TMI Blog2007 (1) TMI 599X X X X Extracts X X X X X X X X Extracts X X X X ..... ain on sale of shares. According to the Assessing Officer, the assessee, in order to evade payment of taxes on the aforesaid capital gains, entered into a sham transaction with M/s. JM Mutual Fund by which he, without making any substantial investments, had earned tax-free dividend of ₹ 29,03,326/- and also allegedly suffered short term capital loss of ₹ 30,49,194/- for setting off the same against the short-term capital gains arising on sale of shares so as to neutralize the tax payable on the aforesaid capital gains. The modus operandi of the assessee in this behalf has been elaborately explained in the assessment order as also in the order of the learned CIT(A). The Assessing Officer, by his well-reasoned assessment order has held the aforesaid transaction to be sham and thus rejected the claim of the assessee for setting off the short-term capital loss against short-term capital gains. 3. As explained in the assessment Order, the assessee had reportedly purchased 6,45,161.89 units (cum dividend) of JM Mutual Fund on 9.2.2001 for a sum of ₹ 1 crore out of which a sum of ₹ 20 lakhs alone was contributed by the assessee out of his own savings and the bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tood supported by the decision of the Hon'ble P and H High Court in Vineet Jain v. CIT, (2006) 205 CTR (PandH) 92. He submitted that the aforesaid decision was squarely applicable to the facts of the case. He contended that the decisions rendered by a High Court regardless of whether it was jurisdictional or non-jurisdictional, was entitled to higher weight and greater respect over the orders of the Tribunal and that this was more so when no other High Court had taken a contrary view. 7. We have heard the parties and considered their submissions. On the facts and in the circumstances of the case, we are quite satisfied that this is a case of colourable device adopted by the assessee by which he claims to have earned tax-free dividend of about ₹ 29 lakhs and suffered loss of about ₹ 30 lakhs in order to set off the said loss against capital gain on sale of shares. Purchase and sale/redemption of units have been completed in just four days including the receipt of dividend and passing of the entries in the account with the Bank. Without making any substantial investment (except ₹ 20 lakhs) the assessee could get tax-free dividend of more than ₹ 29 lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of business or investment. On the facts and circumstances of the case and in law we are in agreement with the learned CIT(A) that the loss claimed by the assessee is not genuine and therefore the order passed by him in this behalf is confirmed. 8. At the time of hearing, the ld. Authorised Representative for the assessee has placed reliance on the decision of a Special Bench of this Tribunal in Wallfort Shares and Stock Brokers Ltd., 96 ITD 1 (3B). The ld. Departmental Representative, on the other hand, has relied upon the decision of the Hon'ble Punjab and Haryana High Court in Vineet Jain (2006) 205 CTR (PandH) 92 in which the Hon'ble High Court, on identical fact-situation, has upheld the order of the Tribunal deciding the issue in favour of the Revenue on the ground that the dividend stripping transactions were not genuine. Perusal of the decision in Wallfort Shares and Stock Brokers Ltd. shows that the said decision is applicable where the dividend stripping transaction is genuine and not to a non-genuine or sham transaction Decisions are rendered in the context of a given fact situation. In taking this view, we are ably guided by the following observation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re to add and as was said in Cassell and Co. Ltd. v. Broome (1972) AC 1027 (HL), we hope it will never he necessary for us to say so again that in the hierarchical system of courts which exists in our country, it is necessary for each lower tier , including the High Court, to accept loyally the decisions of the higher tiers . It is inevitable in a hierarchical system of courts that there are decisions of the supreme appellate tribunal which do not attract the unanimous approval of all members of the judiciary ...... But the judicial system only works if some one is allowed to have the last word and that last word, once spoken, is loyally accepted (See observations of Lord Hailsham and Lord Diplock in Broome v. Cassell). The better wisdom of the court below must yield to the higher wisdom of the court above. That is the strength of the hierarchical judicial system. In cassell v. Broome (1972) AC 1027, commenting on the Court of Appeal's comment that Rookes v. Barnard (1964) AC 1129, was rendered per incuriam, Lord Diplock observed is (p.1131). The Court of Appeal found themselves able to disregard the decision of this House in Rookes v. Barnard by applying to it the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the States Reorganisation Act, it was observed that there was nothing in the said Act or any other law which exalts the ratio of those decisions to the status of a binding law nor could the ratio decidendi of those decisions be perpetuated by invoking the doctrine of state decisis. The doctrine of state decisis cannot be stretched that far as to make the decision of one High Court a binding precedent for the other. This doctrine is applicable only to different Benches of the same High Court. It has been further held; (d) The decision of one High Court is neither binding precedent for another High Court nor for courts or Tribunals outside its own territorial jurisdiction. It is well settled that the decision of a High Court will have the force of binding precedent only in the State or territories on which the court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at best, have only persuasive effect. By no amount of stretching of the doctrine of stare decisis, can judgments of one High Court be given the status of a binding precedent so far as other High Courts or Courts or Tribunals within their territorial jurisdiction ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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