S. 10(33): Any income arising from the transfer of a capital asset, being a unit of the Unit Scheme, 1964.
As per S. 10(33), any income arising from the transfer of a capital asset being a unit of US64 is not chargeable to tax where the transfer of such assets takes place on or after April 1, 2002. This rule is applicable whether the capital asset (US64) is long-term capital asset or short-term capital asset.
If income from a particular source is exempt from tax, loss from such source cannot be set off against income from another source under the same head of income.
Consequently, loss arising on transfer of units of US64 cannot be set off against any income in the same year in which it is incurred and the same cannot be carried forward.
S. 10(33) of the Income Tax Act, 1961 has provided for complete exemptions to all individuals who have invested in mutual funds. Even the individuals who have invested in equity funds are allowed complete dividend tax exemption. This exemption however, applies to those equity fund plan that serve to invest half of the total fund amount or principal in equity. But the companies that issue such funds schemes and pay dividend thereof are subjected to the payment of tax on the dividend and the rate of interest charged on such dividend payment is 14.025%.
Exemption u/s 10(33):
Dividend declared by domestic company is liable to dividend distribution tax @ 15% + surcharge @ 7.5% + education cess @ 2% + SHEC @ 1% of the amount declared. Hence it is declared from tax in the hands of shareholder.
Thus, any income arising from the transfer of a capital asset, being a unit of the Unit Scheme, 1964 referred to in Schedule I to the Unit Trust of India (Transfer of undertaking and Repeal) Act, 2002 and where the transfer of such asset takes place on or after the 1st day of April, 2002 shall be fully exempted.
Related Cases:
S. 115JB of IT Act, 1961—Company—S. 115 JB admittedly is a charging section but at the same time, it has to be kept in mind that S. 115JB is a code by itself and, thus, contains substantive as well as procedural provisions. Term payable used in S. 115 JB cannot be limited only a positive figure. Dividing line for determining the applicability of S. 115JB is seven and one half percent of the book profit vis-a-vis tax payable. Requirement of S. 115JB would be met and the provisions thereof would be applicable even if the tax payable is zero—DCW Ltd. vs. DCIT (2009) 126 TTJ 416 (ITAT-Mumbai)
S. 10(33), 14A of IT Act, 1961—Exemption—The dividend income is exempted from the tax liability u/s 10(33) of the Act. U/s 14A of the Act, expenditure relating to exempted income is not allowable—Pradeep Kar vs. ACIT (2009) 126 TTJ 416 (Karn)
S. 10(33), 14A, 147 of IT Act, 1961—Reassessment—When the record clearly show that there was a full and true disclosure by the assessee of all the material facts, there is no justification to reopen the assessment beyond the period of four year after the relevant assessment year merely to disallow the deduction—Indian Oil Corporation Ltd. vs. DCIT (2010) 327 ITR 272 (Bom)
S. 10(33), 14A, 147 of IT Act, 1961—Reassessment—Since S. 14A itself has not been invoked by the Assessing Officer for reopening the assessment nor while framing the reassessment the Assessing Officer has stated anywhere that interest expenditure was not to be allowed in view of the provisions of S. 14A, there is no valid reason for annulling the assessment—ITO vs. Big Apple clothing Pvt. Ltd. (2011) 10 ITR (Trib) 782 (ITAT-Delhi)
S. 10(33), 32, 80-IB of IT Act, 1961—Depreciation—Depreciation against the air-conditioners though purchased in the name of the managing director and his wife are for the assessee and were to be used for the business of the assessee and not for personal use of the managing director or his wife, is admissible u/s 32 of the Act—CIT vs. Metalman Auto Pvt. Ltd. (2011) 336 ITR 434 (P&H)
S. 10(33) of IT Act, 1961—Exemption—The burden is on the revenue to prove that cost of dividend is included in sale price of shares when purchased by the assessee. Without making any inquiry, the Assessing Officer Proceeded on the assumption that purchase price of shares included cost of dividend, such assumption not based on any material/evidence and it cannot be held valid—Smt. Rekha Bharat Chheda vs. ACIT (2009) 311 ITR 187 (ITAT-Mum)
S. 10(33), 14A of IT Act, 1961—Deductions—The issue raised by the Revenue was as under:—”The learned Commissioner of Income-tax (Appeals) erred in deleting the disallowance of Rs. 63.74 lakhs made by the Assessing Officer allocating 57.34 per cent. of Rs. 111.97 lakhs out of the payments made to employees for salaries and personnel cost towards the expenditure related to earning of dividends, claimed exempt u/s 10(33) of the Act, within the meaning of S. 14A of the Act.” While allowing the appeal of the Revenue for statistical purposes, the ITAT, Mumbai held that:- “We direct the Assessing Officer to disallow the portion of salary expenditure incurred during the year under consideration which in turn has been incurred for the purpose of carrying out the objects of the assessee-company. The assessee is directed to furnish the breakup of salary expenditure incurred during the year under consideration, where services of such employees have been utilized for the purpose of carrying out the objectives of the assessee-company. In case of failure on the part of the assessee to furnish the requisite details, the Assessing Officer is left with no option but to estimate such expenditure which is attributable to earning of dividend income, which in turn can be limited to the extent of percentage of dividend income earned vis-a-vis the total income earned during the year under consideration.” DCIT vs. Tata Investment Corporation Ltd. (ITAT, Mum)
Reference:
As Per Section 10(33), of the Income Tax Act, 1961-
Incomes not included in total income.
10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included—
(33) any income arising from the transfer of a capital asset, being a unit of the Unit Scheme, 1964 referred to in Schedule I to the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002) and where the transfer of such asset takes place on or after the 1st day of April, 2002.