CA FINAL DT | TRANSFER PRICING - CONCEPT SERIES | LECTURE - 2| NOV'26 CA FINAL - 12 MARKS

追加: 2026-05-25

[00:00:01]So very good morning everyone. So in the yesterday's class we started with a new segment called as transfer pricing.

[00:00:11]So in this lecture series this is a lecture number two that is a lecture number one. Today we are going to discuss about special provisions relating to anti-avoidance of tax special provisions relating to anti-avoidance of tax is rough papers okay these are all rough discussions fair discussions we are going to see okay first I'll explain the concept in detail such that every person will be able to understand appreciate the government intention then we will move on into the main discussion and we will do six questions also on that okay how many six I think six or seven are there totally five five questions are there okay so five questions we are going to do practical questions which are possible of being tested directly in exam after completion of this discussion. Before that point number one, what is the name of concept we are going to discuss?

[00:01:26]Let's have a clarity. Name of the concept is bonus stripping and dividend stripping.

[00:01:41]Actually people call it dividend stripping and bonus stripping. But I call it bonus stripping and dividend stripping for one good reason. Why dividend stripping concept is no more relevant to today. It is not relevant today. Today the concept is not there.

[00:01:56]Okay. Why they call dividend and bonus stripping? There are two sections 94 subsection 7 94 subsection 8 7 talks of dividend 8 talks of bonus. Therefore people used to tell dividend stripping and bonus stripping. But when seven is irrelevant 8 is only relevant. Now first I'm writing bonus stripping. Okay. Sir before even going into this sir we are discussing the chapter transfer pricing correct sir in transfer pricing yesterday we discussed about the concepts transfer pricing we introduce ourself with the concept of transfer pricing we got acquainted with certain terms basics of transfer pricing chapter okay we discussed about the word called as associated enterprises we discussed about international transaction specified domestic transaction Dispute resolution panels referring to the TPO transfer pricing officer.

[00:02:50]Methods of evaluating and computing the concept of ALP arms length price.

[00:02:55]Understanding the meaning of arms length price. After that range concept in arms length price when multiple prices are available.

[00:03:02]After that we went into penal provisions relating to transfer pricing chapter.

[00:03:07]Then we went into pla who is a person who is located in a notified jurisdictional area. So we also said about that certain words and phrases we got acquainted ourself in the last class. Correct. Suddenly why we are coming listen there is a wrong notion in entire students community. Shall I tell you what is it? Most of them even don't know that they are doing wrong. Shall I tell? There is no chapter called as transfer pricing in income tax act. Yes, there is no such chapter name. There is no chapter A with the name called as transfer pricing. Clear? Then why they call it transfer pricing? There is a chapter dominated by transfer pricing provisions in that chapter. That's why they call it as transfer pricing. It does not mean that name of the chapter is transferrising. of the in that name there is no chapter but substantial discussion in a chapter is relating to transparing transactions. Therefore the name of the chapter people call it synonyonymously as a transfer pricing including me. Okay but reality I should tell now what is the reality? See the bay that's why I always tell read bay to have a reality in thought process. Okay.

[00:04:27]What is the name of chapter? Chapter number 10 real name is special provisions relating to avoidance of tax.

[00:04:37]the real name special provisions relating to avoidance. That's why special provisions on anti- avoidance.

[00:04:45]Okay. So that's why I have clarity on what I'm using the words what clarity I have I am having it perfectly the words I'm using the phrases I'm using I'm using on par with the legislature. You should change yourself that there is no chapter with the name transfer pricing.

[00:05:01]Anonymously people call this chapter as transfer pricing including me for understanding. If I say students special provisions relating to avoidance of tax be complete and they will ask sir when you will teach transfer pricing they transfer pricing no sir transfer pricing separate chapter like this people will start questioning me so nowhere in this chapter there is a chapter named separately called as a transurprising you can see I'm showing you know what is there to hide in bay if I don't show you you can show you can see directly on the website. See computation of income from international transaction. Okay. Next one, meaning of associated enterprise. Next one, international transaction meaning. These are all in our learning objectives. If you remember meaning of specified domestic transaction, computation of arms length price methods, reference to transfer pricing officer, safe harbor rules, advanced pricing agreement, effect of advanced pricing agreement, secondary adjustment.

[00:06:16]Okay, it is general discussion documents to be kept.

[00:06:21]These are all procedural compliances.

[00:06:23]92F after this after this this anyway not applicable for us.

[00:06:31]94 avoidance of tax in certain transactions in SE this is also within that chapter only. Which chapter we started yesterday? Chapter 10. What is the name? We have given transfer pricing. But actually the name of chapter is not transfer pricing like that if I tell then only people will understand. See in YouTube thumbnail if I put special provisions relating to anti- avoidance no one will know that I'm teaching transfer pricing because everyone made it you like that the transfer pricing is the name of a chapter transfer pricing that these concepts are dominated that's why people call it as a transfer pricing transfer pricing it went like that it is something similar to foreign company chapter and companies act companies act there is a chapter called as foreign company act no there is no such chapter name of the chapter is companies incorporated outside India India dominated by foreign companies. People started calling it foreign company chapter. Same way there is no chapter called as transfer pricing. Chapter 10 is special provisions relating to avoidance of tax in that domination is done by transfer pricing. Way people call it as a transfer pricing chapter.

[00:07:39]You know everyone understood the concept clearly. So therefore this is the first discussion that everyone has to have a clarity or else suddenly people will ask me you said you start with transfer pricing suddenly why you are coming to bonus stripping you should first know what you are dealing with 94 is within the chapter called as chapter 10 chapter 10 94 is one of the part I will show you another thing just try to understand persons located in notified jurisdictional area already we have written next day that is 94A Okay, when 94 A is there in the syllabus, 94 won't be there. So I did not write in the learning objectives yesterday. I forgot actually. Okay, that is also there in our syllabus.

[00:08:24]So next one is are special provisions to anti- avoidance. General anti- avoidance will be GAR provisions already we have completed and uploaded in the app also.

[00:08:33]Okay, GAR all the concepts you have 95, 96, 97. So please clarity is the first key for understanding income tax. So tell me what is it? Anti- avoidance provisions anti- avoidance provisions are of two types. Special provisions general anti- avoidance provisions.

[00:08:58]Special provisions are contained in two places. Number one chapter 10. Number two other chapters.

[00:09:07]There are so many chapters in income tax. Every chapter a tax avoidance anti- avoidance regulatory sections are already enshrined in the income tax act section 40 A2 is there excessive payments and unreasonable payments made will be disallowed for example I wanted to buy raw material fair market value 100 I am buying from my brother I wanted to give him some advantage I will buy from him at 120 so even though it is available at 100 for any unrelated party you are intentionally paying him extra 20. Now that 20 will be treated unreasonable and will not be claimed as an exemption. Assessing officer won't allow that. That 20 rupees they will disallow and add back. What is this?

[00:09:50]This is a SAR special anti- avoidance.

[00:09:53]Special anti- avoidance. It is there in PGB chapter. There is a separate chapter on SAR. A separate chapter we call as special provisions relating to anti- evidence. In short people call it as transfer pricing chapter. So literally every section in that need not be transfer pricing dominated by transfer pricing chapter. Okay. So the clarity this clarity if you have now my work will become simple and easy or else dividend stripping or bonus stripping I will start now. Next immediate doubt sir what is the link between bonus stripping and transfer pricing. Oh bro cool this chapter name is not transfer pricing actually chapter name is special provisions relating to anti- avoidance of tax in that transfer pricing is a dominating area in that bonus stripping dividend stripping is also there because this chapter starts at 92 ends at 92 F is the transfer pricing but others 93 94 94 A are also there 93 anyway not applicable 94 94 we need to read 94 anyway I will add in transfer pricing 94 is what we are going to discuss now. And what is my motive?

[00:11:04]92 to 92 F plus 94A. Anyway transfer pricing uh uh discussion we will see.

[00:11:13]But what about 94? I will cover now and my logic is very simple. Today if I complete in lecture two section number 94 bonus stripping and dividend stripping. If I complete that then whatever we discussed from the lecture number three is completely targeting on transfer pricing and international transactions. Okay. With the clarity with this let us start with our discussion. Okay. See what is this concept of dividend stripping. I will first explain then I will give you time for you to understand I will show you the section then you will be reading 947 everything is not applicable again exactly what is relevant that is only I'm discussing 947 applicable in that anyway 947 again become irrelevant now so 947 is for understanding 948 okay listen first I make you to understand certain financial terms Answer number one dividend dividend.

[00:12:25]This dividend is a real dividend not dividend concept. Real dividend concept.

[00:12:32]A dividend dividend is nothing but distribution of profits. Dividend is nothing but distribution of profits to whom? To the shareholders. Okay. Number one.

[00:12:48]Number two, roughly I'm writing. Don't write all these. I have I will give you enough time for you to copy the main notes. Okay? Copy there. Dividend is nothing but distribution of profits to the shareholders.

[00:13:01]Next one.

[00:13:06]Proposed date.

[00:13:09]Date of board meeting. In the board meeting, board of directors will propose a dividend. They will tell per share we wanted to pay 20% dividend and 10 rupee per value know 20% or 2 rupee dividend we wanted to pay. So that will be called as a date of board meeting. Number three, no doubt will come. Doubt will come. What doubt will come? Sir, I am holding shares. I am holding shares.

[00:13:40]Let us say three dates.

[00:13:44]Date of board meeting I am holding 100 shares.

[00:13:50]I'm holding 100 shares.

[00:13:55]The date on which notice is given for general meeting to uh declare the dividend. I have 110 shares.

[00:14:12]on date of general meeting I hold 90 shares and what is happening I am buying I am selling like that I'm doing at a different different dates I'm having different different amount of shares with me obvious answer market prices also will change according to the uh dates so this is the situation now my question is board of directors proposed dividend in a board meeting uh proposal is always final not final not final because that proposal has to be declared by the shareholders in a general meeting. Okay. Shareholders in a general meeting. Now question will come. What question will come? Sir, to conduct a general meeting, first we need to give a notice. That notice will be given 21 clear days before meeting under section number one of companies act. Notice of a general meeting must be given not less than 21 clear days before the general meeting or not. So 21 clear days before you will give a notice. In that notice you will tell the agenda. In that one of the agenda will be ordinary business.

[00:15:15]Ordinary business four ordinary business. A DA accounts dividend the directors auditors seen in that what is the second one dividend so therefore what will happen you have to first propose the dividend that proposed dividend has to be declared proposed dividend has to be declared so the moment the moment shareholders receive the notice they will come to know that a 2 rupee per share dividend has been proposed by the board which is a pending declaration correct uh now confusion starts now what start confusion start do you know why confusion will See when you proposed dividend in a board meeting Kaus Mukkesh is holding 100 shares I don't know that you proposed dividend no one knows for that case notice is in the notice I came to know 21k is before how many shares I have on the day 110 date of general meeting time how many shares I have 90 shares okay date of general meeting 90 shares now what people will do the moment notice is received the moment notice is received and they came to know the dividend is getting declared. They will start buying the shares. They will start buying the shares which becomes a problem. Correct? And unnecessary panic will be created. Once the notice is received 21 days before the meeting immediately people came to know that okay 2 rupee dividend is proposed on each share. Let us start buying the shares. Like that they will tell yes or no. That panic should not happen in the market. Therefore sebi came out with a via media proposal. Do you know what this mean? Listen carefully.

[00:16:45]Whenever we say agenda for general meeting four agenda matters are ordinary other than four everything is a special business accounts okay dividend directors auditors director's auditor's appointment is non-financial in nature so I'm not going to discuss about this accountancy is financial in nature but it's only a reporting here money related direct transaction happens only with the dividend now let us take this separately part with this dividend. When it comes to dividend, board of directors will conduct a board meeting and propose dividend.

[00:17:25]Immediately after conducting board meeting and approving there, they will give announcement to the stock exchanges where the shares are listed a date called as record date.

[00:17:40]If you do not understand this discussion, you can't understand dividend and bonus stripping at that time don't cry again. Okay. So what is the concept name? Record date. What is the significance of record date? In order not to create panic in the market, panic in the market, board of directors will tell that whoever is a shareholder, I repeat, whoever is a shareholder on the record date to him dividends will be paid. This is not date of general meeting. This is not date of board meeting. This is notice of board meeting, general meeting etc. I will announce one date on that day. Whoever is a shareholder that person only will receive the dividend like that they will do a record date announcement. Record date what announcement.

[00:18:25]Listen let us say for example see they announced 10th August 2026.

[00:18:38]Example as a record date and what does it mean? What is the significance of 108? On 108 whoever is a shareholder that person only will receive dividend.

[00:18:49]How many shares he held on that day? On those many shares only you will get dividend. So who should be paid? How many shares it should be paid will be decided on the basis of your shareholding as on which date? Record date. What is the significance of record date? Significance of record date I'm talking about financial management perspective later we come to the tax part date importance is come dividend share price will start after recorded announcement sir I didn't understand see I usually tell this example for all finance related students even in Ap you might have heard of this example le there is a agriculturist that agriculturist has a cow with him same example You might have listened in uh what to say when I'm discussing about the concept of bonus issue all these things in uh uh advanced financial management. You might have already listened to this example but for those who do not know what is a comedend just I'm throwing this example one more time try to understand it. Okay let us start because without that you can't understand this. Okay. See here what is the significance of come dividend x dividend.

[00:20:00]Come dividend x dividend. See there is an agriculturist. That agriculturist has a farmland. To plow the farmland he require a cow. He require bulls and oxen. Okay. He has two types of revenue activities. And his livelihood is two things. Milk and milk products sale for the cows are required.

[00:20:28]Next agricultural land plowing has to be done. Further bulls and oxen are required not the cows. So milking cows are required for dairy and plowing and other things. Bulls and oxen are required. This is agriculturist. Talk about the dairy. Now this person listening talk about the dairy and his activity. There is a animal husbandry fair is going on and people can buy cattle there by paying money. He went to a cow. A person is selling a cow. Okay.

[00:20:59]He asked how much is this? He said cost of this cow is 50,000.

[00:21:05]Person one. He went to person two. He said cost of this cow is 50k. He went to third person. He also said cost of the cow is 50,000. So everyone is maintaining a standard price for a particular breed of cows. Okay. Now he went to a third fourth person. He said 75,000.

[00:21:27]Immediately he was in a shock and said are same breed same age of the cow almost three and a four years only life 20 years three and a half years life all the cows the same breed again they are saying 50 he's saying 50 he's saying 50.

[00:21:41]I'm trying to bargain. You are directly telling 75,000. Why? He said sir the cow whatever you are buying now is not a cow it is also having a baby cow inside it a cough is also there a cough is also there inside oh so what is the advantage for me with the 75,000 if you buy this cow now in another 30 days key it will give a delivery to a new cow okay if that is a female cow you can use it for your dairy products if it is a male cow you can use it on your agricultural land. So any side you have a double benefit now and I am not selling a cow.

[00:22:21]I am selling actually cows to you. Okay.

[00:22:24]This cow is called as come cough cow means what? It is having calf inside it.

[00:22:32]Therefore value is 75,000 1 month completed. Really it gave birth to a cow. He can use it for milking after some number of years. Are you understanding? uh the moment it gave birth to a cough which came out immediately the value will fall to how much again come to 50,000 like any other cow because that is no more a kov cow it is a x cough cow after giving a delivery and a birth to a cough logic same here in this in this example main cow is the share cough inside is a dividend cough inside is a dividend there veterinary doctor will give a date on this date Hey, this cow is not a normal cow. Yeah, it has a cough inside.

[00:23:15]How you will get that date is called as a record date. Record date means in the records of the stock exchange when you made it public official that day we call as a record date. Record date is so important in finance also in this tax part. On the record date who is a shareholder to him only we'll pay dividend on the record date how many shares you hold on those shares only we will pay dividend we don't pay extra we don't pay less on that day who are there to them only we will pay the dividend up to here I hope everyone understood simply correct listen now what happens now you understood the valuation mechanism of a come cow and come dividend x dividend share that means share price is trading at say for example share is trading at 100.

[00:24:08]Okay. Board of directors announced okay in on a record date saying that from this day okay we are going to announce a record date and said that dividend is proposed 10 rupee dividend immediately what will happen? People came to know that if I buy a share after recorded date. If I buy a share after recorded date, I am not buying a share. I am buying a share having a dividend also along with it. So therefore dividend will get added. This is called as a come dividend share price. CDSP means what?

[00:24:45]Come dividend share price. Okay. After 20 days dividend of 10 rupee declared.

[00:24:51]What will happen? Again 110 will become 100. Again 110 will become 100. Now see how the tax avoidance people has done using this as a uh uh conduit has a channel how the people started doing manipulation using this genuine concept of uh come dividend next dividend. Let us understand what people started doing.

[00:25:12]Now see I will purchase a share. I will purchase what share at 110. at 110.

[00:25:20]Okay. In this 110 actually 10 rupee dividend is also there. Correct? So try to understand clearly 110 if you are buying in that one 10 10 rupee anyway will come to you in the form of dividend. Correct. I repeat one more time here. Sorry I will do like this.

[00:25:40]What people has done I will tell first then I will talk about the remedy government has provided for cheating.

[00:25:47]They are cheating government. What cheating they have done? Let us see.

[00:25:52]I will receive dividend of 10 rupee my income.

[00:26:00]Okay. Next come dividend x dividend price which will be higher which will be lower,000% come dividend price will be more than x dividend price. Okay. Come dividend price will be always more than x dividend price. Okay. So what happens I receive dividend of 10 come dividend share will become X dividend because dividend is paid C came out it is a normal C now it is a normal share now previously it is a come dividend share now it is a X dividend share okay so what happens we have to calculate capital gain or capital loss purchase price 110 sale price 100 because X dividend share price is 100. I am having a short-term capital loss of 10 rupee. This short-term capital loss of 10 rupee. What I will do this 10 rupees. Whatever the short-term capital loss that I have incurred, I will use it for set off. I will use it for set off. No, this kind of practice is not allowed. Reason very clear. See what is the purchase price 110. What is the sale price? 100. What is this uh uh 10 rupee? That 10 rupees actually dividend. The 10 rupees is not a loss to you. Okay. And how to understand? See come dividend share price is 110. Why you paid 110 100 for share 10 rupee for the dividend? 10 rupee for the dividend.

[00:27:31]Really dividend is received now. So dividend is a income. So dividend income 10 rupee and what is your net purchase price? 100. Again at what price you are selling 100. Actually you don't have any capital loss. People don't understand.

[00:27:46]I'm repeating one last time for all of you. Please listen carefully. Come dividend share price is 110.

[00:27:54]X dividend share price is 100. Why this 100? 110 minus 10 dividend is received.

[00:28:00]It became X dividend share price. Okay.

[00:28:03]What this dividend of 10 rupee received by a shareholder is a income or not?

[00:28:07]Yes. One rupee income came 1 rupee income came. So now try to understand this way. Come dividend share price 110.

[00:28:14]X dividend share price 100. Okay. How much is the extra value? 10 rupee. Okay.

[00:28:20]X dividend share price 100. Come dividend share price is 110. Okay. What is this 100? How you got this?

[00:28:28]There is a dividend that is being paid.

[00:28:31]There is a dividend that is being paid.

[00:28:33]What is this 110? This 110 is share price loaded with the dividend. Loaded with the dividend. So what is happening here? I purchase. See this example clearly.

[00:28:44]I purchased for 110 outflow minus after I purchase I am purchasing a share I purchasing a share with the dividend with the dividend company declared dividend company declared what dividend dividend is inflow outflow inflow so plus 10 plus 10 okay next this is my scenario so I purchase for 110 in that 110 10 rupee company pay dividend and what is your net purchase price it is only 100 so outflow is only 100. Next dividend is declared. X dividend share price how much it became 100. I sold at this price. How much is your loss? Zero is my loss. But what you are doing here? What you are doing now?

[00:29:27]See 10 rupee dividend. You will take income type number one. Next what you will do? Come dividend share price 110 which is called as a sale price. Sorry which is called as a purchase price. X dividend share price is a sale price.

[00:29:41]100 minus 110 minus 10 you will take a set off and you are getting two benefits for the same thing. Number one dividend benefit there is no extra and number two is you are claiming a set off. So these kind of things are not allowed under section number 94 subsection number 7.

[00:30:00]Once upon a time this used to have a relevance but today there is no relevance for this last 2022 after okay previous year 2022 23 after this section has no relevance because dividends are now taxable dividends are now what taxable previously dividends are not taxable in India 2122 they introduced with effect from 2023 financial year I mean assessment year at that time this concept used to have some relevance so what is the summary of the entire discussion you will purchase a share.

[00:30:31]You will purchase a share just before the record date. Uh sorry, just after announcing the record date. Okay. Come dividend share you will purchase. You will hold it for some number of months.

[00:30:42]Dividend will be declared. Income came once dividend is declared price will definitely fall. At that price you will sell. You will tell I sold at a lower price purchase higher price. You will claim again a short-term capital loss.

[00:30:53]And you are getting two benefit.

[00:30:54]Dividend benefit capital loss adjustment benefit. department said no no no no it is cheating there is a avoidance of tax here therefore listen carefully 110 rupees you purchased come dividend share price at what we purchase here 110 rupees we purchased come dividend share in that come dividend dividend is already there so you purchase the share with the dividend okay with the dividend without dividend what is the price 100 you should compare a without dividend share with another without dividend share what is the come dividend share price without dividend 100. Okay. With the dividend is one 110.

[00:31:31]Without dividend 100, X dividend 100.

[00:31:34]100 what is the technical value? Zero is the capital loss. But just by through the numbers started people started doing a lot of kirki. That's why department was upset by the behavior of the public and clearly said that these kind of transactional capital losses will not be allowed. Therefore, if you purchase a share at a come dividend price of 110 and sold at the ex dividend share price of 100 because X dividend share price will be always lower than come dividend share price because it is nothing but come dividend share price minus dividend capital loss 100 will be there. Now this is not allowed to be set off because this 10 is not a real loss. It is artificial loss you have created. Okay.

[00:32:21]What is this 10? This 10 is the dividend. Yeah. The dividend already you shown as an income and you will take dividend income. Dividend income at the time is exempted. So on that you won't pay tax. See dividend income is exempted. Dividend income 10 rupee originally previously dividend 10 rupees I received and tax exempted section 1034 at that time it is exempted. So there you are taking exemption from copying the tax again short-term capital loss of 10 rupee will show and for one 10 rupee you will take two times benefit not allowed they said but now what is the scenario dividends are becoming taxable now once the dividend is taxed on this 10 rupee I will pay tax or not yes now you can take a claim of set off or whatever you want because one side you pay tax one side you take benefit no problem but both sides you can't take a benefit that is the reason why dividend stripping concept is no more valid and relevant today understood but still there in the syllabus I don't know why institute is keeping that but I can't believe the institute after recent trends I don't want to take a risk see what is the significance of your discussion okay the doubt will come correct my significance is absolute means If I say something, I will take the bare provisions. I will read, understand, create illustrations and I will explain in that there is no compromise at all.

[00:33:51]1% also no compromise. See the section now whatever I say will be there where any person buys when you are reading observe the content properly where any person buys or acquires any security or a unit within a period of 3 months prior to record date. Means record date let us take 3 months prior to record date he bought. Okay. Next such person sells or transfer such securities within a period of 3 months after record date within 3 months after record date or such unit within a period of 9 months. 3 months for securities units key units of mutual funds 9 months. The dividend or income on such securities or unit received by such person is exempt at that time when dividends were exempted. Then the loss if any arising to him on account of such purchase or sale or unit to the extent such loss does not exceed the amount of dividend such loss does not exceed the amount of dividend or income receivable on such securities shall be ignored for the purposes of computing income charge equal to tax.

[00:35:03]Read it. I will give time.

[00:35:06]Read it properly.

[00:36:28]Okay, completed. So what is the summary here? A person buys a securities or a unit unit of mutual funds within a period of 3 months prior to the record date.

[00:36:42]Okay. But sells that selling should happen within 3 months after record date in case of securities in case of units within 9 months. Okay. And the dividend or any other income on such securities and the units either dividend income on sh securities or interest income on the units. Dividend or interest income anything on the units. Okay. By such person is exempt. So once upon a time there is an exemption for that at that time any loss arising to the extent of that particular dividend okay shall not be eligible for set off therefore shall be ignored while computing the income chargeable to tax as I promised I will give you time for you to copy bay don't write and waste time main concept you need to understand so which chapter we are discussing special provisions relating to avoidance of tax law. We are going to see 94 section first which is in the chapter but not linked to transfer pricing. So once that is completed then all the discussions whatever we make from the next class onwards are completely relating to transfer pricing. Okay. Cory on dividend and bonus stripping 947 and 948 since dividend is taxable now 947 does not have any practical relevance.

[00:38:05]Clarity seek I have written that however bonus stripping is relevant and is covered by section number 94 subsection number 8 anti-ax avoidance measures dividend stripping 947 bay act already you have read necessity illustrated prior to the amendment okay with the example I'm going to show you this one you need to copy Mr. X acquired thousand share this is not given in study meter also okay when I am doing my analysis I will read books now from that I have taken this okay Mr. X acquires thousand shares of PQR limited just before the record date.

[00:38:40]So anyway our provision will get attracted if the acquisition is made 3 months prior to the record date and sale or transfer is made within 3 months after such date in case of securities and 9 months in case of units.

[00:38:52]Note record date is a date fixed by the company to determine the entitlement of div. I told to whom we should pay how much we should pay cost of acquisition of share 110 price is usually on higher side due to dividend expectation come same example. Yeah, holder becomes entered into dividend for rupees 10. Say shortly after the recorded he sells the share and sale price is 100. Same the example what I taught you. So to attract dividend stripping concept the above mentioned three conditions namely shall be satisfied. Okay above mentioned three conditions means what? First thing there should be a person who buy the securities and hold it 3 months prior to the record date and he should sell it.

[00:39:32]That sale should happen within 3 months after that particular date in case of shares securities and 9 months in case of units and he might have incurred some loss then only this particular section will get attracted. So loss to the extent of exempted dividend will be ignored can't be adjusted for set off excess losses that you can eligible for set off post amendment. Now dividends is made dividend is made taxable in the hands of shareholder and therefore this concept has no practical relevance.

[00:40:02]Okay, please I asked you yesterday also transfer pricing chapter please show some respect when I say something write down the orange you will forget the concept actually in exam dividend stripping bonus stripping is tested in transfer pricing chapter though name is not transfer pricing anyway intention was to avoid the tax sorry to curb the tax avoidance now so in transfer pricing chapter itself they are merging and asking questions please give importance Write down corary on dividend and bonus shipping.

[00:40:55]Okay. Uh corollary on dividend and bonus. Coral remains naturally the consequences that occur because of dividend and monitoring. What kind of losses will occur? Consequences on dividend and bonus.

[00:41:30]right After that write down necessity illustrated.

[00:42:49]You should also know that dividend stripping concept is no more applicable today. That also you should know that clarity also you should have.

[00:47:02]writing. Let us now move on into the next part.

[00:47:08]Bonus stripping concept. Okay. Let us begin with the concept of bonus stripping.

[00:47:15]See here.

[00:47:17]Sir, what is this bonus tripping concept? Previous example we saw about income in the form of dividend and interest. Now we are going to see what if it is come bonus shares or come bonus units. Whenever units of mutual funds are given there is a plan called as a bonus plan. Bonus plan what will happen?

[00:47:38]Instead of giving any kind of dividend they will give bonus units in that case or I purchased a share on that share there is a bonus share attached like a dividend it's a come bonus share so x bonus come bonus is there same dividend impacted there also it will fall how to treat that for that 94 subsection 8 has come this concept is very much applicable for your exam and relevant for exams also reason is very clear dividend is a taxable in India Because the dividend is taxable.

[00:48:11]Dividend stripping concept has nothing to do but bonus shares are not taxable unless and until you sell them. So bonus shares are not taxable and issue of bonus shares is not a taxable thing. So therefore since you are escaping payment of tax in the case of bonus shares. So whenever the short-term capital loss will come that will not be allowed as a uh set off. How that will occur? Let us read. After reading the bay act I will give time for you to read one more time.

[00:48:38]full clarity there we will continue.

[00:48:40]Okay, please concentrate properly understand the discussion.

[00:48:46]See here just a minute.

[00:49:25]Okay, let us begin.

[00:49:36]94 subsection number 8. Let us read.

[00:49:40]where any person buys or acquires any securities or units within a period of 3 months prior to the recorded same or second such person is allotted with additional security not with dividend or units without any payment and a bonus units are given or bonus shares are given on the bas of holding of such securities on such date that's what I told on the date of record date how many shares you hold on that basis bonus ratio will apply such person sells or transfer refers all the shares all the securities or units referred to in clause A within a period of 9 months after such day while comput while continuing to hold all or any of the additional securities or units referred to in clause B. Then the loss if any arising to him on account of such purchase or sale of all or any of such securities or units shall be ignored for the purpose of computing his income chargeable to tax and notwithstanding anything contained in any other provision of this act. The amount of loss so ignored shall be deemed to be the cost of purchase or acquisition of such additional securities or units referred to in clause B as they are held by him on the date of such sale or transfer.

[00:50:53]Complication is involved. Read the bay properly without reading the bay. Don't do stunts you can't understand. Read the bay first. Get yourself thorough with the discussion.

[00:52:06]Read read the properly.

[00:52:38]Okay. Yeah.

[00:52:41]So now see here same concept. What is the only difference there? Uh security dividend 3 months. Okay. Units dividend or income whatever the case may be 9 months. Here person purchasing the shares or securities or units. Okay. 3 months prior to the record date. Same such person is allotted with additional units without any payment. Okay. Such a person sells or transfers all or any of the securities or units whatever the case may within 9 months. So 3 months concept is not there. It is 3 months prior and within 9 months after the record date. Then what what they said?

[00:53:19]They said then loss if any arising to him on account of such purchase or sale on account of such purchase or purchase and sale of all or any of such securities or unit shall be ignored for the purpose of computing the income notwithstanding anything contained in any other provision of this act. The amount of so loss so ignored shall be deemed to be the cost of purchase or acquisition of such additional units referred to in clause B as are held by him on the date of such sale or transfer. Sir I understood 70% sir last paragraph I did not understand this can be a general notion of any student correct that can be understood only through illustration before that same x acquate thousand units of mutual fund just before record date price rupees 20 per unit becomes entitled to the bonus units 1 is to1 shortly after record date original units are transferred at a loss loss is compensated by bonus units this is artificial loss which is used to reduce is the taxable income as a tax avoidance counter measure section 9480 is inserted first write down the necessity illustrated once you write down one more time I will explain those who felt that I just read this but not explained for you I will repeat why I read and I went because I already told you for last 30 minutes the logic behind but still sir no no sir I could not understand again I will reexlain this first write down completed writing.

[00:56:09]So read the content once necessary illustrated pointwise I have written read it once for a while. We'll go into a thorough discussion one last time.

[00:56:31]Those who are those who have completed write down this conditions attracting bonus repeat units or sales are acquired within 9 months prior to the record date. Bonus units are allotted on record date and the person who has sold or so sold all or some of the original units or shares are considered to continue to retain okay bonus units and is claiming to set off the loss on the sale sale within 9 months after the record date. Same concept here when come dividend share becomes X dividend how the price will fall bonus share if it goes out instead of dividend share is going out it will fall capital loss will come but I will not give you the capital loss to the extent of the bonus shares.

[00:57:22]So ignore the loss arising on sale of original shares or units such loss deemed to be the cost of acquisition of remaining bonus units unsold.

[00:57:33]Sir how to understand that for all things I have examples we will do but before that read this content clearly the bonus stripping basics write down conditions attracting bonus stripping units or shares are acquired within 3 months prior to the record date bonus units are allotted on record date person has sold all or some of the original units or shares and continue to retain the bonus units and is claiming going to set off. Sail within 9 months.

[01:00:06]Hope you all computed fitting right. Yeah. So rather than reading this multiple times, let us do a good amount of examples. You'll get more clarity.

[01:00:20]But keep the conditions in mind.

[01:00:22]acquisition of units 3 months prior to record date. That condition you need to check. Second, allotted with the bonus units on the record date. Number three, within 9 months. Okay, within 9 months from the record date, he sold those particular units or securities, anything. Okay, then he incurred a loss.

[01:00:45]What they are saying? You received the bonus units. Hm.

[01:00:50]Ignore the loss. Ignore the loss arising on the sale of such units means you are getting some short-term capital loss or something you will get. Ignore that.

[01:01:03]Such loss shall be deemed as cost of acquisition of remaining bonus units unsold. Their complexity will come. Let us try to understand. Okay.

[01:01:14]see illustrations to understand bonus stripping. Okay sir, what is this concept? I will tell you that but before that you understood up to here right? So the person sold the units that continue to retain the bonus units and is claiming set of uh the loss on sale. So the person has sold all are some of the original units. That's why if you see the bare act clearly see here such a person sells or transfer any of the units referred to in clause A. Clause A is not bonus units. Clause A will be original units or original shares. Okay.

[01:01:57]Within 9 months after such date means what is the logic here? You are acquiring 100 shares. Company announced 50 bonus shares. Okay. which sale this provision will get attracted that 100 original shares you need to show not on the bonus units or bonus shares clear sir even I tell 100 times you won't understand one illustration we will do not one set of five illustrations we will do you will get full clarity on how the bonus stripping actually works okay see company x limited par value of share 10 per share record date 25th December 2024 okay any year you take a Provisions are same. Now just for understanding we can sum here. Bonus ratio 1 is to 4 means what? For every four shares held one share will be issued or units held one unit will be issued. Date of acquisition of original share September 28th 2024. Record date December 25th. Go back 3 months. Go back 3 months. What are the three months? 25th December.

[01:02:59]25th November 25th October 25th September. Okay. Date of acquisition of original shares within 3 months within 3 months prior to the record date. Read the bare act again. Clarity within 3 months prior to the record date means you should not buy after 3 months prior means 4 months prior 5 months prior you should not take in the 3 months time wherever acquisition happened. So up to 25th September you can take I took on 28th September condition once satisfied.

[01:03:32]Okay. number of bonus shares allotted,000 bonus shares are allotted or bonus units are allotted whatever the case may be on 25th of December on 25th of December. So tell me now this is the data fact different different cases let us create on this date of transfer June 6th 2025 sale uh consideration 45 sale 1 1400 original shares remaining shares balance no transfer in 9 months what happened let us see first I transferred on June 6th 2025 June 6th 2025 June 6th 2025 means it is within 9 months within 9 months after 9 months we from the record date December 25th is the record date correct from there within 9 months means Jan February March April May June July August September till then I have time but I sold on June 6th so that condition also satisfied sale consideration 45 sale consideration 45 but here what you have to understand see here I purchased 4,000 shares at 40 each.

[01:04:46]4,000 shares at 40 each.

[01:04:50]Uh, understand this properly. Okay. See here what happened? I sold all the shares. I acquired 4,000 shares. But I sold how many shares? I sold 1,400 original shares. Means in this 4,400 are sold. Okay. Bonus shares are also issued to you or not? Yes, bonus shares are issued. So, how many bonus shares? 1,000 bonus shares came because 1 is to4 ratio s. Now, what we will do? You will immediately try to book a loss. But here the concept does not apply. Reason is very simple. See what is the sale consideration 45. What is the purchase consideration? 40. You are getting a capital gain or capital loss. Capital gain directly. So I sold 1,400 shares original shares at 45. Those 1,400 I repeat I write here those,400 I purchased at 40. So 40 into 14 14 56 56,000 STCG short-term capital gain 7,000. Bonus stripping concept does not involve because there is no capital loss one point over second date of transfer March 16 2025 second case sale consideration this time 23 why prices have fall because of bonus shares issue sale 800 original shares okay 800 original shares are sold Same logic sale consideration 800 into 23 18,400 but I purchased those 800 at 40 rupees each at 32,000 I'm getting a short-term capital loss no I will not give you any short-term capital loss how many number of bonus shares are there 1,000 I will divide this 13,600 not to set off in four years time or 8 years time I will give you cost of acquisition to the bonus shares normally cost of acquisition of bonus shares should be taken as how much nil but here how much we are taking the cost of acquisition 13.6 how much 13.6 six. So the number of bonus shares are 1,000. So 13,600 loss you are getting now I will not give you as a set off or carry forward of that loss. Okay number of bonus shares whatever is there I will take that particular amount as cost of acquisition on each share or a unit. So 13,600 if you really purchase bonus shares how many bonuses you got? 1,000 at each one 13.6 rupia will give as a cost of acquisition. Next time when you sell the bonus shares you need to compute capital at that time instead of taking zero as a cost of acquisition take this 13.6 6 as a cost of acquisition.

[01:07:42]So date of transfer May 12, 2025 sale concentration 27 sale, 1100 take calculator now, 1100 you practice yourself into 27 29,700 those 1100 shares I might have purchased at 40 at 44,000 loss will be 14,300 now number of bonus shares are,000. So each bonus share key 14.3 we will take as a cost of acquisition. Okay.

[01:08:14]Now next see here sale of bon uh remaining shares no transfer in 9 months. Sale of bonus shares 500 bonus I got 1,000 in that 500 I'm selling on 10th June 2025 the rate of 25 for this bonus tripping don't get attracted direct capital and competition will come. So 500 into 25 500 into 25 12,500 cost of acquisition is 14.3 into 500 7,150 balance is the short-term capital gain. So instead of giving us a set of carry forward chapter I will give when you sell the shares.

[01:08:55]Case study number four, date of transfer 18th March 2025. Sale consideration 29,000 original shares are sold. So 1,000 into 29 29,000 40,000 11,1 rupees sale consideration he sold 600 bonus share. This date is irrelevant. Okay. 30 rupees he sold. So 18,600 short-term capital gain is 11,400 on bonus units bonus shares. Case study five, date of transfer, Jan 10th, 2025. Sale consideration 21 per share. Sale 2,900 original shares. Second sale of original share 200 shares of 56 each. Date of sale 1st April 2025. Sale of 900 bonus shares. Okay. Uh August 17, 2025 at the rate of 45 each. Read the question first. Complication is there means you have to put some time and effort on that. Read the question.

[01:11:06]Okay.

[01:11:11]Let's see. So what happened? 10th Jan 2025 I sold. Okay. 20th Jan 2025 I sold.

[01:11:18]Section gets attracted. Sale consideration 21. Directly using calculator you do now. 2,900 original shares we sold at 21 each. 60,900 roughly. Let us do here itself 60,900 sale consideration cost of acquisition 2,900 into 40 1 lakh 16,000 1 lakh 16,000 - 60,900 55,100 divided by,000 bonus shares 55.1 will be taken as a cost of acquisition of each bonus share. Okay, each bonus share 55.1. This 55,100 actually capital loss I will not give you. But when you sell the sh bonus shares when when you sell the bonus shares cost of acquisition you can take as 55.1 at that time. Okay. So date of sale uh second sale happened again. When second sale happened 1st April 2025 200 shares 56 key they sold 200 shares when they sell at 56 they purchased them at 21 they purchased them at 40 but they sold at 56 or not. See we purchased at 40 rupees now sold at 56. Again bonus flipping don't get attracted though it is within 9 months time because sale consideration is 56. 200 into 56 11,200 minus cost of acquisition. Those 200 shares are not bonus shares, original shares. So 200 into 40 8,000 3,200.

[01:12:54]Perfect. So 55.1 correct. 3,200 correct.

[01:12:58]Sir, if bonus shares are sold, then how you will tackle that also is there in this question. Sale of 900 bonus shares.

[01:13:05]900 bonus shares into at what price? 45.

[01:13:10]45 into 900. 40,500.

[01:13:15]Cost of acquisition, how much you need to take? 55 on each share.

[01:13:20]Okay. 55 on each share. 55 into 900.

[01:13:25]55 into 900. 49,500.

[01:13:31]40,500 minus 49,500 9,000 is short-term capital loss. Let's see the answer.

[01:13:41]Perfect. Uh 9,90. Oh, 55.1. Okay. Okay.

[01:13:46]So, 900 into 55.1 49 590 49 590 90.

[01:14:10]This is short-term capital loss. Okay, this is how we need to solve questions on bonus stripping and dividend stripping. So for avoidance of tax by taking short-term capital loss immediate benefit government has introduced these two concepts in the segment called as chapter number 10 these two sections were inserted which chapter special provisions for avoidance of tax okay so anti- avoidance measures transfer pricing chapter plus bonus stripping dividend stripping is a segment that's why actually I wanted to insert this in GA segment in our regular classes also I'm inserting this lecture in transfer pricing lecture number two We will be inserting this. Okay. So hopefully everyone understood the concept of bonus stripping and dividend stripping clearly. Right. So next lecture we are going to start with specified domestic transactions section 80 subsection number 8910 and section number 40 A2 and section number 92. We will discuss some parts and then we will be starting with international transactions associated enterprises arms price computation of arms price reference to the transfer pricing officer uh after that range concept after that we'll go for safe harbor rules so advanced pricing agreement penalties and prosecutions through the uh transfer pricing chapter finally we will come to the area called as transactions with the persons located in the notified jurisdictional areas okay thank you very much meet you in the next session with a new concept which will be called as understanding specified domestic transactions.