106. Avoidance of tax by transactions in securities.-

I.T. Manual, Part-1                                                                                                                                                                                                             [Sec. 106


106.  Avoidance of tax  by  transactions  in securities.-  (1) Where the owner of any  securities  sells  or  transfers  those  securities  and  buys  them  back  or reacquires them, or buys or acquires similar securities, and the result of the transactions  is  that  any  interest  becoming  payable  in  respect  of  the  original securities sold or transferred by the owner is not receivable by the owner, the interest  payable  as  aforesaid  shall  be  deemed,  for  all  purposes  of  this Ordinance,  to  be  the  income  of  such  owner  and  not  of  any  other  person, whether  the  interest  payable  as  aforesaid  would  or  would  not  have  been chargeable to tax apart from the provisions of this sub-section.

(2)  Where  any  person  has  had  for  any  period  during  an  income  year  any beneficial interest in any securities and the result of any transactions within that year relating to such securities or the income thereof is that no income is received  by  him,  or  that  the  income  received  by  him  is  less  than  the  sum which  the  income  would  have  amounted  to  had  the  income  from  such securities accrued from day to day, and been apportioned to the said period, then the income from such securities for the said period shall be deemed to be the income of such person.

(3) Where, any person carrying on a business which consists wholly or partly in dealing in securities buys or acquires any securities from any other person and  either  sells  back  or  re-transfers  those  securities,  or  sells  or  transfers similar  securities,  to  such  other  person,  and  the  result  of  the  transactions  is that  the  interest  becoming  payable  in  respect  of  the  securities  bought  or acquired by him is receivable by him but is not deemed to be his income by reason of the provisions of sub-section (1), no account  shall be taken of the transactions  in  computing  for  any  of  the  purposes  of  this  Ordinance  any income arising from, or loss sustained, in the business.

(4) The Deputy Commissioner of Taxes may, by notice in writing, require any person to furnish him, within such time, not being less than twenty-eight days, as may be specified in the notice, such particulars in respect of all securities of which such  person  was  the  owner,  or in  which  he  had  beneficial interest  at any  time  during  the  period  specified  in  the  notice,  as  the  Deputy Commissioner  of  Taxes  may  consider  necessary  for  the  purpose  of ascertaining whether tax has been borne in respect of the interest on all those securities and also for other purposes of this section.

Explanation.- For the purposes of this section,-

(a) "interest" includes dividend;
(b) "securities" includes stocks and shares; and
(c) securities shall be deemed to be similar if they entitle their holders to the same  right  against  the  same  persons  as  to  capital  and  interest  and  the  same remedies for the enforcement of these rights, notwithstanding any difference in  the  total  nominal  amounts  of  the  respective  securities  or  in  the  form  in which they are held or in the manner in which they can be transferred


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