2010 (9) TMI 277 - HC - Income Tax

Dividend income - Commissioner of Income Tax (Appeal) in treated the dividend earned to be exempt from income tax in view of the provision of Section 10 (33) of the Income Tax Act 1961 as it existed during the relevant year - Subsequently there is trading loss - Held that - Standing Counsel has very fairly submitted that since the period involved in the present appeal is of assessment year 2001-02 i.e. prior to the 1st April 2002 before insertion of Section 94 (7) of the Act the business loss suffered by way of sale of shares mutual funds security etc. could not be ignored in view of the decision of the apex Court in the case of Commissioner of Income Tax Vs. Walfort Share and Stock Brokers P. Ltd. reported in (2010 -TMI - 76751 - SUPREME COURT) and the question involved in the present appeal is squarely covered by the aforesaid decision in favour of the assessee - Appeal is dismissed

Summary

Issues:
Appeal under Section 260A of the Income Tax Act, 1961 for assessment year 2001-02 regarding the treatment of dividend income as exempt under Section 10(33).

Analysis:
The case involved an appeal by the revenue challenging the Tribunal's decision to uphold the Commissioner of Income Tax (Appeal)'s order treating dividend income as exempt from income tax under Section 10(33) of the Income Tax Act, 1961 for the assessment year 2001-02. The assessee received a dividend income of Rs. 22,17,423.44, which was claimed as exempt under Section 10(33) for the relevant year. The assessee had purchased mutual funds and incurred a loss on their sale, which was claimed as a business loss and set off against other business income. The revenue disallowed this claim, arguing that since the dividend income was exempted from tax, the loss could not be set off. However, the Commissioner of Income Tax (Appeal) allowed the assessee's claim, a decision that was confirmed by the Tribunal.

During the hearing, the Standing Counsel for the petitioner acknowledged that for the assessment year 2001-02, before the insertion of Section 94(7) of the Act, business losses from the sale of shares, mutual funds, securities, etc. could not be ignored. The counsel cited the decision of the apex Court in the case of Commissioner of Income Tax Vs. Walfort Share and Stock Brokers P. Ltd., which supported the assessee's position. The counsel argued that the business loss suffered by the assessee should be considered, as per the decision of the apex Court, allowing for the set off of losses against other business income. The Court, in light of the arguments presented, found no merit in the appeal and dismissed it accordingly, upholding the decision in favor of the assessee.