TaxTMI 
TaxTMI 
2013 (10) TMI 541
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....ed 29/04/2008 for AYs 2003-04, 2004-05 & 2005-06. All these appeals are connected because in the case of company, similar disallowance was made by the AO in four years on substantive basis which was deleted by the ld. CIT(A) in all the four years and protective addition was made by the AO in the cases of these two individuals which were also deleted by the ld. CIT(A) on a consequential basis. Hence, all these appeals were heard together and are being disposed of by this common order for the sake of convenience. 2. Since substantive addition was made by the AO in the hands of the company M/s. Prudent Finance (P.) Ltd., first we decide the four appeals filed by the Revenue in this case. In this case also, the issue involved in all the years is identical and it was agreed by both the sides that the same can be decided in any one year and that order can be followed in the remaining years. Hence, we take up the appeal of the Revenue for AY 2002-03 in ITA No.2452/Ahd/2008. 2.1 Brief facts till the assessment stage and the submissions before the ld. CIT(A) and his decision are available in para Nos.8 to 19 of the order of the CIT(A) and the same are reproduced below for the sake of ....
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....p; 8.1 It was observed by the Assessing Officer, that the analysis of digital data found during, the search, reveal that the off market transactions carried out by the appellant with connected concerns as well as others had resulted in huge losses. With a view to verify the genuineness of losses claimed, the Assessing Officer called for the details of transactions conducted by the appellant with the above named 10 concerns. From the order of assessment it is seen that in response to this requisition, the appellant need not submit the details called for in the tabular format for each scrip on day to day basis as it involved voluminous data. Thereafter, after observing that the appellant had avoided furnishing the data called for, the Assessing Officer asked the appellant to establish that the transactions were genuine, supported by actual delivery of shares and that they had been carried out at the market rate in respect of certain transactions only, for different years. In the assessment order it is mentioned that the assessee did not provide even the alternative details called for. Thereafter, the Assessing Officer issued a show-cause notice to the appel....
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....t taken into consideration because even otherwise on facts, according to her, the transactions were not genuine but were colourable device, however, the Assessing Officer has gone on to discuss the applicability of section 19(1) of Securities Contracts (Regulation) Act, 1956. The Assessing Officer has agreed with the appellant's contentions regarding the reduction of losses arising from the transactions with M/s. N.P.C. Capital Market. The Assessing Officer, however, disagreed with the appellant's submissions regarding the genuineness of off market transactions, to ignore the transactions carried out with concerns other than sister concerns and also the appellant's submission regarding netting of losses. The main contentions of the Assessing Officer on these issues and the appellant's submissions thereon are summarized as under:- Assessing Officer's observation Appellant's rebuttal in statement of facts Assessee company's affairs are managed by one of its directors Shri Nitin B. Parikh The AO has proceeded on wrong perception that assessee company's affairs are managed by one director. The fact is that it was not Shri Parikh alone who was looking after the business affa....
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.... corresponding market rate and if such details were available on record, it would have become casier to verify whether assessee has carried out off market transactions on market rate or not. Annexure stated in reply date 24/12/2007 regarding market proof is not submitted Assessee has failed to prove that off market transactions were at market rate The appellant vehemently objects to a patently wrong statement made by the Assessing Officer in stating that the annexure containing the details called for by her in regard to transactions carried out on a particular date claimed to have been submitted alongwith the appellant's submission on 24/12/2007 were in fact not submitted. The appellant submits that the annexure mentioned in their reply dated 24/12/2007 was submitted on next working day, as the details of market rates required to be submitted as part of the format took a considerable time to be downloaded from the official website of the Bombay Stock Exchange. In other words, the details as called for were submitted though a day late and for valid reasons. If required, the appellant is even prepared to submit affidavits of their representatives who were regularly appearing....
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....ded to prohibit organizing of or assisting in organizing of securities trading in places other than a Stock Exchange which is recognized for the said purpose by the Government. We once again reiterate that the transactions that we have entered into to on principal to principal basis, it cannot be classified under any of the substantive activity attributable to a Stock Exchange. In other words, we have not provided any trading platform to the concerns for inter-se transaction in securities, i.e., we have not brought together the buyers and sellers of securities and facilitated their securities transactions in any manner, no do we regulate or control the securities trading. (As submitted before assessing officer dated 24/12/2007) The Assessing Officer that the intention of SEBI in putting ban of off market transactions with certain exceptions is just to protect the interest of the investors. The appellant humbly submits that no ban has been put by SEBI on off market transactions as is being observed by the Assessing Officer. The off market transactions are perfectly legitimate transactions and assessee relies on submission made vide letter dated 24th December, 2007 to AO ....
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....sactions which were found recorded in the seized data which is regular record and not incriminating document as non-genuine so as to disallow loss incurred in the transactions chosen by the A.O. Therefore, one has to consider the data as a whole and not to adopt pick and choose method so as to delete the transactions from that data which are found inconvenient to the Department. Appellant relies on following decisions: (a) Glass Line Equipment Company Ltd. v. Commissioner of Income-tax 253 ITR 454(Guj.) (b) Dhanvarsha Builders & Dev. Pvt. Ltd. 102 ITD 375 (c) Chander Mohan Mehta 71 ITD 245 (d) Hanshyambhai Thakker 88 Taxman 65) (Para 1.2 of submission) This may be further appreciated in view of following few examples: (i) For example loss in the transaction with Nitin Parikh (Ind.) has been disallowed at Rs. 50,44,592/- whereas same statement shows profit in transactions with the proprietary concern of Nitin Parikh (Ind.) viz. Nitin Parikh & co. (PNB) Rs. 24,40,464/-; Nitin B. Parikh Rs. 3,64,68,436/-. In this case the above profit in off market transaction is taxed whereas loss is disallowed. (ii....
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....g profits of such paltry amounts. Even, name address, PAN and confirmation of said parties were given which were not doubted by AO. The assessee has made loss by making book entry. For example, AO has observed that losses or planned losses from mutual funds and profits were transferred to them. On one hand the Assessing Officer has observed that the profits had been transferred to related concerns, who had losses or had planned losses from the mutual fund transactions, the same Assessing Officer, while assessing M/s. HNP Traders has accepted the losses arising from their mutual fund transactions as genuine. The profit/loss arising in the hands of the other is not relevant sofaras assessment of the appellant is concerned. That the activity of the appellant is within the frame work of law has been admitted by the Assessing Officer when she observed that "the issue involved in the case of the assessee is not legitimacy of "off market transactions" ". Further, scant evidence has been adduced to establish that the device adopted by the appellant was 'colorable' or that the appellant's methods were 'dubious'. The AO has relied on decision of Macdowell company Ltd. v. CTO(1985....
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....ty of persons with whom off market transactions have been made by assessee. The AO has never doubted identity and genuineness of persons with whom such transactions are made. The AO has accepted that funds of individuals/concerns were with Assessee. However, AO is off the view that there was no one to one banking transactions. In other words, when sale was made it was not followed by cheques received nor when purchases were made were followed by cheque payment. Even while settling the account, netting was done and on majority occasion net amount payable to such concerns were credited to their accounts. AO has not doubted that fund of aforesaid persons were with appellant. Conducting transactions on principal to principal basis with any one entity regularly, pre-supposes complete trust with regards to purchase and sale transactions and its execution. In the assessment order, the Assessing Officer admits the availability of the funds of the parties concerned with the appellant but ignores the reality of a running account. Not a single instance has been cited by the Assessing Officer to impute that funds are supplied by the appellant in any account which went into defic....
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....which have not been disputed by AO. The transactions were with group concerns and other parties and are not one or two single transactions but were made regularly hence it cannot be stated that they are for connivance with other parties. Purchase and sale bills issued by assessee are self serving documents and they are devoid of any third party evidences. During the course of assessment proceedings, appellant has submitted details stated in para 2.4 of SOF alongwith market price, your goodhonour may appreciate that whether the appellant's case is devoid of third party evidence. Moreover, if the quality of evidence submitted was suspect, the Assessing Officer could as well have examined the parties concerned to satisfy herself in this regard. 10. It may be relevant to put on record some basic issues involved in share transactions generally for better appreciation of issues involved in this case. From reading the assessment order and after going through the submissions made by the appellant's representatives, it seems these basics have remained to be appreciated by the Assessing Officer while dealing with this case. No statute can prohibit or put restrictions on the transfer....
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....ed in profit or loss. In the instant case the Assessing Officer has rightly observed that the price list of securities called for by her to examine the genuineness of losses was a vital document. If in her verification it was found that in the instant case the 'off market transactions' had taken place outside the price band of the day for any security to the transaction, she would have been perfectly justified in making her own calculations of profit/ loss on the prices available in the price band. Therefore, apart from legitimacy of the 'off market transactions' involved in this case which has not been disputed by the Assessing Officer, the question regarding genuineness had to be settled with reference to the identities of the parties, fund flow and prices of the day. The submissions made by the appellant success fully, address these three vital aspects of genuineness in contradistinction to the averments made by the Assessing Officer. 10.2 Yet another expression which has been repeatedly used by the Assessing Officer in her order, which needs to be clarified, is "spot delivery". From the reading of the assessment order, it appears that the Assessing Officer has equated 'off m....
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....g the business of buying, selling or dealing in securities. In my view, the Assessing Officer has wrongly interpreted the section by simply taking the buying, selling and dealing in securities part of the provision ignoring the crucial operative part, i.e., assisting, regulating or controlling the business of share transactions. No evidence has been brought, on record by the Assessing Officer that the appellant was engaged in-the function of assisting, regulating or controlling the business of share transactions either for themselves or for others. 12. Considering the above position, what is left to. be examined is whether the appellant's modo of securities transactions with entities connected with themselves and some outsiders on principal to principal basis was legitimate and genuine. In other words, whether the 'off market transactions' conducted by the appellant on principal to principal basis was legally permissible and even if it was legally permissible whether the-transactions the appellant carried out were in fact genuine and not merely paper transactions, as has been held by the Assessing Officer, with the prime .motive of transferring profits to other entities. 13. ....
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....m the contentions of the Assessing Officer and the appellant's submissions thereon which have been summarized in the earlier part of this order, I find that the Assessing Officer has gone on record to accept the genuineness of the parties to the transactions and the genuineness of the funds and its availability with the concerned entities. However, the Assessing Officer's sole reasons for treating these transactions as non-genuine appear to arise from her view that the transactions have not been carried out at market rate and that in her view the appellant has engineered a unique method for exploiting' the provisions of law, in such a manner that no tax is paid by the appellant, by transferring profits and the profits so transferred to sister concerns are offset by losses generated on sale of units of mutual funds thereby avoiding any incidence of tax on them as well In her final view, the transactions are not genuine because even though they may legally correct these transactions have been devised to defraud the Revenue. In other words, according to the Assessing Officer, if a tax-payer is lowering the incidence of tax payable or pays no tax through legitimate tax planning conduct....
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....gitimate and genuine but were carried out in the normal course of the appellant's business activity without any malafide intentions of avoiding taxes by transferring profits or booking losses. It was contended that with genuine parties, genuine funds and transactions on the day's market rates, it was merely the Assessing Officer's suspicion that the transactions were not genuine. 15. Coming to the other observation of the Assessing Officer to hold these transactions as non-genuine by alleging that the transactions had not been carried out at market rate, in their arguments before me, the appellant's representatives vehemently objected to the Assessing Officer's remark that the transactions had not been carried out at the market rate. In their submissions it was argued that the market rates of the relevant dates were down loaded from the website of the Bombay Stock Exchange and provided to the Assessing Officer for verification. Presuming but not admitting it was further argued that even if the appellant did not provide the rates, which in fact they did, before making such huge disallowances the Assessing Officer could as well have verified the rates from the website of the 'exch....
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....able Tribunal had held that the Assessing Officer could not be allowed to blow hot and cold simultaneously. The Revenue could not be permitted to use that part of the statement which was beneficial to it and reject the other part of the statement which .was detrimental to it. And almost similar decisions of the Honorable Ahmedabad Bench of ITAT in the case of Ghanshyambhai R. Thakker (88 Taxman 65) was also brought to my attention where in regard to a statement made during the course, of a Survey, the Honorable Tribunal had held that statement of the assessee should not considered choosing one part or other of it but had to be considered in its entirety. In the light of these decisions, it was argued that the Assessing Officer was unfairly ignoring the part of the seized documents favourable to the appellant. 17. As regards the Assessing Officer's observation that the transactions had been devised in such a manner that the profits transferred to the sister concerns had been offset against the losses generated from the sale of units of the mutual funds, once again avoiding any incidence of tax on thorn as well, it was pointed out by the appellant's representative that the losses ....
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....funds for the transactions were available with the appellant and such funds had genuinely come from the parties concerned, the prices of transactions are at market rate(s), the transactions had been confirmed by the respective parties through letters of confirmation filed before the Assessing Officer, the money for the transaction, whenever moved, moved through the banking channel and finally the delivery of the shares were given as and when asked for by the parties. All these clearly establish that the transactions of the appellant with the parties listed by the Assessing Officer in her order were legitimate and genuine off market transactions and I also agree with the appellant's contention that the Assessing Officer, in contravention of section 132(4), selectively chose the losses for disallowance treating them as non-genuine whereas in the same set of transactions the profits were treated as genuine. In view of these, therefore, the disallowance of losses made by the Assessing Officer is uncalled for and is deleted.' 3. Since the disallowance was deleted by the ld. CIT(A) in all the four years, now the Revenue is in appeal before us in all the four y....
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....06-07 -reg. Kindly refer to the hearing in the above cases on 10/04/2013, where written submission was to be given from the side of Revenue. 2. The detailed written submissions of the respective Assessing Officers is dated 12.04.2013 in above cases is enclosed, as desired. In addition to the above submissions, regarding disallowance of loss in off-market transactions, it is also respectfully submitted that :- (1) Physical delivery of shares was not handed over by the assessee company in individuals/concerns. This is the basic requirement of off-market transaction, as is evident from page-9 para-4.5 of AO's order. The assessee would merely issue purchase/sale bills at his own discretion. (2) One to one banking transactions were missing in these off-market transactions, as is clear from page-20 para-8.6 (A.Y.2004-05) of AO's order. The off-market transactions are not followed by corresponding one to one bank entries for receipt and pa....
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.... (Submitted through the Addl. CIT, Range-5, Ahmedabad) Madam, Sub : Appeal before the Hon'ble ITAT, Ahmedabad in the case of Prudent Finance Pvt. Ltd. - ITA No.2450 to 2455/Ahd/2008 - A. Yrs. 2000-01 to 2005-06 - Regarding. Kindly refer to the subject mentioned above. 2. As desired, kindly find a written submission defending the department's case in the above mentioned case for above mentioned Assessment Years as under:- 3. In this case a search action u/s 132 of the IT Act was carried out on 22/09/2005. Accordingly notices u/s. 153 A of the Act were issued for the above mentioned Assessment Years and assessments were finalised. The details of returned income, additions made by the A.O and assessed income for these Assessment Years are given in the following table. A.Y. Returned Income in Rs. Additions Made in Rs. Assessed Income in Rs. U/s.14A Disallowance of loss in off Marke....
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....siness and therefore, the expense attribute to it will be governed by section 14A and not by section 36(l)(iii) of the Act. 4.3 Further in the case of ITO v. Daga Capital Management (P.) Ltd. it has been held that for the purpose of section 14A what is relevant is to work out expenditure in relation to exempt income and not to examine whether expenditure incurred by assessee has resulted into exempt income or taxable income. The head note of the refer judgment is reproduced as under:- "Section 14A of the Income-tax Act, 1961 - Expenditure Incurred in relation to income not inclinable in total income - Assessment years 2001-02 and 2002-03 - Whether section 14A is a special provision which deals with disallowance of expenditure incurred by assessee in relation to income which does not form part of total income under Act and thus, in view of specific provisions of section 14A , expenses falling under any head or section which are otherwise deductible as business expenditure or under other respective heads, would call for disallowance to extent to which those expenses have been incurred in relation to incom....
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....g Ltd. (iii) Anagram Securities Ltd. and (iv) L&FS Investment Ltd. The A.O also noted that the assessee has also carried out "off market transactions" for sale purchase of stock with other following main parties: Sr.No. Name of the Party Remark 1. M/s. NBP Traders Sister Concern 2. M/s. HNP Traders Sister Concern 3. M/s. Prudent Finance Consultants Sister Concern 4. Nitin Parikh & Co. Sister Concern 5. Manubhai & Co. 6. JMP Traders 7. Darshana fiscal (P.) Ltd. 8. Anjali Exim (P.) Ltd. 9. Shri Parshwa Profin (P.) Ltd. 10. Varuneshkumar Rameshwar Prasad On analyzing accounting data seized during the course of search from the business premises of the assessee, A.O observed that the assessee had earned hefty profit in stock market in the transactions carried out through the brokers registered with SEBI. However, the A.O. also observed that in the off market transactions made with above mentioned parties, assessee had shown huge loss whic....
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....see had preferred not to furnish those details on the pretext that the data called for was voluminous one. Even on test check basis, assessee failed to furnish such details and therefore, A.O came to the conclusion that the off market transaction carried out by the assessee with the family members and others were not carried out at market rate and therefore, the loss arouse on account of those transactions was not allowable as those transactions were nothing but a colorable devise to reduce /transfer out profit earned in regular stock market operations. 6.1 On assessee's appeal, Ld. CIT(A) has deleted the addition observing that the off market transactions with the family members and others were carried out at market rate and therefore. those being genuine one loss claimed by the assessee in off market transaction was allowable. 6.2 On careful consideration of the decision of the Ld. CIT(A) it is seen that while deciding the issue in favour of the assessee, Ld. CIT(A) has been carried away simply by the submission of the assessee which is not supported by any factual evidences. It is evident from the order of the Ld. CIT(A) th....
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....5-06 Rs. 11,90,48,610/- To give a brief background of this case so as to appreciate the controversy in proper context, a search was conducted under sec.132 of the Income-tax Act, 1961 on 22/9/2005, in the case of Nitin B. Parikh group. The assessee is the flagship company of this group. As a consequence of scrutiny of return filed in response to notice under section 153A, it was noticed by the Assessing Officer that the assessee company, which trades in shares, units of mutual funds and also trades in Futures and Options, normally conducted transactions of two types - a) transactions on the stock exchanges through registered market intermediaries; and b) transactions with certain individuals/concerns on principal to principal basis. The individuals/concerns as reflected from seized documents were the following: (i) M/s. N.B.P. Traders (sister concern) (ii) M/s. H.N.P. Traders (sister concern) (iii) M/s. Prudent Financial Consultants (s....
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.... (e) While tax planning is perfectly legitimate, the presence of the following in planning of tax could be termed as "tax avoidance". (1) Fraudulent motives; or (2) Malafide intentions; or (3) Colourable devices; or (4) Form of transaction in accordance with the letter of law but absence of substance of transaction defeating the legislative intent. It can be safely concluded that the assessee's intention was to evade tax by transferring taxable profits to other entities and in the case of sister concerns loss booked on account of dividend stripping was set off against the profit transferred. Tiic.3, this is a device to avoid payment of tax (Page 17-18 of assessment order). (f) So far as identity of person with whom off-market transactions have been conducted, there is no doubt about it; as regards the availability of funds of concerns, funds were there with the assessee. Availability of funds of such concerns is not denied at all. But, the sale and purchase is not conducted through banking channel and therefore....
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.... for aforesaid issues raised in Department's appeal. 2. The observations made by the Learned Commissioner of Income Tax, DR - B Bench in the note supplied to the Hon'ble Bench and copy to the assessee, are dealt with in subsequent paragraphs. 2.1 In para 2.1 of her written submission, the learned Commissioner of Income-tax (D.R) has once again highlighted the issue of physical delivery of shares not handed over as a basic requirement of off-market transaction to emphasize that this renders the transactions as non-genuine. In this regard, the attention of the Hon'ble Bench is drawn to page 16 of the order of the Commissioner of Income-tax (Appeals) where the learned Commissioner of Income-tax (Appeals) was explained this issue which was also appreciated by him while drawing the final conclusion. It was pointed out that given the short settlement cycle where the securities were required for day to day transaction to reduce market risk and also to reduce the cost of transfer and other administrative cost, the shares bought or sold were retained by the assessee on the basis of general written instructio....
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....venue in the case of sister concerns as well. In this regard, the attention of the Honourable Bench is drawn to Page 12-13 of the order of the Commissioner of Income-tax (Appeals). The assessee would like to be categorically put on record that no profit has been transferred by the assessee either to any sister concern or any outside concern or individual. Moreover, the ultimate outcome of the profit earned by a sister concern, i.e., whether it eventually suffered tax or was set off against some loss cannot be an argument to treat the assessee's transaction as non-genuine. Finally, on this issue, it has perhaps inadvertently escaped the learned Commissioner of Income-tax (DR)'s attention that the very same Assessing Officer has accepted the losses in the case of M/s. H.N.P. Traders arising from their mutual fund transactions as genuine. Therefore, even if the sister concern has got the benefit of set off of its loss against profit earned through the assessee, the entire transaction is evidently genuine and has been accepted as such by the same Assessing Officer. The assessee would like to draw attention of Hon'ble Bench to para....
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....ara 4.3 has made following submission: "4.3 All our purchases and sales conducted on principal to principal basis with concerns have been done at the market price on the relevant date as is also evident from the details submitted along with the down-loaded copy of the market rate from official website of www.bseindia.com. The Assessee further submits that during the course of Assessment Proceedings, Your Good selves has asked us to submit details of transactions carried out in particular date in tabular format with certain individuals/concerns along with market proof, which we submit along with letter as annexure which will further establish that transactions of purchase and sale carried out by Assessee are genuine transactions." The issue raised by Learned. CIT (DR) has been also dealt with in statement of facts filed before the CIT (A) wherein at page No. 17 assessee has explained as under: "The assessee vehemently objects to a patently wrong statement made by the Assessing Officer in stating that the annexure containing .the details called for by her in regard to transactions carried out on a par....
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....ble with the Department and they have not recorded any adverse finding against these facts. The attention of the Honourable Bench is drawn to page 7 and page No. 24 of the order of the Commissioner of Income-tax (Appeals) wherein it was clarified that this averment of the Assessing Officer was factually incorrect mainly because the Annexure containing details of market rates mentioned in the reply of the assessee dated 24/12/2007 was submitted the next day as it took considerable time to download the rates from the official website of the Mumbai Stock Exchange. (Submission dated 24th December, 2007, along with downloaded copy of the market rate for transactions submitted to Assessing Officer enclosed at page Nos. 20 to 166. (i) It was further clarified that insofar as the scrip-wise date-wise transaction details are concerned, the same was in any case available with Department in the seized documents and before dubbing the entire gamut of transactions in 4 years aggregating to approx. Rs. 25.67 crores as non-genuine merely on the ground that the assessee had not furnished the day rates of the securities traded, the same were also available to the Assessi....
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....e carried out at prevailing market rate, it cannot be considered as Sham Transactions. Reliance is placed on following decisions: (i) Mukesh R. Marolia v. Additional Commissioner of Income-tax [2006] 6 SOT 247 (MUM.) (ii) Mishapar Investments Ltd. v. ITO [2006] 8 SOT 532 (MUM.) (iii) ITO V/s. Ajay Shantilal Lalwani [2012] 23 taxmann.com 143 (Pune) (Copy of said decisions are enclosed at Page No. 167 to 229) 2.5 The learned Commissioner of Income-tax (DR) has flagged yet another issue vide para 2.5 of her written submission, i.e., that the assessee used to set off the transactions to the settle the accounts of sister concern merely by making book entries. In this regard, the kind attention of the Honourable Bench is drawn to our reply to the learned Commissioner of Income-tax (DR)'s averment at item 2 on page 5 above as also page 15-16 of the order of Commissioner of Income-tax (Appeals) containing our submissions on this issue. It is, once again, reiterated that in the scenario of day to day transactions, it is not possible to make bill by bill payment for payments and re....
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.... submissions made by the assessee successfully addresses these three vital aspects of genuineness in the contradiction of the averments made by the Assessing Officer. The attention of the Honourable Bench is drawn to pages 13-15 of the order of Commissioner of Income-tax (Appeals) where the assessee has respectfully submitted the decisions to counter the view expressed by the Honourable Apex Court in the case cited above. The assessee has placed reliance on the Apex Court's decision in the case of Azadi Bachhao Andolan 263 ITR 706 and the decision of Guahati High Court in the case of George Williamson (Assam Ltd) 265 ITR 626. The assessee would also like to draw the kind attention of the Honourable Bench to the quote from the report quoted by House of Lords in their decision in the case of Inland Revenue Commissioner v. Breben (76 ITR 436) reproduced on page 14-15 of the order of Commissioner of Income-tax(Appeals). To repeat: "When the question of carrying out a genuine commercial transaction, as this was, is reviewed, the fact that there are two ways of carrying it out - one by paying maximum amount of tax and the other by p....
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....e Central government, organize or assist in organizing or be a member of any stock exchange (other than a recognized stock exchange) for the purpose of assisting in, entering into or performing any contract in securities." For this purpose 'stock exchange' means - (a) anybody of individuals, whether incorporated or not, constituted before corporatization and demutualization under section 4A and 4B, or (b) a body corporate incorporated under the Companies Act, 1965 (1 of 1956) whether under a scheme of corporatization and demutualization or otherwise. For the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities". 5.3 From the very provisions of section 19(1) of Securities Contract (Regulation) Act, 1956 reproduced above, we find that the provisions of this section will apply if a person is organizing or is a Member of Stock Exchange (other than a recognized Stock Exchange) for the purpose of assisting in, entering into or performing any contracts in securitie....
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....nsferring taxable profit to other entities because in those other entities, profit was set off against loss incurred on dividend stripping. It is by now a settled position of law that dividend stripping was perfectly valid before insertion of section 94(7) in the IT Act w.e.f. AY 2002-03 and also after AY 2002-03, the same is valid if the acquisition of securities or unit was before the prescribed period before the record date and the sale of such securities and unit was also after the prescribed period from the record date w.e.f. AY 2005-06 as provided in sub-section 7 of section 94. This is not the case of AO that sub-section 7 of section 94 was violated by any of these persons to whom, as per the allegation of the AO, profit was allegedly transferred by the assessee-company. 5.5 This is also not the case of the AO that these "off market transactions" were settled without delivery. Only objection of the AO is this that such delivery or payment was not effected separately for each transaction but was effected after a period on cumulative basis. In our considered opinion, this objection is also without any basis. 5.6 The most important objection of the AO is that this "off ma....
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....ee of Rs. 256.88 is just close to the high price of this share on this date. Similarly, for remaining sale of ten various scripts also, the assessee had also submitted prices of the concerned share on 26/3/2004 and it is seen that almost in all the cases, the sale price adopted by the assessee is near to the high price of the concerned script on this date. When the sale price adopted by the assessee is close to the high price of the concerned share on the relevant date, it cannot be said that the transactions effected by the assessee is not at market rate, particularly, when the AO has not given even a single instance where the assessee has effected the transaction of purchase at a price higher than the high price of the concerned share on the relevant date or effected the sale of a share at a price below the low price of the concerned share on the relevant date. This allegation of the AO that "off market transactions" are not at market rate is baseless and is to be rejected. 5.7 There was one more contention of the assessee raised before the AO that in similar transactions, the assessee has earned profit also and even if the AO is making disallowance of the loss in "off market ....
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.... 6.2. While deciding the appeal of the Revenue in the case of Hina Nitin Parikh in ITA No.2449/Ahd/2008 for AY 2006-07 as per separate order pronounced on 17/5/2013, we have decided this issue in favour of assessee as per para-9 of the Tribunal's decision and for the sake of ready reference, the same is reproduced below:- "9. We have heard the rival submissions and perused the materials on record and gone through the orders of authorities below and the judgments cited by both the sides. Since this issue is now to be decided as per the only decision available of Hon'ble High Court i.e., of Karnataka High Court, the Tribunal's decisions cited by both the sides are not being discussed by us. In the judgment of Hon'ble Karnataka High Court rendered in the case of CCI Ltd. (supra) it was held that if the assessee is a dealer of shares and securities then it cannot be said that such purchases of shares and holding of shares were for the purpose of earning of dividend income and hence, expenditure incurred in acquiring cannot be u/s. 14A of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'). In the case, this is admitted position of fact that asses....