2012 (8) TMI 916 - SCH - Income Tax

Dividend Stripping Transaction - Disallowance of loss claimed by the assessee on the ground that a dividend stripping transaction was not a business transaction and since such a transaction was primarily for the purpose of tax avoidance the loss so called was an artificial loss created by a pre-designed set of transaction - Held that - The issue involved in this civil appeal relates to dividend stripping which is squarely covered in favour of the assessee by the judgement of this court in the case of CIT v. Walfort Share and Stock Brokers P. Ltd. reported in 2010 (7) TMI 15 - SUPREME COURT wherein held section 14A deals with disallowance of expenditure per se and not with a disallowance of a loss which arises at a point of time subsequent to the purchase of units and the receipt of exempt income and occurring only when there is a sale of the purchased units. - Under Section 94(7) the dividend goes to reduce the loss. It applies to cases where the loss is more than the dividend - Section 14A comes in when there is claim for deduction of an expenditure whereas Section 94(7) comes in when there is claim for allowance for the business loss. HC case confirmed 2009 (2) TMI 801 - DELHI HIGH COURT - Decided in favor of assessee.

Summary

The Supreme Court dismissed the civil appeal filed by the Department in a case related to dividend stripping, citing precedent in favor of the assessee. The judgment was delivered by S. H. Kapadia C.J.I. and Madan B. Lokur, J. in 2012 (8) TMI 916 - SC.