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TMI Blog2019 (2) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... sold and then repurchased from; who actually earns the interest income and is liable to income-tax, but however is absolved from it by reason only of sub-section (1); would not in his assessment be entitled to claim for any loss that occurred in the transaction. Section 94 at one stroke discourages both the owner of securities, who sells and the purchaser from entering into a transaction, ostensibly to be one for avoidance of tax on the interest income. Pertinently, it is to be seen that sub-section (4) does not speak of an exemption under Section 10(15), but speaks of the interest income received by the person, who buys and re-sells the securities, not having the liability to income tax by reason only of sub-section (1), the deeming pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving found that the assessee does not have a business consisting wholly or partly in dealing in securities for reason only of the Assessing Officer having treated the loss on sale of securities as capital loss in an earlier year and the same having acquired finality at the Tribunal stage, with the Revenue accepting the same ? 3. The transactions by virtue of which the Assessing Officer invoked Section 94 is purchase and sale of units. Admittedly, the assessee had purchased units of the Unit Trust of India in the earlier years and also in the subject year and sold a considerable portion of the same in the subject year itself. For the units/bonds purchased and held for about 25 months, short term capital gain of ₹ 22,81,871/- was com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any interest becoming payable in respect of the securities is receivable otherwise than by the owner, the interest payable as aforesaid shall, whether it would or would not have been chargeable to income-tax apart from the provisions of this sub-section, be deemed, for all the purposes of this Act, to be the income of the owner and not to be the income of any other person. Explanation .- The references in this subsection to buying back or reacquiring the securities shall be deemed to include references to buying or acquiring similar securities, so, however, that where similar securities are bought or acquired, the owner shall be under no greater liability to incometax than he would have been under if the original securities had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seller, to be absolved of the liability to tax, which he would otherwise have had; dehors Section 10(15) by application of the deeming provision under sub-section (1). 7. Sub-sections (1) and (4) of Section 94 are interlinked. We are of the opinion that the enquiry should commence from sub-section (1); where the owner of securities attempts to sell and repurchase, so that the interest income is not taxed in his hands. In that circumstances, the person to whom the securities are sold and then repurchased from; who actually earns the interest income and is liable to income-tax, but however is absolved from it by reason only of sub-section (1); would not in his assessment be entitled to claim for any loss that occurred in the transaction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er claim, cannot be entertained by reason of the provisions under sub-section (4). 9. In the present case, we do not see any such deeming fiction applied on the interest income obtained by the assessee by reason only of which the interest receivable by him is exempted from taxation. The fact that Section 10(15) exempts such interest income is not relevant, insofar as sub-section (4) speaking only of the interest received by an assessee being deemed to be not his income by reason of the provisions under sub-section (1). In such circumstances, we answer the first question of law framed in favour of the assessee and against the Revenue and uphold the order of the Tribunal. We notice that the Tribunal has also considered the second issue of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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