2007 (3) TMI 284 - AT - Income Tax

Summary

Issues involved: Whether the loss on the sale of units can be disallowed.

Summary:
The appellant, engaged in garment business, incurred a short-term capital loss of Rs. 29,43,695 on the sale of units of K-30 equity growth scheme, which was set off against business income. The Assessing Officer (AO) disallowed the loss, considering it as an expenditure to earn exempt dividend income u/s 10(33) of the IT Act. The CIT(A) held the transaction genuine, classifying the loss under "Capital gains." The Revenue appealed to the Tribunal.

The appellant cited the decision of the Special Bench in a similar case, where such transactions were deemed genuine. The Departmental Representative referred to a High Court decision questioning the genuineness of the loss. The appellant relied on a Delhi High Court decision supporting the genuineness of such losses. The Tribunal considered conflicting decisions and upheld the appellant's claim, following the Special Bench decision.

The Tribunal distinguished the facts from the High Court case cited by the Departmental Representative, concluding that the loss in the present case was genuine. Citing legal precedents, the Tribunal upheld the CIT(A)'s order in favor of the appellant.

In conclusion, the appeal was dismissed, and the appellant's claim for the loss on the sale of units was upheld.