Agencies Rajasthan (P.) Ltd. v. ITO – [2019] 109 taxmann.com 139 (Jaipur – Trib.)

Assessee-company had taken loan of Rs. 50 crore from IIFL. Out of loan amount, it purchased certain units of mutual funds of Rs. 50 crore from JMF-MF and earned dividend of certain amount on same.

 Soon after earning dividend, a redemption took place wherein assessee had suffered loss of Rs. 24.04 crores.

This loss was set off against capital gain earned by assessee during year from sale of immovable property.

Assessee had also claimed dividend income to be exempt under section 10(33). Assessing Officer (AO) observed that assessee had concocted a story in connivance with JMF-MF and IIFL and attempted to prepare a colourable device just to set off capital gain earned on sale of immovable property and also by claiming exemption on dividend earned.

The Jaipur ITAT held that loan taken by assessee from IIFL was paid through bank and that assessee had also filed repayment schedule of IIFL.

Assessee had also filed copy of statement issued by JMF-MF in which purchase of mutual fund was clearly shown.

Further, there was no loss to revenue insofar as JMF-MF had already paid dividend distribution tax on declaration of such dividend. That apart, assessee had also paid STT on those transactions as was evident from statement of JMF-MF on subjected transaction. There was no iota of evidence brought by revenue on record to prove that IIFL had indulged in providing bogus capital gain/losses etc. Thus, disallowance of assessee’s genuine claim of loss incurred on redemption of mutual funds was unjustified.