2010 (10) TMI 372 - AT - Income Tax

Disallowance of loss - The restriction of loss to the extent of divided - Held that - there is no restriction that dividend or income on such securities or units should be received in a particular year. The restriction is that such dividend or income should be exempt and therefore there is no force in the argument that since the dividend was received in the earlier therefore this provision cannot be applied. - the units have been redeemed therefore same would definitely constitute transfer for the purpose of sec.94(7) - Decided against the assessee.

Summary

Issues:
1. Rejection of adjournment application due to repeated requests by the assessee.
2. Application of provisions of section 94(7) for setting off dividend income against short term capital loss.

Issue 1: Rejection of adjournment application
The Appellate Tribunal rejected an adjournment application by the assessee on the grounds that multiple adjournments had already been granted in the past. The tribunal noted that the reason for the adjournment was the unavailability of the person handling the tax matters, but since adjournments had been granted on various pretexts previously, the application was rejected.

Issue 2: Application of provisions of section 94(7)
The assessee raised a ground challenging the application of section 94(7) by the CIT(A) in setting off dividend income against short term capital loss. The assessee argued that since the dividend was received in a different financial year from when the loss occurred, the provision should not be applicable. However, the CIT(A) held that section 94(7) does not require the dividend to be earned in the same year, but only that it should be exempt. The CIT(A) also explained that the definition of transfer under section 2(47) includes redemption of units, which would constitute a transfer. The tribunal further cited a Supreme Court decision and a Tribunal decision to support the application of section 94(7) in similar cases.

In conclusion, the Appellate Tribunal upheld the decision of the CIT(A) regarding the application of section 94(7) to set off dividend income against short term capital loss. The tribunal found no merit in the argument that the provision should not apply due to the timing of dividend receipt and loss occurrence. Citing relevant legal precedents, the tribunal determined that redemption of units constitutes a transfer under the law, supporting the disallowance of the loss to the extent of dividend income. The appeal was ultimately dismissed in favor of the decision made by the CIT(A).