Sunday 22 January 2012

Dividend Stripping - Section 94(7)

Dividend Stripping - Section 94(7)

Suppose Record Date for Dividend / Income - 31.01.2010

Acquisition of Shares / Units of MF – Within 3 months prior to the record date (01.11.2009 till 31.01.2010)

Sale or Transfer of
·        Units of MF within 9 months after the record date (01.02.2010 till 31.10.2010)

…………….. in such a case, short term capital loss if any arising on the sale of such shares / MF Units, shall be ignored to the extent of dividend / income received or receivable thereon.

Example - (In the case of Shares) -

Particulars
Case I

Case II
Case III

Case IV

Dividend received (31.01.2010)
20000
20000
20000
20000
Sales Consideration
270000 (01.05.2010)
270000 (30.04.2010)
270000 (01.05.2010
270000
(30.04.2010)
Less: Cost of Acquisition
300000 (01.11.2009)
300000 (31.10.2009)
300000 (31.10.2009)
300000 (01.11.2009)
Short Term Cap. Gain / (Loss)
(30000)
(30000)
(30000)
(30000)
Less: Capital Loss to be ignored u/s 94(7)
-
-
-
20000
Short Term Capital Gain / (Loss) for the purpose of computing income chargeable to tax
(30000)
Loss
(30000)
Loss
(30000)
Loss
(10000)
Loss



Particulars
Case V
Case VI

Case VII
Dividend Received
(31.01.2010)
20000
20000
20000
Sales Consideration
310000 (30.04.2010)
290000 (30.04.2010)
300000 (30.04.2010)
Less: Cost of Acquisition
300000 (01.11.2009)
300000 (01.11.2009)
300000 (01.11.2009)
Short Term Cap. Gain / (Loss)
10000
(10000)
NIL
Less : Capital Loss to be ignored u/s 94(7)
-
10000
-
Short Term Capital Gain / (Loss) for the purposes of computing income chargeable to tax
10000
Gain
NIL
NIL



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