C.I.T.,MUMBAI vs M/S.WALFORT SHARE & STOCK BROKERS P.LTD.

The Supreme Court addressed the issue of whether losses from dividend stripping transactions prior to 1.4.2002 could be disallowed as artificial losses under the Income Tax Act, 1961. The Court held that such transactions, primarily aimed at tax avoidance, do not constitute genuine business transactions, and thus, the loss claimed by the assessee was disallowed. The Court upheld the assessment order which disallowed the loss of Rs. 1,82,12,862.80, confirming that the dividend income was exempt under Section 10(33) but the associated loss was not permissible for set-off.