TMI Blog2009 (2) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... ile Ltd. [2008] 304 ITR (AT) 36 ; [2008] 116 TTJ (Del) 784 : [2008] 9 DTR (Del) 617 pertaining to the assessment year 2004-05. The only issue which arose for consideration was whether the capital loss incurred by the assessee on redemption of units of mutual funds was liable for disallowance in view of the provisions of section 94(7) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). 2. In order to appreciate the issue which had arisen before the authorities below the following brief facts are required to be noted. 3. The assessee, which is a public limited company, is engaged in the busi- ness of sale/purchase and trade in stock/units and units of mutual funds. During the relevant assessment year, the assessee purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchaser. 4. In the aforesaid circumstances the Assessing Officer thus invoked the provisions of section 94(7) of the Act which was introduced precisely for this purpose by the Legislature, and disallowed the capital loss incurred by the assessee on redemption of the said units. The assessee being aggrieved by the order passed by the Assessing Officer carried the matter in appeal to the Commissioner of Income-tax (Appeals) (hereinafter referred to as "the CIT(A)"). Before the Commissioner of Income-tax (Appeals), the assessee contended that the provisions of section 94(7) of the Act as it stood at the relevant time, that is, prior to its amendment with effect from April 1, 2005 were not attracted to the instant case on account of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Finance Act, 2001, with effect from April 1, 2002. In respect of transactions prior to the insertion of this section this court in the case of CIT v. Vikram Aditya and Associates (P) Ltd. [2006] 287 ITR 268 (Delhi) ; [2006] 204 CTR (Del) 238, has sustained such like transactions. In the instant case, we are concerned with the provisions of section 94(7) of the Act as it stood prior to the amendment carried out by the Finance Act (No. 2), 2004, with effect from April 1, 2005. The relevant provision 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fund Date of Purchase Purchase Amount (in Rs.) Record date of dividend Divident amount(in Rs.) Date of redemption 1 Tata Index Fund Nifty Plan Option-A 25-11-2003 1,00,00,000 25-11-2003 (1st divi dend) and 3-3-2004 (next divi dend) 29,89,774 and 9,96,591 9-3-2004 2 Tata Index Fund Nifty Plan Option-A 25-11-2003 1,50,00,000 25-11-2003 (1st divi dend) and 3-3-2004 (next divi dend) 44,84,662 and 14,94,887 9-3-2004 3 IL and FS Index Fund Nifty Plan 16-12-2003 4,00,00,000 16-12-2003 1,18,35,408 17-3-2004 9. A perusal of the Table would show that the assessee during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , was beyond the statutory period of three months from the record date, which was March 17, 2004. 10. In the circumstances it is clear that the aforesaid transactions are outside the net of section 94(7) of the Act. The record date is really the median line for the statutory period prescribed both for purchase and sale which is three months on either side of the record date. It is only when the trans- action is in relation to a security or a unit in respect of which the dividend or income received is exempt and it is within statutory period as prescribed in clauses (a) and (b) of sub-section (7) of section 94 that the loss, if any, would stand disallowed to the extent of the dividend or income received or receivable on such securities or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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