2010 (3) TMI 730 - AT - Income Tax

Sale of unit - as per the provisions of section 94(7) of the Income-tax Act, as it stood at the relevant time, if the assessee sold a unit within the period of three months after its purchase, the loss arising therefrom is to be disallowed - assessee purchased the unit on November 25, 2003 and the same was sold on February 25, 2004, which was after 92 days from the date of purchase - Even if month to month basis is to be considered then the three months after the date of purchase would complete on February 24, 2004 - units were sold on February 25/2004 which was not within the period of three months from the date of the purchase, i.e., November 25, 2003 Revenue s appeal dismissed

Summary

Issues:
Appeal against deletion of loss claimed in respect of Tata Mutual Fund under section 94(7) of the Income-tax Act for the assessment year 2004-05.

Analysis:
The Revenue appealed against the Commissioner of Income-tax (Appeals)-XIV, Ahmedabad's order dated April 27, 2007, concerning the deletion of a loss claimed in relation to Tata Mutual Fund for the assessment year 2004-05. The main contention was the interpretation of section 94(7) of the Income-tax Act, specifically regarding the time limit for disallowing losses arising from the sale of units within three months of purchase. The Revenue argued that the sale of units within 92 days from the purchase date should lead to disallowance, while the assessee contended that the term "month" should be considered as 30 days, making the sale after 92 days compliant with the three-month limit. The Commissioner of Income-tax (Appeals) had deleted the disallowance based on this interpretation.

Upon careful consideration of the arguments and the relevant legal provisions, the Appellate Tribunal agreed with the Commissioner of Income-tax (Appeals). The Tribunal noted that the units were purchased on November 25, 2003, and sold on February 25, 2004, which was after 92 days from the purchase date. Even if a month was defined as a period of 30 days, the three-month period would end on February 24, 2004, making the sale on February 25, 2004, outside the three-month limit. Therefore, the Tribunal upheld the decision of the Commissioner of Income-tax (Appeals) and dismissed the Revenue's appeal.

In conclusion, the Appellate Tribunal affirmed that the sale of units in question did not fall within the three-month period stipulated by section 94(7) of the Income-tax Act. The interpretation of a "month" as 30 days was crucial in determining the timeline for disallowing losses, ultimately leading to the dismissal of the Revenue's appeal against the deletion of the claimed loss in respect of Tata Mutual Fund.