Tax avoidance — For application of Ss.(7) of S. 94, all the three conditions mentioned in clauses (a), (b) and (c) thereof must be cumulatively satisfied; conditions of three months before and after record date for purchase and sale respectively of units

The Assessing Officer held that S. 94(7) can be
invoked even if any one of the conditions is fulfilled. Since the units were
purchased on the record date, he held the case to be one of dividend stripping
and disallowed the loss invoking the provisions of S. 94(7), even though they
were sold after three months from the record date. The CIT(A) accepted the
claim of the assessee that all three conditions of S. 94(7) are to be
cumulatively satisfied. On Revenue’s appeal, the ITAT held that :

1. The question that arises for consideration is as to whether clauses (a), (b)
   and (c) of S. 94(7) need to be satisfied cumulatively or not. One may take a
   look at the language used in other portions of the IT Act, 1961, where such
   requirement for satisfying one of the many conditions or all conditions
   cumulatively is laid down.

2. The case where only one condition is needed to be satisfied as laid down in
   the proviso to S. 139(1) relating to one by six scheme, may be taken for
   instance. The language of such provision uses the expression ‘or’ at the end
   of each condition.

3. The Legislature, when it desired that all conditions are to be satisfied
   cumulatively, has used the word ‘and’ in the relevant provision. For
   example, one may take the language used in provisions of S. 80-O, where the
   conditions of receipt of income in convertible foreign exchange and such
   income should be for services rendered outside India are cumulatively
   required to be satisfied.

4. A
   plain reading of the provision of S. 94(7) shows that it has neither used
   the expression ‘or’ nor the expression ‘and’. The Revenue wants to say that
   each of the conditions laid down in S. 94(7) is independent and if an
   assessee satisfies any one of the conditions, then he should be held to be
   covered within the mischief of the law. But the use of words, ‘such person’,
   ‘such unit’, ‘such date’, ‘such securities or units’ in clauses (b) and (c)
   of S. 94(7) also indicates that the three clauses have to be read
   together—Such an interpretation also finds support from CBDT Circular No. 14
   of 2001.