2014 (4) TMI 888 - AT - Income Tax

Disallowance u/s 94(7) of the Act - Short term capital loss on sale of mutual funds Held that - The assessee during the relevant year under consideration had bought and sold units or mutual funds of Birla Basic Indu. Sel. Sec. Fund and Reliance Vision Fund - A perusal of information with respect to transaction set out against SL No. one would show that the record date is 19.01.2007 and the date of purchase is 19.10.2006 which is within a three months from the record date - The assessee received by way of dividend on 19.01.2007 - The sale of the said securities took place on 23.01.2007 which was also within a period of three months from the record date, i.e. 19.01.2007 - the purchase date as well as the date of sale was not in consensus with the statutory period of time prescribed by section 94(7) thus, there was no reason to interfere in the order of CIT(A) Decided against Assessee.

Summary

Issues:
1. Disallowance of short term capital loss on the sale of Mutual Funds, Units u/s 94(7) of Income Tax Act, 1961.
2. Sustaining the interest charged u/s 234B of the Income Tax Act.

Analysis:
1. Disallowance of short term capital loss on the sale of Mutual Funds, Units u/s 94(7) of Income Tax Act, 1961:
The appellant contested the disallowance of short term capital loss of Rs. 4,88,918/- on the sale of Mutual Funds, Units under section 94(7) of the Income Tax Act. The Assessing Officer found that the appellant's sale of units of Birla Basic Indu. Sel. Sec. and Reliance Vision Fund fell under section 94(7) after considering the dividend record date and purchase/sale dates. The appellant argued that the record date should be excluded, placing the purchase date within the permissible period. However, the department contended that even with this interpretation, the sale occurred shortly after the record date, falling under section 94(7)(b). The Tribunal analyzed the provisions of section 94(7) and concluded that the conditions for disallowance of loss were cumulative. As the purchase and sale dates did not align with the statutory period, the disallowance was upheld, confirming the CIT(A)'s decision.

2. Sustaining the interest charged u/s 234B of the Income Tax Act:
The appellant also challenged the interest charged under section 234B of the Income Tax Act. The Tribunal noted that this interest was consequential in nature. Consequently, the appeal on this ground was dismissed. In conclusion, the Tribunal upheld the disallowance of short term capital loss and the interest charged under section 234B, leading to the dismissal of the appellant's appeal.

This detailed analysis of the judgment highlights the key issues, arguments presented, statutory provisions examined, and the Tribunal's decision on each matter, providing a comprehensive understanding of the legal reasoning behind the judgment.