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Commissioner of Income Tax-8 Versus Versus M/s. Hertz Chemicals Ltd.

2016 (5) TMI 269 - BOMBAY HIGH COURT

Addition of speculation loss - amounts received from mutual funds/bonds as business income - Revenue contended that Unit Trust of India is a deemed company and income from units is also a deemed dividend therefore the units have to be considered to be shares covered by Section 73 - Held that:- The Apex Court in Apollo Tyres (2002 (5) TMI 5 - SUPREME Court ) negatived the above submission on behalf of the Revenue holding that the provisions of UTI Act creates a fiction to make Unit Trust of India .....

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in Apollo Tyres Ltd. (supra) would cover the controversy arising for our consideration as units are not shares and therefore dealing in units cannot be considered to be shares. - Decided in favour of assessee - Income Tax Appeal No. 2368 of 2013 - Dated:- 25-4-2016 - M. S. Sanklecha And A. K. Menon, JJ. For the Appellant : Mr. Arvind Pinto For the Respondent : Mr. Nitesh Joshi a/w Mr. Jas Sanghvi & Aansh Desai i/b. PDS Legal ORDER P. C. 1. This Appeal under Section 260A of the Income Tax Act .....

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05 the respondent-assessee offered its profit/loss from share trading as income from speculation for purpose of Section 73 of the Act and amounts received from mutual funds/bonds as business income. The bifurcation was as under: Particulars Shares Mutual Funds/Bonds Opening Stock Add : Purchases during the year Less : Closing stock Less : Sales Profit/Loss 10,182,418 79,605,105 89,787,523 24,770,128 65,017,395 72,240,362 7,222,967 56,736,083 1,252,428,221 1,309,164,304 220,934,501 1,088,229,803 .....

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ct assessment year was shown as ₹ 1.01 crores and the balance of ₹ 5.67 crores was shown as opening stock of mutual funds/bonds. This was done by the respondentassessee in view of the decision of the Apex Court in Apollo Tyres Ltd. vs. CIT 255 ITR 273 rendered on 2nd May, 2002. However, the Assessing Officer held that the closing stock on the last day of the preceding assessment year should be the opening stock for the subject assessment year thus the bifurcation is not permissible. .....

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Apex Court in Apollo Tyres Ltd. (supra). In the above decision, the Apex Court held that business of buying and selling of units of Unit Trust of India would not amount to speculation business. Therefore, the addition made by the Assessing Officer of ₹ 4.95 crores was deleted. 6. Being aggrieved, the Revenue carried the issue in appeal to the Tribunal. The impugned order dated 25th April, 2016 of the Tribunal in turn also placed reliance upon the decision of Apex Court in Apollo Tryes Ltd. .....

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ing to him the decision of the Supreme Court in Apollo Tyres (supra) would not have application to units of mutual funds and bonds other then those of Unit Trust of India. Further reliance is placed upon a decision of the Delhi High Court in CIT Vs. DLF Commercial Developers Limited (Income Tax Appeal No.94 of 2013) rendered on 11th July, 2013 wherein the Delhi High Court held that the derivatives would be considered as shares under Section 73 of the Act in view of the fact that their value depe .....

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ection 32(3) of the Unit Trust of India Act which read as follows: (3) Subject to the foregoing subsections, for the purposes of (a) any distribution of income received by a unitholder from the trust shall be deemed to be his income by way of dividends; and (b) the trust shall be deemed to be a company. 9. On the basis of the above provision the Revenue contended that by virtue of the above definition the Unit Trust of India is a deemed company and income from units is also a deemed dividend. Th .....

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