JUDGMENT
1. In this case the relevant Assessment Year is 1992-1993. An Assessment order was passed by the Assessing officer holding that the losses incurred by the Assessee on the sale of debentures and equity shares cannot be allowed as they were contrived losses.
2. The said order was confirmed by the Commissioner of Income Tax (Appeals) in an Appeal. The Income Tax Appellate Tribunal had passed an order allowing the claim of the Assessee, by setting aside the orders of the Assessing Officer and Commissioner of Income Tax (Appeals).
3. Thereupon, the Petitioner had filed a Reference Application under Section 256(1) of the Income Tax Act, 1961, seeking reference on two substantial questions of law:
4. The two substantial questions of law raised in this Income Tax Application read as under:
1. Whether on the facts and the circumstances of the case, the Tribunal was right in law in holding that the loss of Rs. 64,76,048/- claimed by the Assessee due to the sale of the debentures of M/s. Reliance Industries Ltd. is admissible on the ground that this is a genuine loss and not a contrived loss as held by the Assessing Officer and the Commissioner of Income Tax (A)?
2. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in directing the Assessing Officer to reconsider the Assessee's claim for the loss of Rs.5,46,000/- due to the sale of equity shares of M/s. Reliance Industries Ltd. on the lines specified in its order?
5. The second question of law does not arise as on remand by the Income Tax Appellate Tribunal, the Assessing Officer by his order dated 20th February,2006, has assessed the income at Rs. 12,05,750/-.
6. To answer the first question of law, the learned Counsel on behalf of the Assessee highlighted the principle laid down in the McDowell Case. In this case the Hon'ble Supreme Court has observed;
The Court nowhere said that every action or inaction on the part of the tax payer which results in reduction of tax liability to which he may be subjected to in the future, is to be viewed with suspicion and be treated as a device for avoidance of tax irrespective of legitimacy or genuineness of the act.
7. Similarly, in Union of India and Anr. v. Azadi Bachao Andolan and Anr. 263 ITR 706 (SC), the Honble Supreme Court has observed as under:
We are unable to agree with the submission that an act which is otherwise valid in law can be treated as non est merely on the basis of some underlying motive supposedly resulting in some economic detriment or prejudice to the national interests, as perceived by the respondents.
8. Under the aforesaid facts and circumstances, we do no find any substantial question of law in the above, and the Application stands dismissed.