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TMI Blog2018 (12) TMI 1330X X X X Extracts X X X X X X X X Extracts X X X X ..... 4(8) retrospective in operation? (ii) Whether the Income Tax Appellate Tribunal committed an error in law in holding that Section 94(8) is to operate retrospectively when the statute did not expressly so declare or impliedly so refer?" 3. Though we find that there are two substantial questions of law which have been admitted essentially, the only issue to be decided is whether Section 94(8) of the Act is retrospective in operation or prospective. 4. Mr.Karthik Ranganathan, learned Senior Standing Counsel appearing for the respondent/Revenue contended that the Revenue should be permitted to canvas other points other than the substantial questions of law, which have been entertained by this Court. 5. It is the submission of the learned counsel that the Assessing Officer while completing the assessment, vide order dated 27.12.2006, had taken a decision without reference to sub-Section (8) of Section 94, which was inserted with effect from 1st April 2005 by the Finance (No.2) Act, 2004 and therefore, the Revenue should be permitted to sustain the assessment order on certain other grounds. In this regard, the learned counsel referred to the decision of the Hon'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bond Saver against other Short Term Capital Gains. 9. The assessee contended that in case of shares, the bonus shares are distributed out of the benefit earned during the year and then, when there are no profits, bonus shares can be allotted out of accumulated results. However, at the time of purchase of shares, the primary/secondary market, there is no guarantee when bonus shares will be allotted at a later date. The Assessing Officer disagreed with the contentions raised by the assessee and held that, for the purpose of computation of capital gains/loss on purchase and sale of units within a short period, the purchase cost shall be deemed to include the cost of the unit "ex-bonus" plus the cost of bonus units and only the purchase cost of the units 'ex-bonus' shall have to be taken into consideration in computing the loss, if any, on transfer, under the head 'Capital gains'. Before rendering the above finding, the Assessing Officer noted Section 94(8) of the Act, which was inserted with effect from 1st April, 2005 and qualified his finding that, even in the absence of Section 94(8), for the reasons assigned by him, the assessee's case cannot be accepted. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empt dividend income shall be ignored for the purpose of computing his income chargeable to tax. Sub-clause (a) seeks to amend sub-section (7) of the aforesaid section so as to extend the time, limit in relation to sale of units from three months to nine months after record date. Sub-clause (b) seeks to insert a new sub-section (8) in the aforesaid section so as to provide that, where a person buys or acquires any units within a period of three months prior to the record date and he is allotted or is entitled to additional units on the basis of such units without making any payment, and thereafter sells all or any of such units while continuing to hold all or any of the additional units within a period of nine months after such date, then, the loss, if any, arising to him on account of such purchase and sale of units shall be ignored for the purposes of computing his income chargeable to tax and the amount of loss so ignored shall, notwithstanding anything contained in any other provision of the Incometax Act, be deemed to be the cost of purchase of acquisition of such additional units as are held by him on the date of such sale or transfer. Under the existing provisions of cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... months to nine months after record date and this amendment was brought to sub-Section (7) of Section 94 and a new sub-Section (8) was inserted. Both the amendments to sub-Section (7) and sub-section (8) were subsequently ordered to take effect from 1st April, 2005 and accordingly, made applicable in relation to the assessment year 2005-2006 and subsequent years. 16. Furthermore, the Central Board of Direct Taxes has clarified with regard to the date on which such amendments would take effect and in explicit terms, it has been stated that the amendment by way of insertion of sub-Section (8) in Section 94 will take effect from 1st April, 2005 and apply in relation to the assessment year 2005-2006 and subsequent years. If this is the factual position, we have to consider as to whether the arguments of the Revenue that it should be retrospective is acceptable or not. 17. The Hon'ble Supreme Court in Zile Singh vs. State of Haryana, (2004) 8 SCC 1, explained that a cardinal principle of construction of statutes is that every statute is prima facie prospective unless it is expressly or by necessary implication made to have retrospective operation. The rule in general is applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain terms that the insertion of sub-Section 8 was to be prospective. Furthermore, sub-Section (8) was inserted in the statute for the first time and it is not a substitution of an existing sub-section or a provision. 19.2. Secondly, sub-Section (8) is a new sub-section and it is not an explanation to sub-Section (7) of Section 94. Therefore, by applying the principle of statutory interpretation, sub-Section (8) of Section 94 is neither curative nor declaratory of the previous law, which has to be held to be prospective in operation. 20. Further, the Hon'ble Supreme Court in CIT vs. Walfort Share and Stock Brokers P. Ltd. reported in (2010) 326 ITR 0001 (SC), held that sub-Section (7) was to be prospective with effect from 1st April, 2002 and not earlier. The operative portions of the judgement read as follows:- "20. The real objection of the Department appears to be that the assessee is getting tax-free dividend; that at the same time it is claiming loss on the sale of the units; that the assessee had purposely and in a planned manner entered into a pre-meditated transaction of buying and selling units yielding exempted dividends with full knowledge about the fall in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , after 1.4.2002, a part of it would be allowable under Section 94(7) which cannot be the object of Section 94(7) which is inserted to curb tax avoidance by certain types of transactions in securities. There is one more way of answering this point. Sections 14A and 94(7) were simultaneously inserted by the same Finance Act, 2001. As stated above, Section 14A was inserted w.e.f. 1.4.1962 whereas Section 94(7) was inserted w.e.f. 1.4.2002. The reason is obvious. Parliament realized that several public sector undertakings and public sector enterprises had invested huge amounts over last couple of years in the impugned dividend stripping transactions so also declaration of dividends by mutual fund are being vetted and regulated by SEBI for last couple of years. If Section 94(7) would have been brought into effect from 1.4.1962, as in the case of Section 14A, it would have resulted in reversal of large number of transactions. This could be one reason why the Parliament intended to give effect to Section 94(7) only w.e.f. 1.4.2002. It is important to clarify that this last reasoning has nothing to do with the interpretations given by us to Sections 14A and 94(7). However, it is the duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present cases where units are bought at the ruling NAV with a right to receive dividend as and when declared in future and did not carry any vested right to claim dividends which had already accrued prior to the purchase. 23. For the above reasons, we find no infirmity in the impugned judgment of the High Court and, accordingly, these Civil Appeals filed by the Department are dismissed with no order as to costs." 21. Further, as pointed out by the Hon'ble Supreme Court of India in the case of Gold Coin Health Food (P) Ltd. (supra), that the law is well settled that the applicable provision would be the law as it existed on the date of filing of the return and when any loss is returned in any return, it need not necessarily be the loss, as the previous year is concerned. Therefore, the applicable law on the date of filing of the return cannot be confined only to the losses of the previous accounting years. 22. Thus, in the light of the above discussion, we are of the clear view that the Tribunal committed error in reversing the order passed by the CIT(A). 23. In the result, the appeal filed by the assessee is allowed, the order passed the Tribunal is set aside, consequent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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