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Judgment
Ajay Kumar Mittal, J.—This appeal has been preferred by the assessee under s. 260A of the IT Act, 1961 (in short, ""the Act"") against the
order dt. 6th June, 2008, Annex. A3, passed by the Tribunal, Amritsar Bench, Amritsar in ITA No. 424/Asr/2007. for the asst. yr. 2004-05. It
was admitted on 11th Nov., 2008 to consider following substantial questions of law:
(i) Whether in the facts and circumstances of the case, the learned Tribunal has erred in holding that the transaction of shares on line trading is
speculative transaction as specified under s. 43(5) and in misconstruing and misapplying the provisions of the proviso (b) and (d) of s. 43(5) of the
IT Act, 1961 and in ignoring Circular No. 3 of 2006 dt. 27th Feb.. 2006 [ (2006) 201 CTR (St) 185] issued by CBDT, New Delhi?
(ii) Whether in the facts and circumstances of the case the learned Tribunal has erred in misapplying the provisions of s. 94(7) of the IT Act, 1961
and more so when all the three conditions as stipulated in section have not been satisfied at the same time and more so when the assessee has
bought the units on 26th Dec, 2003 (i.e. the record date) and the same cannot be construed as buying ''within a period of three months prior to the
record date'' as stipulated in s. 94(7)(a) of the IT Act, 1961 and units bought on 26th Dec, 2003 were sold on 26th March, 2004 i.e. after three
months and one day and the same cannot be construed having sold ''within a period of three months after said date'' as stipulated in s. 94(7)(b)?
Briefly, the facts necessary for adjudication of the controversy involved, as narrated in the appeal may be noticed. For the asst. yr. 2004-05, the
assessee concern filed return of income on 30th July, 2004 declaring income of Rs. 5,40,445. The same was processed on 24th Nov., 2004. The
case was taken up for compulsory scrutiny. Notice under s. 143(2) of the Act was issued on 2nd Nov., 2004 to the assessee. On 30th Dec,
2005, the Asstt. CIT Circle-II, Bathinda passed the assessment order. Annex. Al, disallowing the claim of loss of Rs. 3,67,795 from speculative
transactions of stock option or stock future. Short-term capital loss of Rs. 3,11,934 against short-term capital gains was disallowed as the
transaction was hit by the provisions of s. 94(7) of the Act. Thus, total addition of Rs. 6,79,730 was made to the short-term capital gains and
assessment was completed at total income of Rs. 12,22,930. Aggrieved by the order, the assessee filed appeal before the CIT(A), which was
dismissed on 17th Sept., 2007, Annex. A2. Still not satisfied, the assessee filed appeal before the Tribunal which was dismissed vide order dt. 6th
June, 2008, Annex. A3. The assessee filed miscellaneous application (rectification petition) for recall of the order dt. 6th June, 2008 relating to
ground No. 2. The said application was allowed by the Tribunal vide order dt. 16th Sept., 2008 and the case was heard on 22nd Sept., 2008 but
no order thereupon was passed by the Tribunal. Aggrieved by the order dt. 6th June, 2008 passed by the Tribunal, the assessee is before this
Court through the present appeal.
Learned counsel for the assessee submitted that the Tribunal was wrong in declining the claim of the assessee on account of loss on sale of
certain shares to the tune of Rs. 3,67,995 by treating the same to be speculative loss in view of the provisions of s. 43(5) of the Act. According to
the assessee, the same was to be treated as short-term capital loss in view of s. 43(5)(d) of the Act. The other contention raised by learned
counsel was that the assessee had purchased the units on 26th Dec, 2003 which was the record date and were sold on 26th March, 2004 just
after the expiry of three months and one day. The period of three months after the said date as provided under s. 94(7)(b) of the Act, applied
whereby the assessee was entitled to claim short-term capital loss of Rs. 3,11,934 on the sale of the units. He referred to sub-s. (35) of s. 3 of the
General Clauses Act, 1897 to submit that the word ''month'' shall mean a month reckoned according to the British calendar. Learned counsel
further submitted that according to Halsbury''s Laws of England, Third Edition Vol. 37, wherein calendar month running from arbitrary date has
been defined, according to which when the period prescribed is a calendar month running from any arbitrary date, the period expires with the day
in the succeeding month immediately preceding the day corresponding to the date upon which the period starts. It was urged that in the present
case, the period of three months as envisaged under s. 94(7)(b) of the Act had expired on 25th March, 2004 and consequently the sale on 26th
March, 2004 was not covered under the mischief of s. 94(7)(b). Reference was made to judgment of the apex Court in State of Himachal Pradesh
and Another Vs. Himachal Techno Engineers and Another, .
On the other hand, learned counsel for the Revenue besides supporting the orders passed by the AO, CIT(A) and the Tribunal, submitted that
the day 26th March, 2004, when the units were sold was to be counted, as three months from 26th Dec., 2003 would expire on that date and the
said authorities were right in applying the provisions of s. 94(7)(b) of the Act and disallowing the claim of short-term capital loss made by the
assessee.
After hearing learned counsel for the parties, we do not find any merit in the appeal.
Adverting to the first question, it may be noticed that s. 43(5)(d) of the Act was introduced by Finance Act, 2005 w.e.f. 1st April, 2006. The
said provision would thus be applicable from asst. yr. 2006-07. Once that was so, the benefit as claimed by the assessee that it was entitled to set
off short-term capital loss, has been rightly declined by the authorities below.
Taking up the second question, the primary issue that would arise for determination is whether the date on which the units were sold i.e. 26th
March, 2004 would fall outside the ambit of three months from the record date of 26th Dec, 2003.
It would be advantageous to refer to relevant portion of s. 94(7) of the Act, which reads thus:
94(7). Where--
(a) any person buys or acquires any securities or unit within a period of three months prior to the record date;
(b) such person sells or transfers--
(i) such securities within a period of three months after such date; or
(ii) such unit within a period of nine months after such date;
(c)...............
It may be noticed that sub-s. (35) of s. 3 of the General Clauses Act, 1897 defines ''month'' and it reads thus:
3(35). ''Month'' shall mean a month reckoned according to the British calendar;
According to Halsbury''s Laws of England Third Edition Vol. 37, the. word ''month'' has been described as under:
Calendar month running from arbitrary date-When the period prescribed is a calendar month running from any arbitrary date the period
expires with the day in the succeeding month immediately preceding the day corresponding to the date upon which the period starts; save that, if
the period starts at the end of a calendar month which contains more days than the next succeeding month, the period expires at the end of the
latter month (k).
If a period of one calendar month includes the last day of February there must be twenty-nine or twenty-eight days, according as the year is or is
not leap year (I).
In the aforesaid volume, an illustration has been given which reads thus:
(k) A period of a month which begins on the 28th or any later day in January must in the ordinary year terminate on 28th February.
Further the Hon''ble apex Court in Himachal Techno Engineers'' case (supra) in para 11 had noticed as under:
Sec. 3(35) of the General Clauses Act, 1897 defines a month as meaning a month reckoned according to the British calendar. In Dodds v.
Walker (1981) 2 All ER 609 , the House of Lords held that in calculating the period of a month or a specified number of months that had elapsed
after the occurrence of a specified event, such as the giving of a notice, the general rule is that the period ends on the corresponding date in the
appropriate subsequent month irrespective of whether some months are longer than others. To the same effect is the decision of this Court in Bibi
Salma Khatoon Vs. State of Bihar and Others, . Therefore when the period prescribed is three months (as contrasted from 90 days) from a
specified date, the said period would expire in the third month on the date corresponding to the date upon which the period starts. As a result,
depending upon the months, it may mean 90 days or 91 days or 92 days or 89 days.
Similarly the Gujarat High Court in Bhikhalal Bhovan Vs. Sunni Vora Noormamad Abdul Karim and Others, , while examining the scope of
the term ''month'' had noticed as under:
In common parlance, the ''month'' is hardly understood as a calendar month according to the Gregorian calendar, but it by and large means
''space of time from a day in one month to the corresponding day in the next''. This is the meaning of the term ''month'' given in the Concise Oxford
Dictionary, 1964 Edition. The term ''month'' has been explained also in the Bombay General Clauses Act, 1904. The term ''month'' as defined in s.
2(30) of the Bombay General Clauses Act, means ''a month reckoned according to the British calendar''. The term ''reckoned'' is equivalent of the
term ''calculated'' or counted. If the legislature wanted the month to mean only a compact unit of a calendar month, the normal definition would
have been as a British calendar month or a calendar month. The elaborate explanation given in the definition of the term ''month'' and particularly
the reference to calculation clearly and pointedly suggest that what is intended to be referred to by the term is a space of time between the two
dates of the two contiguous months...........
No doubt, there is the judgment of the learned Single Judge of this Court referred to above, supporting the submissions made on behalf of the
petitioner tenant, but we find that the learned Single Judge has not put forward any reasons in support of that view of his, which with profound
respect we say is not correct, The learned Single Judge has assumed we say so with respect because there is no elaboration at all that a month as
occurring in s. 12(2) of the Rent Act means a calendar month, commencing from the first day of the month following the service of the notice of
demand upon the tenant. Even the learned Single Judge in his judgment accepts the position that ''ordinary'' or ''usual'' would mean a month
calculated from a specified date. There is nothing in the context or in the text of s. 12(2) of the Rent Act which would suggest such an unusual
connotation. As observed by us above, both the general tenor of the term as well as the clear meaning that could be derived from the interpretation
of the term occurring in s. 12(2) clearly point to only one conclusion, namely, that the month referred to there is a span of time between two dates
of two contiguous months and not a calendar month. We, therefore, find ourselves unable to agree with the view of the learned Single Judge.
In view of the above, the period of three months reckoned from the date of purchase of the units on 26th Dec, 2003, would expire on 26th
March, 2004. Thus, the AO, CIT(A) and the Tribunal were right in holding that the provisions of s. 94(7)(b) of the Act were fully applicable.
Adverting to the judgment in Himachal Techno Engineers'' case (supra). on which reliance had been placed by the learned counsel for the
appellants, suffice it to say that in view of the observations quoted above, we do not find that the said pronouncement helps the assessee in any
manner.
In view of the above, the substantial questions of law are answered against the assessee and in favour of the Revenue. Accordingly, the appeal
is dismissed.