2014 (5) TMI 554

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....assessee filed a return nor he complied with the notices issued u/s 142(1) of the Act subsequently. Therefore, the Assessing Officer finally issued a show cause notice u/s 144 of the Act on 14-7-2009 proposing to complete the assesment to the best of his judgment. Even to this notice also, there was no response by the assessee. Therefore, the Assessing Officer proceeded to compete the assessment ex parte u/s 144 of the Act. The Assessing Officer noticed that the assessee had declared capital loss both long term and short term of Rs.1,60,58,190/- He further noted that the short term capital loss of Rs.12,33,988 comprised of the following items:- ii) Short term capital loss on sale/redemption of units of MF Rs.43,56,961 ii) Short term capital gain against sale/redemption of units of MF Rs.31,22,974 He further noted that as per information available on record, the assessee claimed exempt income being dividend from units of Mutual Fund at Rs.95,84,031/- u/s 10(34) of the Act. The Assessing Officer on verifying the details such as date of purchase, date of sale and dividend received of short term capital gain amounting to Rs.43,56,961/- noticed that part of the loss is not allo....

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....asic objectives behind introduction of such section in the statute, I am of the view that even in such instances, since the dividend income shown from such units is claimed exempt from tax, the claim of loss to the extent of dividend received, cannot be allowed deduction. Even though vide such amendment made vide Finance Act, 2004, w.e.f. 1-4- 2005, when such period has been extended to 9 months, it cannot be said that, if such period i.e., from the record date to the date of redemption/sale of the unit, exceeds 3 months during F.Y.2003-04, the loss arising from such transactions cannot be disallowed u/s 94(7). When the primary objective behind introduction of such section 94(7) has been not to allow claim of loss separately, while at the same time claiming exemption from tax of the dividend income received from such units, the amount of loss referred to by the Assessing Officer in respect of those four equity funds/company at sl.no.5,7,8 and 11, in my considered view, cannot be allowed deduction. 5.5 Further, it is pertinent to mention here that in case of CIT vs. Walfort Share and Stock Brokers Pvt. Ltd., (2010) 326 ITR 1, the Hon'ble Supreme Court, while interpreting the scop....

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....an three months by applying the amended provisions of section 94(7) of the Act which came into the statute w.e.f. 1/4/2005. The learned AR submitted that since the amended provisions would be applicable prospectively for the assessment year i.e., 2005-06, it cannot be made applicable to the impugned assessment year 2004-05. In support of such contention, the learned AR relied upon a decision of Income-tax Appellate Tribunal, Amritsar Bench in case of Suri Sons vs. Addl.CIT (124 TTJ 800). 6. On the other hand, learned DR relied on the orders of the revenue authorities. 7. We have heard the submission of the parties, perused the orders of the revenue authorities as well as the other materials on record. The issue in dispute before us is limited to the fact as to whether the amended provision of section 94(7) incorporated in the statute w.e.f. 1-4-2005 would be applicable to the impugned assessment year for disallowing the claim of loss even in respect of units held for more than three months. As we have stated earlier, the Assessing Officer in his remand report dated 11-5-2011, referred to in para 4.8 of the CIT (A), has accepted that in case of equity funds mentioned in srl. N....

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....on, if units were sold within three months of the record date, then loss claimed to the extent of dividend income would be disallowed. Similarly in respect of units purchased prior to 3 months from the record date the provision of sec. 94(7) will not be applicable. However, as per the amended provisions if units are sold within the period of 9 months from the record date, then loss to the extent of dividend income will be disallowed. Therefore, as per amended provision the restriction of three month has been extended to 9 months. Now the issue before us is whether the amended provision brought to the statute w.e.f. 1-4-2005 would be applicable to the assessment year under consideration i.e., assessment year 2004-05. It is the contention of learned AR that since it has been introduced to the statute w.e.f. 1-4-2005 it will not be applicable to the impugned assessment year. In this context, it is to be noted that the Income-tax Appellate Tribunal, Amritsar Bench in case of Suri Sons vs. Addl. CIT (supra) has categorically held that the amended provision u/s 94(7) as brought into the statute w.e.f. 1-4-2005 would apply prospectively w.e.f assessment year 2005-06. The Incometax Appella....