COMMISSIONER OF INCOME TAX-II vs. SHRI RAJIV PATNI

The High Court decided this question, as under: - “In so far as the question No.2 is concerned, the learned counsel for respondent has relied on the decision of this Court in Smt. Shashi Verma v. Commissioner of Income Tax (ITR 224 Page 106). In the said judgment, it was arrived that the assessee sold her property at Jabalpur and realized capital of Rs.31,980/- out of which she invested a sum of Rs.71,256/- and purchase a house at Delhi. The exemption was claimed from the charge of tax on capital gain under Section 54-F of the Act. It was rejected by the ITO as also by the Tribunal. This Court observed that substantial investment was made in construction of the house. In view of the requirement of Section 54 of the Act, the Tribunal, in the facts and circumstances of the case, was not justified. We are fortified in the above view by the decision of the Delhi High Court in Balaraj v. CIT (254 ITR 22) to the effect that for the purpose of attracting the provision, it was not necessary that the assessee should have become the owner of the property. Section 54 spoke of purchase and registration was not imperative.

Considering the aforesaid, we are of the view that the learned Tribunal rightly accepted the contention of the assessee and decided the question against the Revenue. 6. Second ground in the appeal was raised by the Revenue is in respect of allowing dis-allowance of Short Term Capital loan of Rs.24,11,311/-. The learned Tribunal, relying on the decision of High Court of Punjab & Haryana in the case of Vaneet Jain v. CIT 205 CTR (P&H) 92 and the decision of Delhi High Court in the case of CIT v. Vikram Adiyna & Associates Private Limited 287 ITR 268, has held that if two views are possible, then the view in favour of the assessee should be made applicable and decided the aforesaid question in favour of the assessee, dismissed the appeal filed by the department. 7. During the course of hearing before the ITAT Indore, reliance was placed on the decision of High Court of Punjab & Haryana in the case of Vaneet Jain v. CIT (supra) wherein it is held, as under: - “Assessee having purchased units of a mutual fund and sold them at a loss within four days after realizing dividends the obvious intent was to enjoy tax-free dividend income and claim business loss, the same cannot be regarded as a genuine business transaction, order of the Tribunal holding that there was no adventure in the nature of trade and no loss was incurred by assessee does not call for interference.”

Reliance was also placed on the decision of Delhi High Court in the case of CIT v. Vikram Adiyna & Associates Private Limited (supra) wherein it is held, as under: - “The assessee purchased units of mutuals funds on February 9, 2001 and sold them on February 11, 2001. Although it received the declared dividend of Rs.43,54,838/- it suffered an overall loss. The assessee adjusted its short term capital loss against a long term capital gain and the return was accepted by the Assessing Officer under Section 143 (3) of the Income Tax Act, 1961. The Commissioner sought to revise the order. He described the transaction of the assessee as “dividend stripping” that is a transaction in which an investor buys stocks or units of mutual funds which is before the record date of dividend and these units are held only long enough to receive the dividend and to sell them subsequently. The Tribunal set aside the order of revision. On appeal to the High Court:

In view of the aforesaid, we are of the view that the substantial question of law raised by the Revenue is well settled by the Indore Bench in the case of Commissioner of Income Tax, Bhopal v. Ajitsingh Khanjanchi, Indore (supra) as well as by the Punjab & Haryana High Court in the case of Vaneet Jain v. CIT (supra) and Delhi High Court in the case of CIT v. Vikram Aditya & Associates Private Limited (surpa). 10. No substantial question of law is arising in this appeal. 11. Income Tax Appeal No.403/2007 fails and is hereby dismissed.