TMI Blog2010 (11) TMI 710X X X X Extracts X X X X X X X X Extracts X X X X ..... a), (b) and (c) thereon must be cumulatively satisfied – Accordingly the appeal is dismissed - ITA NO. 6924/MUM/2008 - - - Dated:- 24-11-2010 - R.V. EASWAR, PRESIDENT AND B. RAMAKOTAIAH, ACCOUNTANT MEMBER ORDER Per B. Ramakotaiah, Accountant Member This appeal by the Revenue is against the order of the CIT(A) XXI, Mumbai dated 30.09.2008. 2. Revenue has raised the following ground on two issues: - "1. (i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 13,39,252 made by the AO on account of income from undisclosed sources. (ii) the Ld. CIT(A) erred in allowing the Short-Term Capital Loss of Rs.3,85,587 which was disallowed by the AO." 3. Briefly stated, the assessee is an individual, filed return of income declaring total income of Rs. 5,93,930 from income from remuneration, house property, capital gain and other sources. Income from partnership has been claimed as exempt. There are two issues raised in the appeal. The first one being the issue of gift received. In the course of scrutiny assessment the A.O. noticed that the assessee has credited an amount of Rs. 13,39,252 in the Capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue. 6. The learned D.R. explained the facts of the case on both the issues and took us through the orders of the A.O. to submit that the CIT(A) was wrong in allowing the claims of the assessee. It was his submission that the assessee has not furnished any evidence with reference to the creditworthiness of the donor with reference to the gift received and further he analysed the provisions of section 94(7) to submit that provisions of the said section are applicable to the facts of assessee s case and CIT(A) has wrongly given relief to the assessee. 7. The learned counsel in reply submitted that assessee s brother-in-law has migrated to USA as early as 1982 and has the capacity to invest in State Bank of India bond issued in October 1998 of US$ 20000 and also has the capacity to hold on till maturity in 2003 and just before maturity these were gifted to the assessee and the assessee redeemed them in the State Bank of India and furnished all the evidences with reference to the genuineness of the gift transaction and its redemption which was credited to capital account. He also relied on the decision of the Hon'ble High Court of Allahabad in the case of Kanchan Singh v. CIT 174 Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature encashment of the RIBs in Non-Repatriable Indian Rupees by holders/donees/survivors, the proceeds in the hands of the holders/donees/survivors will be free from any tax in India. On the basis of this assurance given at the time of issuance of RIBs about the tax treatment, the CIT(A) has correctly come to the conclusion that the amount can not be treated as unexplained income when the source was maturity proceeds of the RIBs and accordingly, he deleted the addition. Eventhough the learned D.R. vehemently argued that examination of creditworthiness is an important aspect in accepting the claim of gift, we are of the opinion that the A.O. has wrongly considered the amount for addition under section 68. It is not the case of the A.O. that the assessee has routed the amount through his brother-in-law. The investment was made by the said Shri Vijay Vora way back in October 1998 in USA. Just because the bonds were gifted to the assessee before maturity, it cannot be stated that the transaction is not a genuine one warranting an addition under section 68. Provisions of section 68 require examination of nature of source of the credit and the assessee has discharged his burden of expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 211.238 12. A perusal of the above statement indicates that the said Mutual Funds have declared two Record Dates and since the investments made in the said Mutual Funds/sale made were within three months period from the second Record Date AO was of the opinion that the provisions of section 94(7) are applicable. It was contended before the CIT(A) that as far as investment in Sundaram Select Midcap-Dividend was concerned the provisions were not applicable either way. The purchase of mutual fund on 19.11. 2003 was more than three months, if considered with the second date 27.02.04, hence gets out of the provisions of section 94(7). If one consider the first Record Date 21.11.03 then the sale was after three months period as it was 08.03.04. Accordingly provisions of section 94(7) are not applicable taking either of the record dates as basis. With reference to other two investments, it was assessee s contention that the Record Date with reference to the purchase alone can be considered as the assessee would not be in the knowledge of second Record Date for declaration of dividend which happened subsequent to the date of purchase and so provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s considered the second Record Date when the dividend was declared again for considering the applicability of provisions of section 97(7). The extent of loss disallowed was also not correct. As per the provision only loss to the extent of dividend received should only be disallowed where as the AO disallowed the entire loss claimed. In our opinion the Record Date, with which the assessee has purchased the units in mutual fund can only taken into consideration for examining whether provisions of section 94(7) are satisfied. If the first Record Date alone was considered, assessee has sold all the units after keeping it for more than three months and accordingly provisions of section 94(7) are not attracted. In our view the CIT(A) has correctly excluded the second Record Date as the provisions must be complied only with reference to the first Record Date immediately following the purchase of units. Any other interpretation would result in attracting clause (b) or section 94(7) even in a case where the units are held for few years but was sold with three months of the last Record Date on which dividend was declared. In view of this, we are of the opinion that the CIT(A) has correctly i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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