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2015 (4) TMI 442 - HC - Income TaxBusiness loss incurred in the course of purchase and sale of mutual fund units - whether is an expenditure incurred for earning exempt dividend income and hence not allowable under Section 14-A ? - whether 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? - whether Section 14-A of the Act is invokable by the Department in the transaction in issue? Held that:- In decision of Commissioner of Income Tax - Vs - Walfort Share & Stock Brokers P. Ltd. [2010 (7) TMI 15 - SUPREME COURT] wherein identical issue fell for consideration and the Supreme Court while negativing the stand of the Department that the transaction in the said case would fall under Section 14-A, distinguished the stand of the Department, in bringing the case under Section 14-A holding that the loss in the sale of units could be disallowed on the ground that the impugned transaction was a transaction of dividend stripping and, therefore, it was alleged to be a colourable device. Return of investment cannot be construed to mean "expenditure" and if it is construed to mean "expenditure" in the sense of physical spending still the expenditure was not such as could be claimed as an "allowance" against the profits of the relevant accounting year under Sections 30 to 37 of the Act and, therefore, Section 14A cannot be invoked. The Supreme Court, in the above decision, further fortified this issue by stating that such a transaction was curbed by the introduction of Section 94 (7) in Finance Act, 2001 with effect from 1.4.02 relevant to the assessment year 2002-2003. In view of the abovesaid decision of the Supreme Court, the plea of the Department that the transaction would attract Section 14-A of the Act fails and, this Court holds that the assessee is entitled to claim the amount as business loss during the assessment year in question. - Appeals are allowed setting aside the order of the Tribunal - Decided in favour of assessee.
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