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TMI Blog2018 (1) TMI 395X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 94(7), the Ld. CIT(A) has held that the said provisions are not applicable in the case of the assessee as it involved investment in dividend reinvestment plan. Moreover, as submitted by the learned counsel for the assessee at the time of hearing, the assessee had not received any dividend from the relevant mutual funds. Thus as in agreement with the Ld. CIT(A) that provisions of 94(7) are not applicable in the case of the assessee. As held by the Ld. CIT(A), the provisions of section 94(8) were relevant and since the assessee had not continued to hold all or any of the additional unit allotted on the reinvestment of the dividend, the same was also not applicable. Therefore, uphold the impugned order of the Ld. CIT(A) giving relief to the assessee on this issue and dismiss ground no 1 and 2 of the revenue’s appeal. Addition u/s 14A - Held that:- It is observed that this issue is squarely covered in favour of the assessee by the decision of the Hon’ble Kolkata High Court in the case of CIT vs G.K.K. Capital Markets (P) Ltd. (2017 (2) TMI 628 - CALCUTTA HIGH COURT) wherein it was held that no disallowance under section 14A can be made on account of expenditure incurred in rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince dividend was earned by the assessee before such redemption resulting in sharp fall in the NAV of the units, the loss was a result of dividend stripping. Accordingly, he invoked the provisions of section 94(7) and ignored the loss of ₹ 23,40,887/- even for computing the income under the head Capital Gains . 4. The action of the A.O. in treating the loss from the transactions in mutual funds as a capital loss and ignoring the same even for computing the income under the head Capital Gains by applying section 94(7) was challenged by the assessee in the appeal filed before the Ld. CIT(A) and after considering the submissions made by the assessee as well as the material available on record, the Ld. CIT(A) decided this issue in favour of the assessee from the following reasons given in paragraph no 9.3 to 9.7 of his impugned order: 9 . 3 . The first issue arises in this case is regarding the applicability of section 94 ( 7 ) of the Income Tax Act, 1961 in respect of the loss in Mutual Funds allegedly on Dividend stripping . Before me, the appellant has submitted that the provisions of section 94 ( 7 ) of the Income Tax Act, 1961 are not applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 . 6 . I have examined the above contention of the appellant together with all the submissions, assessment order and the facts of the case and I am inclined to accept the contention of the appellant that the transaction in shares and mutual funds cannot be split up to be given different treatment for the purpose of computing the income of the assessee since both the activities are one and the same and are carried out in an organized manner to earn profit and therefore, fall under the definition of business under the Act as has been interpreted by various courts including the Hon ble Supreme Court . 9 . 7 . In view of the same, the A . O . is directed to set off the entire loss of mutual funds with the profits on share dealing by treating both the activities as one having been earned in the course of carrying on of business by the assessee . In view of the same, the ground Nos . 2, 3 4 are allowed in the hands of the assessee . 5. I have heard the arguments of both the sides on this issue and also perused the relevant material available on record. It is observed that the mutual funds and shares were held by the assessee as investment and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . under section 14A is raised by the revenue in ground no 3 and 4 as under: 3 . That on the facts and circumstances of the case and on law, the Ld . CIT ( A ) is not justified in deleting disallowance of Rs . 29,69,773 /- u / s 14A by holding that dividend was earned out of shares etc . in stock in trade, without considering the fact that the assessee has categorised these under the head investments . 4 . That on the facts and circumstances of the case and on law, the Ld . CIT ( A ) is not justified in deleting disallowance of Rs . 29,69,773 /- u / s 14A by holding that dividend was earned out of shares etc . in stock in trade, without considering several judicial pronouncements in which it has been held that disallowance u / s 14A can be made for the shares etc . categorised under the head stock in trade also . 8. During the course of assessment proceedings, it was noticed by the A.O. that the assessee has made investment in shares from the funds borrowed on interest. Since the income from the said investment was exempt from tax, the A.O. was of the view that the expenses incurred by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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