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2016 (1) TMI 122 - ITAT BANGALORE

2016 (1) TMI 122 - ITAT BANGALORE - TMI - Disallowance of short- term capital loss - whether loss would have been allowed if the sale were made after nine months as against the applicable law of three months in the month of June 2004 Held that:- There is no dispute that prior to amendment by Finance Act 2004 in the provisions of sec.94(7) of the Act, loss if any, arising from the purchase and sale of securities or units acquired within a period of three months prior to record date and unsold wit .....

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eriod of 9 months after such record date, then the loss if any arising from such sale/purchase shall be ignored to the extent of the amount of dividend or income received or receivable which is exempt as per the provisions of the Act.

The transaction in question was completed prior to the bill proposing the amendment to be introduced then it is not disputed that the assessee could not visualize the subsequent amendment in the provisions of sec.94(7) and enhancement of tax liability as .....

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ity can be imputed on the transaction of sale of M.F.units completed prior to the introduction of bil proposing the amendment. Hence, the addition made by AO by invoking the provision of section 94(7) is deleted. - Decided in favour of assessee - ITA No.1287/Bang/2014 - Dated:- 13-11-2015 - SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER For The Appellant : Shri Mukesh Jain, CA. For The Respondent : Dr. P.V.Pradeep Kumar, Addl.CIT(DR) ORDER Per VIJAY PAL RAO, JM: .....

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ing the short- term capital loss incurred and concluding that the loss would have been allowed if the sale were made after nine months as against the applicable law of three months in the month of June 2004 and the learned Commissioner of Income Tax (Appeals)-III has concurred the same view. 3. The learned Assistant Commissioner of Income Tax has failed to appreciate that the amendment to the section 94 (7) was made after the redemption of units and the Commissioner of Income tax has not appreci .....

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bove and on other grounds to be adduced at time of hearing. it is requested that the impugned order be i. quashed or at least the additions made be deleted, ii. the interest charged under section 234 B be deleted 3. The assessee is an individual and engaged in the transaction of purchase and sale of shares and mutual funds. The assessee filed its return of income on 6/12/2005 declaring income of ₹ 14,03,668/-. During the period relevant to the assessment year under consideration, the asses .....

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vestments in mutual funds, investment in HSBC and Templeton Growth Fund is not covered under the provisions of 94(7)of the Act as no dividend was declared. Therefore, the AO excluded these two transactions from the purview of sec.94(7) and proceeded for dividend scripting in respect of three remaining transactions viz., Birla Yield Plus, Chola triple ace and Templeton India Growth. The AO held that as per sec.94(7) when the units were sold within 9 months of the record date and the assessee rece .....

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9 months of the record date and further the assessee has received dividend from these three investments. 5. Aggrieved by the action of the AO, the assessee filed appeal before the CIT(A) and submitted that sale in respect of all these transactions took place in the month of June 2004 whereas the period of 9 months has been brought to the provisions of sec.94(7) by the Finance Act,2004 w.e.f. 01/04/2005. The assessee contended that on the date of sale of these investments, the provisions were in .....

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ee and held that the provisions of sec.94(7)(b)(ii) of the Act is squarely applicable to the case of the assessee. She has fortified her view by the judgment of the Hon ble Supreme Court in the case of Karimthanavi Tea Estates Ltd. vs. State of Kerala 60 ITR 262. 6. Before us, learned AR of the assessee submitted that the liability of the tax was not foreseeable at the time of transaction carried out by the assessee because the amendment in the provisions of sec.94(7) was brought into statute su .....

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ecision of the Hon ble Gujarat High Court in the case of Nirmal Textiles Ltd. (224 ITR 378) and submitted that the Hon ble High Court has held that capital gains is not income which accrues from day to-day during the previous year but arises at the fixed point of time i.e. on the date of transfer. Therefore, for tax on capital gains, law to be applied is the law on the date of transfer. He further submitted that harmonious construction of the provisions is required to be considered for the purpo .....

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on the orders of the authorities below and submitted that when the provision is applicable w.e.f. 1/4/2005 then the provisions which existed on the beginning of the assessment year under consideration is applicable for the transaction carried out during the previous year relevant to the assessment year under consideration. 8. We have considered the rival submissions as well as the relevant material on record. There is no dispute that prior to amendment by Finance Act 2004 in the provisions of se .....

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per amended provisions of sec.94(7), if any person buys or requires any unit within a period of 3 months prior to recorded date and sales/transfers the same within a period of 9 months after such record date, then the loss if any arising from such sale/purchase shall be ignored to the extent of the amount of dividend or income received or receivable which is exempt as per the provisions of the Act. Therefore, prior to introduction of the Finance Act, 2004, no assessee could foresee that the loss .....

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per the existing provisions of law and there is no reason to foresee any change in law which enhances the tax liability of the assessee in respect of the transaction completed then such subsequent amendment in the provisions of the Act cannot be applied on such transactions which are completed even prior to the said amendment was proposed. The Hon ble Gujarat High Court in the case of Nirmal Textiles Ltd. (supra) has observed that the liability of tax on capital gain arises on a fixed point of .....

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he assessment. Liability does not depend on assessment, that ex hypothesi has already been fixed. But the assessment particularizes the exact sum which a person liable has to pay. Lastly, come the methods of recovery if the person taxed does not voluntarily pay. The dictum of Lord Dunedin in Whitney vs. IRC (1926) Appeal Cases 37 has been quoted time and again by the Federal Court and the Supreme Court of India in various decisions and does not need elaboration. The other principle in the presen .....

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ned with reference to law as on the date on the occurrence of event which creates or attracts the liability to tax, unless the statute by express or by necessary implication provides otherwise. In computing such liability what is to be excluded, or included or conditions or allowances of deductions or exemptions and like matters of law as it exists on 1st of April of the relevant assessment year govern the assessment. 13. Applying the aforesaid principles, if we view the facts of the present cas .....

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