Judgment :-

S.H. KAPADIA, CJI.

Delay condoned.

Leave granted.

Whether the loss arising in the course of dividend stripping transaction taking place prior to 1.4.2002 was disallowable on the ground that such loss was artificial as the dividend stripping transaction was not a business transaction, is the question which arises for determination in this batch of Civil Appeals; the lead matter of which is C.I.T., Mumbai v. M/s. Walfort Share & Stock Brokers Pvt. Ltd.

The facts in the lead matter are as follows:

The assessee is a member of Bombay Stock Exchange and it earns income mainly from share trading and brokerage. During the financial year 1999-2000, relevant to the assessment year 2000-01, the Chola Freedom Technology Mutual Fund came out with an advertisement stating that tax free dividend income of 40% could be earned if investments were made before the record date, i.e., 24.3.2000. The assessee by virtue of its purchase on 24.3.2000 became entitled to the dividend on the units at the rate of Rs. 4/- per unit and earned a dividend of Rs. 1,82,12,862.80. As a result of the dividend payout, the NAV of the said mutual fund which was Rs. 17.23 per unit on 24.3.2000, at which rate it