AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (4) TMI 442
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....e, the Tribunal was right in holding that the transaction of purchase and sale of units had not taken place without appreciating the evidence produced and after holding that loss on sale of shares is an expenditure for earning dividend income." 2. The appellant/assessee is engaged in the business of trading in stocks and shares. The appellant/assessee, for the assessment year 2001- 2002, filed its return of income on 22.10.01 declaring a loss of Rs. 43,67,910/-. The return was processed under Section 143 (1) of the Income Tax Act (for short 'Act') on 17.10.02. Notice under Section 142 (1) was issued calling for certain information and the same was furnished. In the return, the assessee claimed dividend of Rs. 98,47,325/- as exempt under Section 10 (33) of the Act. The assessee received dividends from various companies on mutual fund units. The dividend includes dividend of Rs. 40,22,988/- received from Sun F&C Mutual Fund units and dividend of Rs. 58,06,451/- received from J.M. Mutual Fund units along with other dividends, which were claimed to be exempt under Section 10 (33) of the Act. Notice was issued on the assessee and in response to the said notice, particulars soug....
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....e alleged investment. Assessee claims to have paid an interest of Rs. 28,110 towards the loan. The details of expenditure or loss claimed by assessee is worked out as under:- Expenditure/Loss claimed - Sun F&C Mutual Fund Units - Open Dividend Reinvested Total expenditure incurred on purchase of 1445233.265 units Purchase price 1149425.287 units Rs.2,00,00,000 Less : Total consideration received (excluding dividend) Rs.1,56,70,947 Rs. 43,29,053 Add : Interest Paid Rs. 28,110 Total expenditure claimed Rs. 43,57,163 The total consideration realized on sale of these units Units @ 295807.978 13.44 1149425.287 13.44 Rs. 39,75,659 Rs.1,54,48,276 Redemption Amount Rs.1,94,23,935 Less : Dividend Received Rs. 40,22,988 Add : Incentive Received Rs. 2,70,000 Total consideration received Rs.1,56,70,947 Assessee neither received cash of Rs. 2 Cr., nor the redemption amount of Rs. 1.54 Cr., excluding dividend. Nor the dividend of Rs. 40,22,988 was received by the assessee though assessee was not involved in the transaction, it claimed to have received dividend of Rs. 40,22,988/-. Assessee also claimed the expenditure/loss of Rs. 4....
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....rior 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 unit received or receivable by such person is exempt, then, the loss, if any, arising to him on account of 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 purposes of computing his income chargeable to tax." 8. From a reading of the above Section, it is clear that sub-section (7) to Section 94 was inserted to clarify the position as to how the computation of income to be made for the purpose of charging tax in case of purchase and sale of securities or units within a specified period. The purport of insertion of sub-section (7) to Section 94 is only to curb dividend stripping, which is used as a colourable device. The said Section 94 (7) having come into effect from 1.4.2002, the same will be enforceable only from the assessment year 2002-2003 onwards. In the present case, the assessment year....
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....art of the total income under the Act against the taxable income (see Circular No. 14 of 2001 dated 22.11.2001). In other words, Section 14A clarifies that expenses incurred can be allowed only to the extent they are relatable to the earning of taxable income. In many cases the nature of expenses incurred by the assessee may be relatable partly to the exempt income and partly to the taxable income. In the absence of Section 14A, the expenditure incurred in respect of exempt income was being claimed against taxable income. The mandate of Section 14A is clear. It desires to curb the practice to claim deduction of expenses incurred in relation to exempt income against taxable income and at the same time avail the tax incentive by way of exemption of exempt income without making any apportionment of expenses incurred in relation to exempt income. The basic reason for insertion of Section 14A is that certain incomes are not includible while computing total income as these are exempt under certain provisions of the Act. In the past, there have been cases in which deduction has been sought in respect of such incomes which in effect would mean that tax incentives to certain incomes was bei....
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....es of accountancy, a pay-back in the strict sense does not constitute an "expenditure" as it does not impact the Profit & Loss Account. Pay-back or return of investment will impact the balance-sheet whereas return on investment will impact the Profit & Loss Account. Cost of acquisition of an asset impacts the balance sheet. Return of investment brings down the cost. It will not increase the expenditure. Hence, expenditure, return on investment, return of investment and cost of acquisition are distinct concepts. Therefore, one needs to read the words "expenditure incurred" in Section 14A in the context of the scheme of the Act and, if so read, it is clear that it disallows certain expenditures incurred to earn exempt income from being deducted from other income which is includible in the "total income" for the purpose of chargeability to tax. As stated above, the scheme of Sections 30 to 37 is that profits and gains must be computed subject to certain allowances for deductions/ expenditure. The charge is not on gross receipts, it is on profits and gains. Profits have to be computed after deducting losses and expenses incurred for business. A deduction for expenditure or loss which i....