE RE MEDY. IT IS IMPORTANT, IN MY CONSIDERED VIEW, TO EXAMINE THE FA CTS OF THE INSTANT CASE HOLISTICALLY. IN A NUTSHELL, THE APPEL LANT PURCHASED A BIG BLOCK OF ABOUT 38 LAKH UNITS ON 15-09-2005 AT A PURCHASE PRICE OF RS.13.07 PER UNIT. ON OCT 28TH, 2005, I.E. , LESS THAN TWO MONTHS FROM PURCHASE, A DIVIDEND OF RS.0.80 PER UNI T WAS DECLARED AND ON 13-01-2006 ANOTHER DIVIDEND OF RS.1 .20 PER UNIT WAS DECLARED. WITHIN ABOUT A MONTH OF DECLARATION O F THIS LATTER DIVIDEND, THE APPELLANT REDEEMED ALL THE UNITS AT A PRICE OF RS.12.38 PER UNIT. TO SUM UP, WITHIN A PERIOD OF AB OUT FIVE MONTHS, THE APPELLANT EARNED RS.2.00 PER UNIT BY VI RTUE OF TAX-FREE DIVIDEND INCOME AND WAS ALSO, ON THE BASIS OF USING THE SECOND DATE AS THE DATE OF RECORD, ALL SET TO SET-OFF THE SHORT-TERM CAPITAL LOSS RESULTING FROM THE REDEMPTION AGAINST OTHER SH ORT-TERM GAINS. IN MY UNDERSTANDING, THE FACT OF TWO POSSIBLE RECOR D DATES NOTWITHSTANDING, THIS IS A CLASSIC CASE OF DIVIDEND STRIPPING, AND TO ALLOW A TECHNICALITY SUCH AS WHAT RECORD DATE TO USE TO ALLOW THE TRANSACTION TO SLIP OUT OF THE NET OF S.94(7) W OULD BE TO DEFEAT THE PURPOSE OF THE ENACTMENT. IN TERMS OF THE MISCH IEF RULE, IT WOULD TEND TO ADVANCE THE MISCHIEF AND DEFEAT THE R EMEDY. 6.1.3 I AM ALSO OF THE VIEW THAT THE TIMING OF PU RCHASE IS HARD TO ACCEPT AS BEING A MERE COINCIDENCE. THE APPELLANT C OMES FROM A VERY SUCCESSFUL BUSINESS FAMILY AND WOULD, I ASSUME , ALSO HAVE HIGHLY COMPETENT ADVISORS ADVISING HER ON HER INVES TMENT OPTIONS. STOCK MARKETS WERE BOOMING AT THE TIME AND EXPECTING A DIVIDEND ON COMPLETION OF SIX MONTHS OF THE FINANCI AL YEAR WAS NOT OUT OF PLACE. THE TWO DIVIDEND DECLARATIONS WER E A MERE TWO AND A HALF MONTHS APART. CONSIDERING THE FACTS, THE RE IS EVERY REASON TO TREAT THE DATE OF FIRST DIVIDEND AS THE R ECORD DATE. IN SUCH CIRCUMSTANCES, THE TRANSACTION IS SQUARELY HIT BY THE PROVISIONS OF S.94(7). IN THE LIGHT OF THE DIKTATS OF THE MISCHIEF RULE AND ALSO TREATING THE FIRST DATE OF DECLARATIO N OF DIVIDEND AS THE RECORD DATE, I AM INCLINED TO ACCEPT THE STANCE TAKEN BY THE AO IN REGARD TO THE SINGLE POINT IN ISSUE. CONSEQUE NTLY, GROUNDS 2 & 3 FAIL. 12. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSE SSEE IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO.871/BANG/2012 PAGE 8 OF 11 13. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATE D THE PLEA OF THE ASSESSEE AS PUT FORTH BEFORE CIT(A). THE LEARNED D R RELIED ON THE ORDER OF THE CIT(A). 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE CBDT IN CIRCULAR NO. 14, DATED 22ND NOVEMBER, 2001 CONTAINING EXPLAN ATORY NOTES ON THE PROVISIONS OF THE FINANCE ACT, 2001 EXPLAINS THE AB OVE PROVISIONS THUS : '56. MEASURES TO CURB CREATION OF SHORT-TERM LOSSE S BY CERTAIN TRANSACTIONS IN SECURITIES AND UNITS 56.1 UNDER THE EXISTING PROVISIONS CONTAINED IN SE CTION 94, WHERE THE OWNER OF ANY SECURITIES ENTERS INTO TRANSACTIONS OF SALE AND RE-PURCHASE OF THOSE SECURITIES WHICH RESULT IN THE INTEREST OR DIVIDEND IN RESPECT OF SUCH SECURITIES BEING RECEIVED BY A PERSON OTHER TH AN SUCH OWNER, THE TRANSACTIONS ARE TO BE IGNORED AND THE INTEREST OR DIVIDEND FROM SUCH SECURITIES IS REQUIRED TO BE INCLUDED IN THE TOTAL INCOME OF THE OWNER. 56.2 THE EXISTING PROVISIONS DID NOT COVER A CASE WHERE A PERSON BUYS SECURITIES (INCLUDING UNITS OF A MUTUAL FUND) SHORT LY BEFORE THE RECORD DATE FIXED FOR DECLARATION OF DIVIDENDS, AND SELLS THE SAME SHORTLY AFTER THE RECORD DATE. SINCE THE CUM-DIVIDEND PRICE AT WH ICH THE SECURITIES ARE PURCHASED WOULD NORMALLY BE HIGHER THAN THE EX- DIVIDEND PRICE AT WHICH THEY ARE SOLD, SUCH TRANSACTIONS WOULD RESULT IN A LOSS WHICH COULD BE SET OFF AGAINST OTHER INCOME OF THE YEAR. AT THE SAME TIME, THE DIVIDENDS RECEIVED WOULD BE EXEMPT FROM TAX UNDER S ECTION 10(33). THE NET RESULT WOULD BE THE CREATION OF A TAX LOSS, WITHOUT ANY ACTUAL OUTGOINGS. 56.3 WITH A VIEW TO CURB THE CREATION OF SUCH SHOR T-TERM LOSSES, THE ACT HAS INSERTED A NEW SUB-SECTION (7) IN THE SECTI ON TO PROVIDE THAT WHERE ANY PERSON BUYS OR ACQUIRES SECURITIES OR UNI TS WITHIN A PERIOD OF THREE MONTHS PRIOR TO THE RECORD DATE FIXED FOR DEC LARATION OF DIVIDEND OR DISTRIBUTION OF INCOME IN RESPECT OF THE SECURIT IES OR UNITS, AND SELLS OR TRANSFERS THE SAME WITHIN A PERIOD OF THREE MONT HS AFTER SUCH RECORD DATE, AND THE DIVIDEND OR INCOME RECEIVED OR RECEIV ABLE IS EXEMPT, THEN, THE LOSS, IF ANY, ARISING FROM SUCH PURCHASE OR SALE SHALL BE IGNORED TO THE EXTENT SUCH LOSS DOES NOT EXCEED THE AMOUNT OF SUCH DIVIDEND OR INTEREST, IN THE COMPUTATION OF THE INC OME CHARGEABLE TO TAX OF SUCH PERSON. 56.4 DEFINITIONS OF THE TERMS 'RECORD DATE' AND 'U NIT' HAVE ALSO BEEN PROVIDED IN THE EXPLANATION AFTER SUB-SECTION (7) O F SECTION 94. 56.5 THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRI L, 2002, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YE AR 2002-03 AND SUBSEQUENT YEARS.' ITA NO.871/BANG/2012 PAGE 9 OF 11 15. THE PROVISIONS OF SEC.94(7) OF THE ACT ARE SILE NT AS TO WHICH RECORD DATE IS TO BE RECKONED FOR APPLYING THOSE PROVISION S WHEN THERE ARE TWO RECORD DATES BETWEEN THE DATE OF PURCHASE AND SALE OF UNITS. IT IS THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE TH AT CREATION OF SHORT TERM LOSS IS ONLY DUE TO THE SALE OF THE UNITS AND THEREFORE IT IS ONLY THE RECORD DATE THAT IS CLOSEST TO THE DATE OF SALE THA T SHOULD BE TAKEN FOR THE PURPOSE OF SEC.94(7) OF THE ACT. IN THIS REGARD HE RELIED ON THE CBDT CIRCULAR EXPLAINING THE PROVISIONS OF SEC.94(7) OF THE ACT WHICH LAYS EMPHASIS ON CREATION OF SHORT TERM LOSS. THE ARG UMENT OF THE ASSESSEE IS THAT IT IS THE POINT OF SALE THAT CREATES A LOSS AND THEREFORE THE RECORD DATE THAT IS CLOSEST TO THE DATE OF SALE SHOULD BE TAKEN FOR THE PURPOSE OF SEC.94(7)(A) OF THE ACT. THE LEARNED COUNSEL FOR T HE ASSESSEE HAS LAID EMPHASIS ON ADOPTING THE MISCHIEF RULE OF INTERPR ETATION, WHICH WOULD ADVANCE THE ASSESSEES PLEA. WE DO NOT WISH TO GO INTO THE ARGUMENTS ON THE APPLICABILITY OF THE MISCHIEF RULE AS APPLICA TION OF THAT RULE IN FAVOUR OF THE ASSESSEE OR THE REVENUE (AS HELD BY THE CIT(A) IN HIS ORDER) CAN EQUALLY BE JUSTIFIED BY BOTH OF THEM. WE ALSO DO N OT AGREE WITH THE OBSERVATIONS OF THE CIT(A) REGARDING THE TIMING OF PURCHASE NOT BEING A MERE COINCIDENCE BECAUSE THE ASSESSEE COMES FROM A VERY SUCCESSFUL BUSINESS FAMILY AND WOULD HAVE HAD HIGHLY COMPETENT ADVISORS ADVISING HER ON HER INVESTMENT OPTIONS. THESE FACTORS IN OUR VIEW WOULD BE IRRELEVANT FOR DECIDING THE CONTROVERSY. WE WOULD THEREFORE GO BY THE PLAIN WORDS OF THE SECTION. THE PROVISIONS OF SEC.94(7) OF THE ACT PRESCRIBE A MINIMUM HOLDING PERIOD OF UNITS FROM THE DATE OF PU RCHASE TO THE DATE OF ITA NO.871/BANG/2012 PAGE 10 OF 11 SALE. THE SECTION I.E., SEC.94(7)(A) STARTS WITH D ATE OF PURCHASE OF UNITS AND FIXES THAT DATE AS A DATE THREE MONTHS PRIOR TO THE RECORD DATE. IT THEREFORE FOLLOWS THAT THE FIRST RECORD DATE SHOULD ALONE BE CONSIDERED. SEC.94(7)(B) THEN FIXES THE DATE ON WHICH THE UNITS PURCHASED SHOULD NOT BE SOLD AND THAT DATE IS FIXED WITH REFERENCE TO TH E RECORD DATE APPLICABLE TO SEC.94(7)(A). THE ARGUMENT OF THE LEARNED COUNSEL F OR THE ASSESSEE TO THE EFFECT THAT WHEN THERE ARE MORE THAN ONE RECORD DAT E, THE RECORD DATE NEAREST TO THE SALE/REDEMPTION IS TO BE CONSIDERED AS RECORD DATE FOR APPLICABILITY OF SEC.94(7) CANNOT THEREFORE BE ACCE PTED ON A PLAIN READING OF THE SECTION. FOR THE REASONS GIVEN ABOVE, WE CO NFIRM THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL OF THE ASSESSEE. 16. IN THE RESULT THE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF MARCH, 2013. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 28 TH MARCH, 2013. DS/- ITA NO.871/BANG/2012 PAGE 11 OF 11 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.