TMI Blog2008 (2) TMI 467X X X X Extracts X X X X X X X X Extracts X X X X ..... absence of word 'or' at the end of clauses (a) and (b) does not provide for the interpretation that sub-section (7) of section 94 apply, where transactions satisfy at least one condition. Rather, simple reading of the clauses even without the expression 'and' can lead only to one condition that all the three conditions cumulatively is required to be satisfied before invoking section 94(7). The use of words as 'such person', 'such unit', 'such date', 'such securities or units' in clauses (b) and (c) of section 94(7), also indicates that the three clauses have to be read together . Thus they advocate for cumulative application of conditions and not otherwise. In view of the CBDT Circular, which explains the Finance Act, 2001 is that all the conditions prescribed in section 94(7) are to be cumulatively satisfied and not otherwise. Therefore, we find no reason to interfere with the order of learned CIT(A) and the grounds raised by revenue in appeal, being devoid of merit, are rejected. In the result, the appeal by the revenue is dismissed. - Member(s) : N. V. VASUDEVAN., D. KARUNAKARA RAO. ORDER Per D. Karunakar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nifty Plan --------------------------------------------------------------- 3. Assessee earned dividend income as shown in the table above. However, the effect of the above transactions was capital loss of Rs. 1,88,47,816. The Assessing Officer has, however, not allowed the said lost which was incurred on sale of aforesaid units alleging the said transactions are hit by the provisions of section 94(7) of the Act. Section 94(7) of the Act as it stood prior to its amendment with effect from 1-4-2005 reads as follows:- "Where- (a) any person buys or acquires any securities or unit within a period of three months prior to the record date; (b) such person sells or transfers such securities or unit within a period of three 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." 4. According to the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than three months from the record date. The Assessing Officer was of the view that the provisions of section 94(7), will apply even if anyone of the condition is satisfied and that it was not necessary that all the three conditions have to be satisfied. The Assessing Officer held that this is a case of dividend stripping and managed for creation of short-term losses only for adjustment of losses against the other taxable profit, which is sought to be prohibited by the provisions of section 94(7) of the Act. 7. Aggrieved by the order of the Assessing Officer dated 30-12-2005, the assessee filed an appeal before the ld. Commissioner of Income-tax (Appeals). The ld. CIT(A) held that the provisions of section 94(7) will apply only when three conditions laid down therein are cumulatively satisfied. For this, the learned Commissioner of Income-tax (Appeals) relied on a Circular No. 14/2001 issued by the Central Board of Direct Taxes explaining the provisions of Finance Act, 2001 and the reasons for incorporating section 94(7) of the Act. The relevant part of the said Circular is reproduced hereunder for the sake of ready reference: "56. Measures to curb creation of short-term lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he three conditions as specified in the provisions of section 94(7). In this regard, he has taken us through the portions, mentioned in pages 12 and 13 of the CIT(A) order. At the end of his arguments, he has submitted that none of the transactions vis-a-vis five record dates, the conditions mentioned in clauses (a), (b) and (c) of section 94(7) of the Act are cumulatively satisfied. 10. We have heard the rival submissions, perused orders of the lower authorities and the documents filed before us. Table contains three transactions of purchases on 25-11-2003, 25-11-2003 and 16-12-2003. We find that the condition of three months before and after the record date for purchase and sale respectively have not been satisfied in all of the transactions cumulatively. 11. Order of the CIT(A) details the facts of the transactions showing as to how the conditions in section 94(7) are not fulfilled. Relevant parts are from pages 15 and 16 are as under:- "Now coming to the case of the appellant it is noticed that the mutual funds of Tata Index Fund Nifty Plan - Option A, were purchased on 25-11-2003 for Rs. 1,00,00,000. On the same date the dividend of Rs. 29,89,774 was received by the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e find that a plain reading of the provision of section 94(7) of the Act shows that it has neither used the expression 'or' nor the expression 'and'. The revenue wants to say that each of the conditions laid down in section 94(7) are independent and if an assessee satisfies anyone of the conditions, then he should be held to be covered within the mischief of the law. The provisions are ambiguous and obscure, as wwe have already noticed above In the circumstances, we would place a construction on the provisions of section 94(7) so as to place least restriction on an individual's (assessee) rights. We would, therefore, hold that the claim of the assessee that all the conditions laid down in clauses (a), (b), (c) have to be satisfied before the said provisions can be applied in a given case, should be accepted. 14. Therefore, the absence of word 'or' at the end of clauses (a) and (b) does not provide for the interpretation that sub-section (7) of section 94 apply, where transactions satisfy at least one condition. Rather, simple reading of the clauses even without the expression 'and' can lead only to one condition that all the three conditions cumulatively is required to be satisfi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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