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TMI Blog2015 (1) TMI 567X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed by it or as held by the Tribunal, it made a profit of ₹ 56,000/- and the dividend amount and consequently deduction under Section 80M and credit for tax deducted at source has to be excluded from the appellant's assessment - Held that:- Though the contract was entered into, it was not specifically performed. There was an alteration made thereto in as much as the assessee obtained the dividends and then sold the shares at the reduced price to its buyer. Alteration of contract is permissible in law. The Hon'ble Supreme Court in Walfort Share and Stock Brokers's case [2010 (7) TMI 15 - SUPREME COURT] had made the position clear regarding dividend stripping by owners of shares in the period prior to 1st April, 2002, while this court had clearly held until change by registration is effected in the books of the company, the transferor continues to be the holder of the shares. - Decided in favour of assessee. - ITA No. 274 of 2001 - - - Dated:- 24-12-2014 - Soumitra Pal Arindam Sinha, JJ. For the Appellant : Mr. J.P. Khaitan, Senior Adv., Ms. Sanjukta Gupta, Adv. For the Respondent : Mr. M.P. Agarwal, Adv. JUDGEMENT This appeal was admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them at the rate of ₹ 1,435/- per share. Mr. Khaitan submitted scrutiny of the aforesaid transactions would reveal price fluctuation in the period when his client made the sale and purchase of the shares without actual delivery or transfer of them. This his client had done to guard against loss of its holding those shares. He pointed out that in the fluctuation of the prices of the said shares between 27th July, 1990 and 29th August, 1990 the market price of the shares continued to rise except between 8th and 9th August 1990 when the price of the said shares fell from ₹ 1,060/- per share to ₹ 1,044.50 per share. According to learned counsel the relevant provision read with the proviso excepted hedging transactions without providing for the requirement of the result of such transactions. He submitted in hedging transactions if the price of the share fell between the time of sale and purchase then the share holder would end up with profit in hand to compensate the loss in the value of the shares. On the other hand if the price of the shares increased between the time of sale and purchase, the share holder would incur loss being the difference between the increas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lose but such a gain or loss would be marginal and far less than what it would be if the person had not hedged at all. While, however, the hedging operation protects the hedger against loss arising from adverse fluctuations in prices, it also prevents him from making windfall profit owing to favourable fluctuations in prices as well. The forgoing of such a possible windfall profit is the price which he pays for the insurance against loss. He then referred to Ashokbhai B.Shah to submit the Gujarat High Court in that decision had applied Mohanlal Ranchhoddas. Referring to the case of Hotz Hotel Ltd. he submitted the Delhi High Court in considering questions A and D in that appeal proposed for formulation, dismissed the same on the basis of concurrent finding by the CIT (A) and Tribunal that the loss incurred by the assessee therein was hedging loss. So, Mr. Khaitan submitted, the aforesaid substantial question of law should be answered in the negative and in favour of the appellant assessee. Mr M.P Agrawal, learned advocate appeared on behalf of the respondent Revenue and submitted according to the Concise Oxford Dictionary, Sixth Edition in page 498 meaning of 'hedge&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43 (5) of the said Act does not require an inquiry into the result of the transactions but that it should have been entered into for guarding against loss in the holding of stocks and shares. The undisputed facts in this case, in our view, contain ingredients of hedging. The result of those transactions, however, was gain in the holding of shares by the assessee by incurring loss of the said sum of ₹ 14.82 lacs, the value of increase in the holding of the appellant in the shares in that period. Therefore, when ultimately the appellant sold those shares at an even greater value, it was denied the windfall profit it would have made if it had not hedged at all. For the reasons aforesaid we answer the questions in the negative and in favour of the appellant assessee. The next question for adjudication as formulated is as under:- Whether in the facts and circumstances of this case, the proper way in law to look upon the Unit Trust Master share transaction of the assessee is that in respect of UTI Master Share Units, the appellant incurred a loss of ₹ 68,900/- and was in receipt of dividend income of ₹ 1,26,000/- as claimed by it or as held by the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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