https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=76299 https://www.taxtmi.com/caselaws?id=76299 Speculative loss – sale and purchase of units ‘US-64’ – Section 94(7) - bonafide transactions – evasion of tax - on 21.5.1990 the assessee-appellant had purchased 25 lacs units of ‘US’64’ of Unit Trust of India (UTI) at the then prevalent market rate of Rs. 15/- per unit, for a total consideration of Rs. 3,75,00,000/- from ANZ Grindlays Bank - On account of non-availability of surplus funds and cost of holding them on interest being un-profitable, the assessee-appellant sold the units on 21.7.1990 to ANZ Grindlays Bank, New Delhi, at the then prevailing market rate of Rs. 13.01 per unit, for a total consideration of Rs. 3,25,25,000/-, after deducting interest of Rs. 9,86,300/- at the rate of 16% on the total sale consideration of Rs. 3,75,00,000/- for a period of 60 days. - Accordingly, the assessee-appellant in its return of income for the Assessment Year 1991-92 claimed the loss as a short term capital loss and also claimed set-off against its income and offered dividend income of Rs. 45 lacs after the statutory deduction for tax. Held that: Hon’ble the Supreme Court in the matter of Apollo Tyres Ltd. [2008 -TMI - 6081 - SUPREME Court] specifically rejected the contention of the revenue that Explanation to Section 73 of the Act, ( which makes the business of purchase and sale of shares as business of speculation) was applicable to the transaction of a sale and purchase of units. – Sale and purchase of US-64 units not to be treated as speculative loss – eligible for set off – decided in favor of assessee. On the issue of tax planning versus tax evasion versus tax avoidence, held that: once the transaction is genuine merely because it has been entered into with a motive to avoid tax, it would not become a colourable devise and consequently earn any disqualification. Hon’ble the Supreme Court in the concluding paras of its judgment in Azadi Bachao Andolan (2008 -TMI - 6130 - SUPREME Court) has rejected the submission that an act, which is otherwise valid in law, cannot be treated as nonest merely on the basis of some underlying motive supposedly resulting in some economic detriment or prejudice to the national interest as per the perception of the revenue. The aforesaid view looks to be the correct view. - The argument of the learned counsel for the revenue respondent based on the judgment rendered in the case of McDowell & Co. Ltd. ( 2008 -TMI - 40038 - SUPREME Court) cannot be accepted because the judgment rendered by Hon’ble Mr. Justice O. Chinnappa Reddy in McDowell’s case has been explained in detail by the later judgment of Hon’ble the Supreme Court in the case of Azadi Bachao Andolan (2008 -TMI - 6130 - SUPREME Court). It is well settled that if a smaller Bench of Hon’ble the Supreme Court has lateron explained its earlier larger Bench then the later judgment is binding on the High Court Case-Laws Income Tax Wed, 31 Mar 2010 00:00:00 +0530